Artificial intelligence turbocharges the global economy
The development of artificial intelligence (AI) is gathering momentum. The technology is transforming entire strategies, increasing productivity and has the potential to boost the global economy. This can also benefit investors.
According to Bill Gates, describing the impact of AI: 'AI will be the most important development of this decade - as important as the development of the PC and the Internet'. And Bill Gates is someone who knows what he is talking about. The founder of Microsoft brought computers into every living room and changed the world. Now we are facing such a moment again.
'The development of AI is suddenly progressing much faster than most people could have imagined,' says Joris Franck, Equity Analyst at KBC Asset Management. 'We have reached the point where we are talking about generative artificial intelligence. Where ‘standard’ AI works on the basis of well-structured data, generative AI can handle unstructured data. It is able to extract connections from a seemingly unconnected hotchpotch of text, images and videos. That creates endless new possibilities.'
Generative artificial intelligence can extract connections from unstructured data, creating endless new opportunities
Joris Franck, Equity Analyst at KBC Asset Management
Boost for productivity and profit margins
ChatGPT has brought generative AI to the attention of lots of people and companies. 'This kind of application makes AI accessible. There has been a lot of talk about big data and AI in the past, but the truth is that these things were only accessible to very large corporations. For small businesses, the cost was prohibitive. But now even the smallest organisations are looking at ChatGPT to see how they might be able to use it. That’s a real game-changer,' says Tom Simonts, Senior Financial Economist at KBC.
Technology companies like Apple, Microsoft, Nvidia, Amazon, Meta, Tesla and Alphabet - the so-called Magnificent 7 - have paved the way for a true AI wave. They provide the necessary cloud infrastructure and computing power. 'The technology sector is clearly the first to benefit from this. But the whole economy can reap the benefits. It’s a matter of tailoring the capabilities of AI to fit other sectors as well. That would give a major boost to companies' productivity and profit margins and, ultimately, to economic growth.'
AI technology is already being integrated more frequently into a variety of sectors. 'With the help of generative AI, day-to-day administrative tasks such as communication, translations, marketing campaigns, software programming or analytics can be made much more efficient,' says Franck. In addition, the research firm Gartner is forecasting that within a few years, 30 per cent of new drugs will be developed using generative AI. It also expects 30 per cent of marketing emails to be automatically generated and personalised. And it will no longer be necessary to take notes during a meeting because an AI tool will automatically create a summary.
Even the smallest companies are looking at ChatGPT to see how they might be able to use it. That's a real game-changer
Tom Simonts, Senior Financial Economist at KBC Group
Investment opportunities
Integrating AI into existing systems and processes remains a challenge and takes time. There are also concerns about privacy, property rights and strict regulation, and the technology itself still suffers from a number of teething problems. 'Not everything is on point yet, that's very true; but that won’t slow down this new evolution,' says Simonts.
Investors can also capitalise on the trend, for instance by investing directly in companies that are benefiting from the AI evolution. 'AI will deliver big productivity gains for software developers, designers and even accountants. Demand for additional cloud infrastructure is also set to grow strongly, as is demand for software that offers AI-based solutions. 'The AI wave will require ever more computing power, and therefore semiconductor chips and devices,' says Franck.
'In addition, the indirect impact of AI on companies also offers opportunities for investors. Companies are feeling the pressure to implement AI in their business. If they don’t, they risk being put at a competitive disadvantage and disappointing investors in the long run,' Simonts concludes.
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This article is informational only and should not be considered investment advice.
