Ongoing demand from large technology companies and strong support from the U.S. government is solidifying the fundamentals of artificial intelligence investments for institutional investors, says Gurvir Grewal, a U.S. specialist from William Blair’s global equity team.
“At the beginning of the year we had concerns around DeepSeek, we had political uncertainty with Trump and the tariffs but as the market has looked past those more near-term stories, the fundamentals and demand for AI-related products has driven [public equities] in this space to make all time highs.”
Read: 2024 Risk Management Conference: How can AI play a bigger role in investment decisions?
As part of the larger technology sector, AI investments can be split into three general categories — software or service providers, pick-and-shovel operators and consumer facing hyperscalers — for investors to review, he adds.
Concerns for fading demand from some of the biggest corporate technology companies like Google, Meta Platforms Inc., Amazon Inc. and Microsoft Corp., hasn’t materialized, he says.
“From the industrial side, . . . from power providers, utilities show that the demand for AI [computing needs] is still very strong.”
It’s been a busy year for AI deal-making from some of Canada’s biggest pension funds, with recent deals coming from the Public Sector Pension Investment Board and the Healthcare of Ontario Pension Plan joining a $500 million funding raise from Cohere, a Canadian enterprise AI firm offering business solutions. Similarly, the Ontario Teachers’ Pension Plan recently invested US$40 million in an AI human resources platform called Darwinbox.
These type of specialized industry solution tools for finance or HR demonstrate the need for AI models to be fine tuned to specific use cases, he says.
“You can take a model and it’s just a general representation of the world or of the language it needs to be customized for the specific end use case. . . . They become particularly useful when you think about the complement.”
A 2024 report from the Canada Pension Plan Investment Board found the ultimate goal of an effective AI integration strategy shouldn’t only be productivity improvements but institutional investors should be ready to engage with investee companies about the rapid convergence of AI with talent strategy.
Read: Survey finds Canadian employers are balancing opportunities, challenges of AI