In this episode of “Investment Management Foundations,” Ayako Yoshioka, Senior Portfolio Manager at Wealth Enhancement, discusses the rise of artificial intelligence (AI) in the corporate sector and the impact it’s having on investment markets.

VIDEO TRANSCRIPT BELOW

Hello, and welcome to another segment of “Investment Management Foundations.” My name is Aya Yoshioka, and I am a Senior Portfolio Manager here at Wealth Enhancement Group. Today, I'm here to talk about artificial intelligence. Chat GPT has become a well-known application, and it has created so much buzz for AI since its launch. Since then, there's been a race to invest in AI focused on the infrastructure needed to support the computational power and efficiency of processing complex algorithms and managing very large data sets. Artificial Intelligence continues to be a theme in equity markets, with 41% of S&P 500 companies mentioning AI during their conference calls in the most recent earnings season. And you can see that in this chart. In terms of how much it has grown, it was only 23% just a year ago, and according to a recent study by KPMG, 72% of U.S.-based CEOs believe AI is one of their top investment priorities in the coming years.

So, what is required to lay the foundation for businesses to access greater AI capabilities? Well, for now, the investments are predominantly the high performance chips. Everybody knows Nvidia, the semiconductor equipment needed to fabricate all of these chips, and the data centers that will house all the servers with these chips. Tech giants Microsoft, Meta, Amazon, Alphabet, and more are estimated to spend over a trillion dollars in AI over the coming years, and some believe the benefit to productivity and efficiency will accrue to businesses who adopt this technology, and it will allow workers to automate tasks. Goldman Sachs estimates that almost 20% of tasks that many of us do can be automated through the use of AI.

However, beyond just automating tasks, AI may be able to assist with drug discovery for biopharma or enhance fraud detection for finance companies, and further automate even manufacturing processes. The theme for AI and the performance of stocks that are tied to AI will encounter difficulties along the way. The electric grid may be under pressure with all these data centers consuming so much power in the coming years, and although everyone is focused on the picks and shovels phase of AI, there is yet to be a killer app that can really sort of disseminate AI across a broader market and create the return on investment that many companies are looking for, just given the sheer amount of cost related to the infrastructure for AI.

Despite both the excitement and the concerns, AI is likely to be a theme that will continue to be hotly debated in the coming months. Even if some feel that AI is in bubble territory, some bubbles do take longer to burst, and in the meantime, AI can deliver on its promise. Thank you for joining me today, and please tune in for another episode of Investment Management Foundations.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.

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