Artificial intelligence is everywhere – the paranoid will tell you it is taking over – but does the widespread use of AI present an investment opportunity over the long and short-term?
Not so long ago if you were alone in a room and said, “Alexa, add cat food to my shopping basket,” the result would have been a realisation that you had been talking to yourself again and that you didn’t actually know anyone called Alexa.
Now, virtual assistants are just an everyday example of the increasing ubiquity of artificial intelligence - computers processing vast amounts of information to make human-like decisions.
AI has become a boom industry with the technology cropping up all over the place from online shopping to virtual gaming. Alexa’s master Amazon is one of the top investors in AI along with other big names such as Google, Apple, Facebook and Microsoft.
The rise of AI can be seen in the way the big companies are keen to attract the best talent.
Google France recently announced that is funding an artificial intelligence and visual computing chair at the École Polytechnique in Paris. It also has AI research centres in Beijing, New York, Toronto, London and Zurich.
Last year Amazon opened a second development centre in Cambridge, England, employing another 400 research staff looking at everything from extra jobs for Alexa, to drone deliveries.
Buying the so-called FANG stocks would seem to be an obvious way of taking advantage of the rise of AI.
But AI is only a small part of what the FANG companies do and the FANG stocks have been having mixed fortunes recently with Facebook’s data sharing issues sending its shares down more than 10% so far this year and Amazon’s tie up with the US Postal Service being criticised by President Trump.
So what other ways are there to take advantage of the rise of intelligent machines?
Picks and shovels
One way is to look at the parts that make AI work - the old approach of investing in the picks and shovels needed to drive the gold rush. This means looking at companies that make products such as high-end AI chips and memory chips.
Cyrus Mewawalla, founder and CEO of CM Research forecasts that machine learning will be the top technology sector this year. He says: “Deep learning will be the most important AI technology in 2018 with emphasis on voice-driven, conversational computing via digital assistants such as Amazon’s Alexa AI engine.”
He points out that memory chip makers will benefit from AI’s requirement for memory and also that the drive to develop AI application specific chips will intensify.