AI Dominates the Investment Scene

Tim Clift

Chief Investment Officer

As Hollywood writers and actors take to the picket lines, artificial intelligence (AI) is having its 15 minutes of fame. To be fair, AI has been at the forefront of tech innovation for decades, with chatbots and self-driving cars among its buzzy commercial applications.

Public interest in generative AI shot up dramatically late last year following the introduction of the prolific chatbot ChatGPT, which attracted a million registered users within five days of its release and an estimated 100 million users two months after launch.

And as an investment theme, it’s certainly not new to us. We own and will continue to own AI stocksA financial instrument giving the holder a proportion of the ownership and earnings of a company. as part of our core portfolios—they’ve driven growth for us just as they have for the broader market. One could even argue that the present bull marketA period during which stock prices rise significantly from recent lows for weeks, months or years. is a result of investor enthusiasm for AI. As we’ve mentioned in recent weeks, most of the gains in the S&P 500 year-to-date have come from a handful of companies, including Nvidia, Microsoft and Tesla. One thing these mega-techs have in common is that they all create AI-based products and the chips they run on.

Beyond our core portfolios, our private markets offering provides accredited investors with access to earlier-stage AI companies that are not yet publicly traded.

The way we see it, an increasing number of businesses and industries are lining up to adopt AI, boosting efficiency and raising their potential for profitability. According to Goldman Sachs, estimates that this technology could boost annual productivity for S&P 500 companies by 1.5% over the next 10 years, which would flow through to higher earnings per share for investors. The health care, education, financial services, retail and manufacturing industries all stand to benefit from the adoption of AI.

There are caveats we’re watching as well. For instance, government legislation or ESG concerns could possibly slow commercial adoption of generative AI. Another fly in the ointment is questionable accuracy. Like social media and plain vanilla search, ChatGPT and its competitors sometimes spit out replies that are demonstrably false—and acting on bad data opens up numerous legal and reputational risksThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. for businesses.

Our research team is on top of this macro trend and we’re here to talk to you about how it is (or is not) dialed into your specific portfolio plan now and in the future. Let us know what questions you have—we’re here to help.