HAMISH MCRAE: How to win in the world of AI

Beware of the hype; focus on the content. Not a bad rule of life, but one that’s particularly appropriate now with the frenzy over generative artificial intelligence.

On the upside, we have the rising share price of US software company Nvidia, making it worth nearly $1 trillion, and of course the hunt for the best way to invest in AI.

There is the claim of Bill Gates that this is as important as the personal computer, the internet and the mobile phone.

On the negative side, there are suggestions that this technology is already leading to job losses — 4,000 in the US in May — because AI is doing things that humans used to do.

And if you want to go the Full Monty, it seems that half of AI researchers think there’s a 10 percent chance that unless it’s regulated, it could lead to human extinction.

Regulating AI was one of the issues discussed by Rishi Sunak and Joe Biden in Washington this week, with our Prime Minister calling for AI to play a key role here.

In the fall, we will host the first global AI summit on regulation. If there were real threats of extinction, it wouldn’t matter much which stocks have risen in price – but holding a top can’t be a bad idea.

Is it easy to spot, so where is the content? Half a dozen (slightly simplified) points.

One, while AI has been around at least since the 1960s, it hasn’t had much practical use until now.

What has happened is that the combination of increased computing power and the vast database on the Internet means that computers can search all the things that would previously have taken human researchers months or years to do.

They can spot trends and find solutions to problems with what seems like uncanny skill, and they can do it immeasurably faster.

Second, when there is a major technological advancement, not only does it take a while for its impact to travel through the economic system, but it is also impossible to see its full impact.

The Internet dates back to the 1970s, but did not see widespread practical use until browsers and search engines were developed.

And while it took Steve Jobs’s genius to see that the iPhone would, as he said at launch, “change everything,” not even he could discover all the applications it could be used for, including, of course, apps and also the simple selfie. That first iPhone didn’t have a front-facing camera.

Third, one of the great economic problems of the developed world is increasing both the productivity of service companies and the quality of service they provide.

So living standards have risen only slowly over the last 30 years, and we all feel frustrated with the poor response from banks, insurance companies, public utilities, the IRS, and so on – as the range of readership problems addressed by our personal finance experts show.

But now a technology is being developed that should enable them to solve cases more efficiently and quickly, providing them with a cheaper and better service.

Four, jobs will be lost. There are always when a new technology pops up. Some of us are old enough to remember that if you wanted cash you had to get it over the counter at the local bank.

Then came the ATMs. Now there are not even branches. But the jobs that are lost will be replaced. The number of employees in the UK financial services industry has risen steadily to reach 1.1 million by 2021.

So there will be plenty of jobs and the challenge will be to make sure they are good jobs. It’s very early to make much of a sense of this, but there’s some evidence that AI could help less productive white-collar workers do their jobs better, narrowing the gap between the top performers and the less skilled. If so, that’s really good news.

Fifth, it is never clear who the enduring winners will be when a new technology emerges. Vodafone pioneered mobile telephony and is still among the top ten in the world. But the share price never recovered from the dotcom crash and stands at 75p.

Right now, the market thinks the big beneficiaries will be big tech America, with – aside from Nvidia – Apple and Microsoft both close to their all-time highs.

That may be true, but perhaps the real winners are companies that don’t even exist right now.

Finally, regulations will have to be introduced. We have an opportunity in Britain to get this right, and for all sorts of reasons it’s important that we don’t turn it into hashish.