Artificial Intelligence- Investing in AI innovation leaders

Recent news coverage around advancements in Generative Artificial Intelligence (Gen AI) and Large Language Models has stimulated considerable investor interest in the breadth and depth of AI to reshape our day-to-day lives.
Artificial intelligence has the potential to add trillions to global economic growth, with broad influence across all sectors of the economy. Productivity gains are likely to be driven by gains in labour productivity, although labour displacement is also likely.
While the AI landscape is constantly evolving, dominant AI sub-themes continue to focus on deep learning, natural language processing, image and audio recognition, big data/cloud computing, and cybersecurity.
Aligning investments to capture AI growth can help investors participate in the transformative potential of Artificial Intelligence.

As Artificial Intelligence (AI) capabilities continue to evolve, the separation between machines and human intelligence is becoming less clear, paving the way for AI to fulfill functions traditionally limited to humans or requiring human input and oversight. Currently, advancements in generative AI are reshaping how AI can replicate human behaviour through the origination of text, image, and audio content that are increasingly indiscernible from human-generated content. Following the historical launch of OpenAI’s GPT model, Google and Meta among other major technology players have followed suit with launching their own large language models (“LLMs”) to the general public. These LLMs can effectively converse in human-like text, making general connections across vast knowledge domains and almost instantaneously answering queries or prompts across a broader scope than previously thought possible. And LLMs simply represent one facet of AI’s potential contributions to our everyday lives and the growth and productivity potential across the global economy.

Experts believe AI growth has the potential to dramatically increase capital efficiency, with the potential to add trillions to economic growth and to shift human labour away from mundane, repetitive tasks. The collection, analysis, and even creation of data has sweeping application across economic and social landscapes. At the same time, sceptics caution against the potential unintended consequences of AI, ranging from mass unemployment and increased wealth inequality to infringement on privacy and other personal liberties. What is inarguable is the increasing importance of AI in our daily lives.

In this paper, we will explore and define the broad categories of AI, illustrating real-life examples of AI application across industries. For investors, considering the effects of AI development on the investment landscape is an important consideration to investing strategically. Aligning AI investments with specific research areas is paramount for accessing the potential investment growth opportunities in the AI space. In this paper, we will dive into the importance of corporate research and development into highly relevant AI areas and the usefulness of patent approval data as measurement of AI development for companies. We argue that while AI research and development represents a less tangible asset than, say, building a factory, developing intellectual capital in the AI space is potentially a much more meaningful contributor to future revenue and profit growth across the most significant areas of AI development.