When investing in technology companies with artificial intelligence capabilities, it’s important that institutional investors ensure these entities own — or have relationships with large internet players that own — proprietary data that can deliver value, said Rob Zeuthen, head of secular pod and senior portfolio manager at Newton Investment Management, during the Canadian Investment Review‘s 2023 Investment Innovation Conference in November.
Artificial intelligence is about maximizing the value of data and turning it into useful information, products and services that deliver outcomes. It’s not only going to maximize the data collected, it’s going to contribute to it, he said, noting investors who have positions in large internet or software companies that are collecting, storing and analyzing these data are going to continue to compound their growth for many years.
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As AI is increasingly adopted over the next few years, it will continue to be a strong investment theme due to aggressive advancements in what the technology can achieve. According to research by Newton Investment Management, AI may boost projected 2030 global gross domestic product by 15 per cent.
“So this could drive trillions of dollars of incremental gross domestic product that I think investors are becoming aware of,” said Zeuthen.
However, the software industry could soon see consolidation to the point where it becomes increasingly competitive around data. “Everyone’s being a little bit careful with the technology and [are] really using it more for internal purposes. Over the next several years, we’re going to see the industry . . . evolve and there are going to be new winners that we’re starting to talk to that are focused on either building the semiconductors, building the equipment that will make the semiconductors, or, longer term, making the networking equipment and sensors that will help process all of the data.”
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The retail sector is well positioned to benefit from artificial intelligence. “What you’re seeing with health care in terms of getting personalized and customized care is going to happen in many other different types of industries and retail is no different. It’s going to lead to mass customization [and] more personalized goods and services that’s going to give advantages to companies that can use AI to be much more agile at scale.”
Industries that will lag around AI are those tied to regulation, he said, noting while regulation is important to protecting consumers, it can slow innovation. But the bigger risk lies in the ability for AI to compromise trust. “What I most worry about is . . . low-quality data and bias.”
Before using a company’s AI model, Zeuthen encouraged institutional investors to have rules and systems in place to to ensure the information is used responsibly and is compliant with regulations.
Read more coverage of the 2023 Investment Innovation Conference.