Artificial intelligence and the economy: paradigm shift or hype?
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Artificial intelligence and the economy: paradigm shift or hype?

We sat down with three of our technology experts to get their thoughts on the opportunities in artificial intelligence (AI):

AI has become top of mind for investors and the market more broadly. What has been the driver of this narrative shift?

Sanjay Devgan: People have been trying to model human intelligence in computer systems for 30-plus years. What’s interesting now is the confluence of computing power, connectivity and storage – those are the fundamental building blocks.

 

On the compute side, we went from millions of transistors to tens of millions, to hundreds of millions, to billions – so compute power has increased exponentially. If we’re talking about connectivity, we are now shipping switches that are capable of supporting 25.6 terabits per second (one terabit is a trillion bits per second). Next year, we are going to start shipping 51.2 terabit switches.

 

And then you’ve had a coincident increase in memory capacity. This confluence allows you to run the calculations required for AI. If you boil it down, AI literally is just billions and billions of calculations, just simple math matrix multiplication. But you need to do it many times and then you need to bring that  back. The calculation isn’t complex. It’s just the number of nodes needed to process it is massive.

 

Rahul Narang: AI has been topical for several years, but the inflection started tohappen last year when companies finally had the computing power and the data to harness more performance from deep neural networks. OpenAI released ChatGPT in late November for public use, which received widespread media coverage and investor interest.

 

Paul Wick: ChatGPT was the opening salvo. And then it turned out literally a week or two later that Microsoft had invested $10 billion to gain a controlling stake in OpenAI, and that raised a lot of eyebrows.

 

Narang: I should say that while it seems like AI is a new thing, it’s not new to us. It’s been something we have been researching and investing in for many years with the help of the deep bench of central research analysts at Columbia Threadneedle Investments.

How does the advent of AI compare to things like the launch of the internet, cloud-based computing or mobile devices?

Wick: I think the advent of generative AI, and AI in general, is going to rival the advent of the internet and mobile computing as a significant trend in the technology marketplace. One area in which it’s going to be a little bit different is that it is not necessarily a distribution engine. So, you think about the internet and mobile devices – you’re able to consume games, do commerce online and view advertisements. Those developments were big distribution developments as well as new technology developments. Generative AI, I think, is going to be a very powerful tool for knowledge workers in particular, and I think it’s going to make the internet just easier to use and much more powerful.

 

Narang: We are viewing AI as the next platform transition. We had PCs, the internet, the mobile era and cloud computing, and now we’re seeing AI. Similar to how some of these other technologies had a lasting impact on the global economy, we expect AI to add $7 trillion of global economic impact over a 10-year period.

What are some of the areas of opportunity in AI that you are excited about?

Narang: The speed of innovation from companies around AI is breath-taking. We are seeing a faster cadence of product releases that is helping create better products for end-users. For example, Microsoft has released several co-pilots that could help drive productivity gains when writing code. Other areas where we see AI used by companies are in customer service, IT help desks, content creation, fraud detection, supply chain optimisation as well as predictive maintenance.

 

The emergence of AI in health care is reshaping how patients are diagnosed, treated and monitored. Nvidia is doing a fair amount of work here. Specialised large language models should help speed up the discovery of life saving drugs. We also expect to see more advanced use cases in autonomous driving and robotics over time.

 

Devgan: There are obviously a lot of great tangible things that you can point to today. But I don’t think the really big thing has been developed yet. I think it’s going to be somebody, you know, some kid sitting in his college dorm asking “How do I leverage this?”. If we go back to the transition from 3G to LTE and cellular handsets, I remember as a consumer I would just look at the web on my phone thinking, why do we need LTE? But you had businesses like rideshare applications, things like Uber and Lyft that could not exist in the 3G realm and that came to fruition because of that advance.

Figure 1 the opportunity set for AI is expected to expand

How fast do you expect to see these AI-related changes unfold?

Narang: The speed of change is hard to predict, but so far it is fair to say this has been faster than most investors expected – ChatGPT reached 100 million users quickly, and Nvidia recently delivered quarterly results with guidance a few years ahead of schedule. We continue to expect sporadic breakthroughs as the technology evolves.

27 September 2023
Sanjay Devgan
Senior Portfolio Manager, Technology
Paul Wick
Paul Wick
CIO, Seligman Investments, Equity Team Lead, Technology
Rahul Narang
Portfolio Manager, Technology
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Artificial intelligence and the economy: paradigm shift or hype?

Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk.  Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

 

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act and relies on Class Order 03/1102 in marketing and providing financial services to Australian wholesale clients as defined in Section 761G of the Corporations Act 2001. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

 

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

 

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

 

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

 

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

In Switzerland: Issued by Threadneedle Portfolio Services AG, an unregulated Swiss firm or Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

 

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA).  For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

 

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. 

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Important information

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk.  Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

 

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act and relies on Class Order 03/1102 in marketing and providing financial services to Australian wholesale clients as defined in Section 761G of the Corporations Act 2001. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

 

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This advertisement has not been reviewed by the Monetary Authority of Singapore.

 

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the Companies Ordinance (Chapter 622), No. 1173058.

 

In Japan: Issued by Columbia Threadneedle Investments Japan Co., Ltd. Financial Instruments Business Operator, The Director-General of Kanto Local Finance Bureau (FIBO) No.3281, and a member of Japan Investment Advisers Association and Type II Financial Instruments Firms Association.

 

In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.

 

In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.

 

In Switzerland: Issued by Threadneedle Portfolio Services AG, an unregulated Swiss firm or Columbia Threadneedle Management (Swiss) GmbH, acting as representative office of Columbia Threadneedle Management Limited, authorised and regulated by the Swiss Financial Market Supervisory Authority (FINMA).

 

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA).  For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

 

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. 

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