AI – business as usual is over
U COMMENT Ben James of Baillie Gifford US Growth Trust alerted delegates to the revolutionary role of artificial intelligence
As investment specialist director at Baillie Gifford US Growth Trust, I took the opportunity afforded by the Scotsman Investment Conference to explore the transformative impact of artificial intelligence (AI) on the economy and markets, highlighting the exponential growth and potential future developments and challenges in the field.
AI has in fact been around for decades, but has now reached a pivotal moment – akin to the advent of the PC, the internet, or the smartphone – suggesting we may be at the cusp of another computing paradigm.
THE DRIVERS OF AI’S EXPONENTIAL GROWTH
Two significant changes have propelled AI to the forefront: unprecedented computing power, and a data explosion.
Moore’s Law, the principle that computing power doubles approximately every two years, has held true, leading to a staggering increase in the capabilities of chips, exemplified by the evolution from the Intel 4004 chip in 1971, with 2,350 transistors, to the Apple Max 3 chip in 2023, with 92 billion transistors.
Concurrently, the volume of data has grown exponentially, with 90 per cent of all data being produced in the last two years alone. This synergy of computing power and data availability has made machine learning algorithms not just feasible, but also now highly effective.
THE ROLE OF ALGORITHMS
Algorithms, essentially sets of instructions for specific outcomes, are crucial in AI. Machine learning algorithms in particular enable outcomes without human programming, marking a transformative shift in computing. They have made prediction cheap, and nearly everything in life involves some sort of prediction.
THE ECONOMIC IMPLICATIONS OF AI
AI’S ability to make predictions cheap and efficient has wide-ranging applications, from Netflix recommendations to Tesla’s autonomous driving, to revolutionising healthcare and beyond. From enhancing decision-making processes to optimising operations, AI’S application spans across industries, making it a critical driver of future economic growth.
Companies like Nvidia have emerged as key players, with their special computer chips called Graphic Processing Units (GPUS) enabling accelerated computing essential for AI’S development.
This technological advancement suggests a possible shift towards a new era of economic activity, where AI plays a central role in driving innovation and productivity.
CHALLENGES AND OPPORTUNITIES AHEAD
While the exact trajectory of AI’S impact remains uncertain, its ability to transform industries by making certain resources abundant and others scarce is evident.
For instance, the shift towards generative AI could reduce the demand for traditional coding, elevating the importance of highquality, curated data.
Similarly, the emphasis on trust, verification, and energy efficiency underscores the evolving challenges and opportunities within the AI landscape. Companies on the right side of this change should thrive. Business as usual is over for those on the wrong side.
INVESTMENT IMPLICATIONS
For investors, the rise of AI presents both challenges and opportunities. The Baillie Gifford US Growth Trust offers broad exposure across the AI value chain. Companies that are at the forefront of AI development, such as Nvidia, or those that provide essential infrastructure, like Amazon Web Services, are already benefiting from this shift.
On top of this infrastructure, internet security firms like Cloudflare are also potential winners. Companies like Samsara are helping traditionally nondigital industries harness the power of AI – it currently helps with truck fleet management by attaching sensors to collect data and uses AI to generate valuable insights for its customers.
And, at the consumerfacing end of the chain, leading companies are integrating generative AI to enhance their products and services, such as the language learning app Duolingo, which has an Ai-powered teacher embedded in its top subscription tier.
However, discerning the long-term winners requires a patient and strategic approach, focusing on firms that not only leverage AI technology but also contribute to its evolution. This is why Baillie Gifford constantly speaks to leading minds in AI across industries and academia.
CONCLUSION
AI represents a significant shift in the computing paradigm, with far-reaching implications for the economy, markets, and society at large. As we stand on the brink of this new era, the ability to adapt, innovate, and anticipate future developments will be crucial for businesses and investors alike.
The Baillie Gifford US Growth Trust has broad exposure, but the journey of AI is just beginning, and its full potential and impact remain to be seen.
AI’S application spans across industries, making it a critical driver of future economic growth