You can profit on journey into unknown so… Don’t fear AI revolution

Day by day, concerns are growing about the impact on civilization of AI – artificial intelligence. But so is the excitement about its potential.

As the AI ​​phenomenon gained momentum in April, I suggested it made sense to make sure you had some exposure to the sector, either directly or through funds like Allianz Technology, Polar Technology, or Templeton Emerging Markets.

This is still my opinion. It’s reasonable to worry about the impact of the proliferation of ChatGPT, Dall-E, and other “deep-learning” generative AI systems, which produce images, sound, and text, while also wanting to capitalize on the boom they’re experiencing. will cause.

The shares of the megatech companies in this area have risen sharply.

Investors want to support the companies large and small that will provide the “picks and shovels,” the tools that power the tech-age gold rush.

For example, C3.ai, a California software developer, is up 237 percent this year, perhaps in part because it trades under the AI ​​ticker symbol.

Nvidia, the Silicon Valley semiconductor giant that makes the chips for ChatGPT, is up 168 percent in 2023: its market cap briefly approached $1 trillion (£795 billion) last month.

Yet the group is still rated a “buy” by an analyst consensus, a rating that highlights hopes for the returns the AI ​​revolution could bring.

Stephen Yiu, the manager of the Blue Whale fund, which owns Nvidia and other AI-related stocks, says, “We’re at the beginning of the journey. Generative AI is just changing from a concept in a sci-fi movie to reality.’

Management consultancy McKinsey predicts that 70 percent of companies will use at least one type of AI by 2030, as bosses use these technologies to “automate, augment and accelerate work.”

The exuberant Jensen Huang, the founder and CEO of Nvidia, is extremely confident, saying, “A trillion dollars of installed global data center infrastructure will move from general purpose to accelerated computing as companies race to apply generative AI in every product , every service and every business process. .’

The journey will be eventful. Skeptics warn of an AI stock bubble fueled by hype: The public version of ChatGPT reached 100 million users in two months, leading some investors to have unrealistic expectations about its rapid adoption in education, healthcare and other fields. Meanwhile, fears that generative AI could cause catastrophic job losses are leading to calls to delay its implementation.

This is despite fears that if the West takes its time to consider the implications, “the bad guys” could gain an advantage, a senior Wall Street figure argues.

Sam Altman, founder of Open AI, the creator of ChatGPT, is among those warning of the existential risks, and Rishi Sunak will host a global summit that could set rules to regulate AI.

Against this backdrop, optimism about payback times has boosted stocks in what Bank of America has dubbed the “Magnificent Seven.” They are: Amazon, Apple, Alphabet (owner of Google), Meta (the Facebook and Instagram group), Microsoft, which has a stake in Open AI, Tesla and of course Nvidia.

Yiu suggests a wider range of companies. He says: “The tools for AI come from names like ASML, the Applied Materials chipmaker, and Lam Research, an equipment manufacturer. Intel, Samsung and Taiwan Semiconductor Manufacturing Company build chips.

“Advanced Micro Devices, Nvidia and wireless technology specialist Qualcomm are design and sales experts.”

You may be held back from committing to this industry by AI fear – the worry that humanity will become obsolete.

Jobs will be lost. But productivity will be improved and individual ingenuity will still be valued.

Yiu says, “AI allows you to put together a Powerpoint presentation much faster, but you can still add a personal touch.”

AI systems should also help feed the world. James Yardley, of Fund Caliber, says: ‘Imagine being able to water and feed plants individually in a field – by switching their mix from one row to the next depending on the soil and type of plant. change.

“It’s already happening, with See & Spray AI from John Deere.”

You might conclude that you are already on the AI ​​journey if you have money in funds with significant stakes in Nvidia, such as T Rowe Price Global Technology, Martin Currie US Unconstrained, or Martin Currie Global Unconstrained.

Microsoft, which integrates ChatGPT into its Bing search and Microsoft 365 products, is the largest holding in the F&C trust, where I have some money.

If you’re looking for more opportunities, Yardley points to Sanlam Global Artificial Intelligence and says, “What the manager of this fund, Chris Ford, doesn’t know about AI really isn’t worth knowing.”

What no one can know is the magnitude of the change AI will bring. Only take bets you can afford on this journey into the unknown.