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Invesco
Updated 30 Jun 2023
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Disclaimer

This is a non-independent marketing communication commissioned by Invesco. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

It is the stuff of science fiction – from 2001: A Space Odyssey to Star Trek, Star Wars, Red Dwarf and beyond. The recent launch of ChatGPT, an artificial intelligence (AI) chatbot that can answer questions like a human, brings us closer to a world where computers become interchangeable with people in many roles.

Schools and universities are having to revise how they examine students, who can now ask ChatGPT to write their essays – and receive an answer in seconds. It will even write love poems for them – move over, Cyrano de Bergerac!

This is just the start. Google has introduced its own AI chatbot, Bard; Microsoft is incorporating similar technology into its Bing search engine; and Baidu, China’s main search engine, has its own chatbot, Ernie.

It may seem scary, but it is also exciting. AI chatbots allow us to interact with technology in smarter ways. The benefits will extend far beyond homework and courting. Experience has probably taught you to be quite limited in the way you phrase questions for search engines today. That will change. Looking for a Cornish cottage that has three bedrooms, is no further than two miles from a beach and accepts pets? Now you should be able to find the answer much more quickly. The search engine should do the refining, not you.

There is, though, a price to this. First, there are the billions that will be invested in the software. And then there is the hardware. AI will demand ever-greater processing power.

A research paper from Stanford University, Nvidia and Microsoft Research1 highlighted the challenges a couple of years ago. Machine-learning algorithms can require billions of computing operations. If you cannot wait several hundred years for your answer you will need multiple processors running in parallel.

One company involved in the AI revolution is California-headquartered Broadcom. You may not have heard of Broadcom, but the company estimates that 99.9% of all internet data traffic passes through its technology at some point on its journey.

One of Broadcom’s specialisms is chips for networking – it generated $200m in revenue from these in 2022 and expects that number to quadruple this year2.

It also makes components for smartphones, set-top boxes, wi-fi routers, DSL gateways to the internet, technology used in cars for vehicle connectivity, cameras and sensors. It has a business geared to providing infrastructure for data centres, which we will need more of in an AI world, and it is involved in cyber security as well. The switch to 5G also benefits Broadcom.

There are risks, of course. The semiconductor industry is highly sensitive to the state of the economy while rapid technological change leaves the business at risk of being overtaken by disruptors. But Broadcom has demonstrated an ability to invest well in Research & Development and make smart acquisitions. It is significantly expanding its AI capacity and building new data centres specifically equipped to support next-gen AI hardware.

With a wide array of revenue flows in sectors that are critical to society, as well as strong cash flow and opportunities for growth, it is a company I consider worthy of inclusion in our portfolio.

Stephen Anness
Head of the Global Equities team

1 https://arxiv.org/pdf/2104.04473.pdf

2 New Street Research March 2023

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

The use of borrowings may increase the volatility of the NAV and may reduce returns when asset values fall.

The Invesco Select Trust plc uses derivatives for efficient portfolio management which may result in increased volatility in the NAV. In addition, some companies are suspending, lowering or postponing their dividend payments, which may affect the income received by the product during this period and in the future.

The Invesco Select Trust plc – Global Equity Income Share Portfolio invests in emerging and developing markets, where difficulties in relation to market liquidity, dealing, settlement and custody problems could arise.

Important information

Data as at 5 June 2023 unless otherwise stated.

This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

Views and opinions are based on current market conditions and are subject to change.

For more information on our products, please refer to the relevant Key Information Document (KID), Alternative Investment Fund Managers Directive document (AIFMD), and the latest Annual or Half-Yearly Financial Reports. This information is available using the contact details shown.

Further details of the Company’s Investment Policy and Risk and Investment Limits can be found in the Report of the Directors contained within the Company’s Annual Financial Report.

If investors are unsure if this product is suitable for them, they should seek advice from a financial adviser.

Issued by Invesco Fund Managers Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the Financial Conduct Authority.

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