Chance of no winner in AI race, warns Terry Smith

TOP fund manager Terry Smith has warned that the race to dominate artificial intelligence may not produce a clear “winner”.

The 70-year-old stockpicker, who manages £24bn of assets at Fundsmith, said he was sceptical about investors’ ability to identify developers most likely to benefit from AI.

In a letter to investors yesterday, Mr Smith said: “Maybe there won’t be a winner, either in the provision of large language models or their use.

“There are numerous large language models in development and deployment by the major tech companies.

“The adoption of AI may lead to a situation where everyone has it, so no one has any advantage.”

Excitement around AI drove huge markups in the value of US tech shares last year. Chipmaker Nvidia tripled in value while Microsoft shares rose 60pc as investors sought to back companies most likely to dominate AI.

However, the veteran investor said early technology leaders rarely gain control of a market, pointing to Nokia, Yahoo and Myspace as early winners that faded. Despite Chatgpt’s current dominance, several other large language models are also in development, including Gemini from Google owner Alphabet and Llama 2 from Meta.

Regulators have become increasingly uneasy about the ability of tech giants to steal a march on AI. The EU’S competition watchdog yesterday said it was considering whether Microsoft’s investment in CHATGPT owner Openai merited a full-scale merger investigation.

The agency can block deals it deems anti-competitive.

The Competition and Markets Authority is also studying the deal with a view to opening its own inquiry

Mr Smith’s annual letter to Fundsmith shareholders is a closely watched affair. In 2022, he criticised Unilever for focusing on the social purpose of Hellmann’s mayonnaise.

The flagship Fundsmith Equity fund racked up its third year of underperformance last year by failing to keep pace with the global benchmark.

The fund made investors 12.4pc versus nearly 17pc for the MSCI World Index which tracks global stocks. The biggest detractor from performance was the beauty brand Estée Lauder.

‘The adoption of AI may lead to a situation where everyone has it, so no one has any advantage’