The Whys and Hows of Investing in Artificial Intelligence
Artificial intelligence has tremendous growth potential, because most sectors are likely to be working with AI in the future. Investors can benefit from certain companies in particular.
Artificial intelligence (AI) is an integral part of digitalization. The progress made by the IT industry in collecting, analyzing and managing data in real time now enables us to make intelligent machines and computer programs that can learn by themselves and solve problems that previously required human intelligence.
AI is expected to touch most industries one way or another, as it is believed to significantly improve productivity, cut costs and provide a competitive advantage. According to research by Statista, worldwide AI revenue should grow by a CAGR 2016 – 2025E of around 57% to USD 36.8 bn.
The Investment Trends That Result from Artificial Intelligence
Autonomous vehicles, speech recognition and natural language processing are currently in focus with products such as Amazon’s Alexa or Google’s home assistant gaining immense popularity. While these large companies are expected to maintain their lead, there is also a strong ecosystem for AI-related start-ups that have attracted strong interest from venture capitalists.
From an investor standpoint, we believe it makes most sense to focus on “enablers” (companies which provide products / systems that facilitate IT solutions/services e.g. semi.conductor companies etc.) that, in our view, will be the first to benefit from the expected growth in AI usage and machine learning.
Other beneficiaries are the cloud platform providers that already offer “AI as a service” platforms on which companies can build their own tailor-made AI solutions. A third group of enablers are IT service companies, which could benefit from rising corporate demand.
Sectors with the Most Investment in Artificial Intelligence in the Future
According to market researcher IDC, the area of software & services is expected to attract close to half of all AI revenue, with a focus on applications such as text/media analytics, search, visualization and navigation, as well as cognitive software platforms. Of the sectors, financial services and healthcare have been the first sectors to invest heavily in AI over the past decade due to the vast amount of customer data these institutions possess.