By Simon Marsh
July 2023
Artificial Intelligence (AI) is arguably the most exciting space to invest in today due to the speed at which the industry is changing, but which companies should you be investing in, and are there other, lesser-known opportunities that you should consider?
These are a few of the questions we asked in our recent webinar, where I discussed investment opportunities with members of our Research team.
This blog post summarises our main points from the webinar, highlighting the importance of looking to the companies building infrastructure to capitalise on developments – not just the companies making headlines.
Read on for a short summary of developments to date, to learn where we think the most exciting opportunities are for investors right now, and for examples of the companies we believe are well-positioned to take advantage of the ongoing developments within this space.
Please note: As is the nature with all investing, your capital is at risk, and you may not receive back the same amount you put in when you choose to cash out your savings.
The rise and impact of ChatGPT
Since the world was introduced to ChatGPT, AI has been a hot topic of discussion for consumers and company executives alike, with mentions of AI at earnings calls rising exponentially within the last six months. Unlike its productivity-driving predecessors, the PC and the internet, which took consumers considerable time to adapt to, AI software is already being integrated into day-to-day business practices at some of the world’s largest companies.
As with the introduction of any piece of transformational technology in the last millennium, AI stands to deliver both substantial positives and negatives to a huge swathe of businesses. While the rapid adoption of AI can feel a little dizzying, it is important that investors remain aware of developments in this space to ensure they can capitalise on opportunities to see greater returns.
Identifying winners in the AI industry
We believe companies that focus on developing infrastructure, services, data and, more broadly, competitive advantage and efficiency within this space are likely to be the winners over the long term. When we talk about infrastructure in this context, we are referring to companies who build the infrastructure AI needs in order to function, such as the hardware used for data centres. Services refers to the companies who provide services to customers who are looking to take advantage of AI, which may include companies who are providing pre-built models to the market or those who create software that allows customers to build their own models. We have also identified considerable opportunities surrounding data, which is a crucial enabler for AI learning.
Attractive companies in the AI industry
While we can imagine a world where almost every company integrates AI into its working practice, we believe the following companies are uniquely placed to benefit from its integration.
- Perhaps unsurprisingly given its massive status in the technology world, Microsoft stands to gain from the rise of AI. The computing giants were an early investor in Open AI, the minds behind ChatGPT, and have recently incorporated the software into its Bing search engine. Microsoft are also utilising AI to enhance their existing products, an example of this being Co-Pilot, a productivity enhancing tool designed to function alongside the Microsoft office programmes that are so embedded in our everyday life.
- Nvidia is a US listed global leader in industries such as gaming, professional visualisation, and automotive markets and has proven to be a hot stock this year. Its popularity with investors lies in the fact that the company’s products have thus far proved integral to the development of AI. AI models require thousands of high-powered GPUs to run effectively and Nvidia currently dominates this space, holding about 88% of the market share. Furthermore, Nvidia is also taking advantage of the opportunities around AI services, offering pre-built models and consultations to a variety of industries.
- McDonalds may not stick out as an obvious beneficiary of AI at first, but we have identified some key areas where its implementation could drive huge increases of efficiency. In recent years McDonald’s has put more emphasis on its digital operations ranging from its in-store ordering boards through to the development of its mobile app. We believe that generative AI can provide a further chapter in McDonald’s digitisation story by driving sales and cutting labour costs. AI could be implemented into McDonald’s drive throughs and its mobile application to create a more tailored experience, recommending different menu items depending on factors such as the weather and time of day.
Navigating opportunities in a rapidly evolving market
Only time will tell just how much AI embeds itself in our everyday lives and which companies will truly benefit from its development. However, it is important that investors keep a close eye on how the sector evolves to ensure they are best-placed to take advantage of investment opportunities.
With fast-moving situations, like that of AI, seeking financial advice can help you take the most effective course of action. If you currently manage your own investments, you may wish to consider delegating management to an expert Adviser from Killik & Co who will closely monitor the markets and recommend further opportunities to position your portfolio to take advantage of any new developments*. A further benefit of delegating management of your portfolio is the opportunity to benefit from the combined expertise of our Research, Investing and Wealth Planning teams, who can tailor a solution to meet your unique financial needs.
To learn more about how we can help with investing in this space or request a recording of the webinar, please email [email protected].
* As is the nature with all investing, your capital is at risk and you may not receive back the same amount you put in when you choose to cash out your savings.
