This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
Another (almost) quarter of 2023 and another three months of headlines dominated by AI. From the godfathers of the technology falling out over its impact on the human race to Wimbledon implementing AI commentary, you would have to be living under a rock to avoid the subject altogether.
Certainly, despite some naysayers early in the year pooh-poohing its impact entirely, some tangible realities have emerged. Yes, it can perform some helpful tasks: depending on your view of the Fab Four a new Beatles track is something to be heralded.
Yet, as with any tool, it has shown the potential to go off piste should it fall into the wrong hands – Meta’s decision to make its AI tech open source has led to chatbots being created that span from the inappropriate through to the illegal.
From an investing perspective AI noise also abounds. Following the release of Microsoft-backed ChatGPT in December 2022, Google and Meta have been scrambling to retake space in the narrative around the technology. At the same time, the potential for misuse has some investors fearing that they could be liable should the technology be used for malevolent purposes.
As with all technologies, many market participants have been deliberating on how to tap into what seems to be the next big thing. If this is you and you have any allocation to a global or US fund, then you can, to some degree, relax: you’ll probably own one of the big three discussed above and therefore have an exposure to AI regardless of choice.
However, AI is not the be all and end all of new technology, and with many industry experts cautioning that its tangible uses remain limited, it is possibly not the most profitable new technology as yet. Indeed, Apple somewhat infamously revealed earlier this month that it has opted to spend its research dollars primarily on new augmented reality technologies.
Of the investors we speak to, many focus on investing in technologies that have proven, profitable applications. In a recent conversation with the managers of JPMorgan Asia Growth and Income (JAGI), they emphasized the relatively low adoption of electric vehicles in China against forecasts. With that in mind, they have been buying materials suppliers to battery manufacturers, with the expectation of benefitting from adoption of this technology over time.
Another route to gaining exposure to new technologies is to invest through a sector specialist. Allianz Technology Trust (ATT) offers a differentiated exposure against US and Global funds by being overweight to the mid-cap area of the technology index. It also offers a relatively comprehensive exposure to the range of technologies dominating headlines for the tech true believer.
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