In the financial markets, not a day goes by without the mention of artificial intelligence (AI), yet it is by no means a recent phenomenon. Since its intelligence has not dramatically amplified overnight, what could explain this escalating prominence? To answer this, we look back to two groundbreaking moments in technology history identified by Bill Gates himself as pivotal during his lifetime: the introduction of the graphic user interface (GUI) and the late 2022 AI demo from ChatGPT. Both instances signify a crucial turning point – and the democratization of complex technologies – which helped to make them accessible and usable for the average individual. Such a shift has transformative implications for businesses and the investment landscape.
According to research from OpenAI (a leading company in AI research), an estimated 80% of professions can integrate generative AI, a system that has the ability to create a range of media, such as images, text, or music, based on learned patterns and given inputs. Discounting this figure by half still leaves a significant proportion of industries impacted, with obvious implications for employment within them. While predicting the long-term effects remains challenging due to the rapid growth of AI, we can form an educated forecast for the medium term.
Impact of AI on businesses
We can anticipate AI’s impact on businesses through three primary lenses: 1) operational disruption, 2) competitive reshaping, and 3) accelerated innovation.
Operational disruption will stem from AI’s ability to automate routine tasks, forcing businesses to reconsider their workforce strategies. Industries focused on consumer experiences, like retail and e-commerce, stand to gain immensely, enhancing their offerings with tailored recommendations and more efficient services through AI-driven mechanisms such as chatbots. Those businesses that get it right will clearly be the ones investors should back.
Next, we see competitive reshaping as AI alters the competitive landscape within industries. Yet, this goes beyond mere cost savings. As AI-enabled competitors proliferate due to the democratization of the technology, companies must quicken their innovation pace to survive and thrive. For example, large retailers have harnessed AI models that analyze historical and real-time factors such as weather, traffic, and demand patterns to make more accurate inventory decisions. Walmart’s use of predictive AI during the 2022 Thanksgiving and Cyber Monday sales had allowed them to place sufficient inventory in the right locations at the right time amidst the surge of 17 million additional shoppers.
With AI in the mix, we foresee an accelerated rate of innovation across sectors. In research, AI functions as an “always on” 24/7 assistant, meticulously analyzing voluminous research papers, providing insightful conclusions, and potentially solutions unattainable by human means alone. An illustrative example is AI’s use in medical research to discover novel drug combinations, shortening development timelines significantly. Insilico Medicine, a biotech company, utilized AI to accelerate the discovery of potential fibrosis drug candidates to just 46 days, as compared to years when using traditional methods.
Companies that stand to benefit from AI
In terms of immediate beneficiaries, the ‘data first’ companies, including tech titans like Google, Amazon, Facebook, as well as AI-centric startups, are the frontrunners. These organizations possess the necessary infrastructure and culture to harness vast amounts of data, a prerequisite for effective AI models. Further, AI-centric startups bring a fresh perspective to traditional industries and can become the Davids challenging the Goliaths by leveraging AI technologies.
Next in line are the manufacturers of AI-specific components like GPUs, ASICs, and TPUs, represented by companies like Nvidia, Intel, and AMD. Their offerings are essential for the functioning of AI, making them another potential beneficiary.
The third category of companies which also stand to gain comprises of those demonstrating innovation agility and a willingness to experiment with AI in their operations. Such firms are not confined to any specific industry; for example, it could be as varied as a small online bookstore using AI to recommend personalized reading lists, to a global logistics company using AI to optimize supply chain efficiency. However, one key caveat must be emphasized – successful AI integration goes beyond blind adoption. It requires strategic alignment with company objectives, necessitating a management mindset that prioritizes how AI can expedite or enhance the achievement of business goals, rather than mere implementation to keep up with competitors.
Conclusion
Given the potential of AI, its application across industries, and its ability to redefine competitive dynamics, it’s clear that AI could deliver outsize gains for those companies that look to be getting it right (in the same way that Google overturned the market for online search two decades ago). The eventual market leader will be the one that harnesses AI to obtain greater market share, increase capital and operational efficiencies, while expanding profit margins. Successful AI-enabled companies would be able to leapfrog competition or establish competitive moats in their sector. Identifying and capitalizing on the winners of this AI revolution will be key to delivering superior returns to investors for years to come.
