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For Investors Looking Beyond Daily Market Fluctuations, AI Provides a Compelling Proposition

Opinion

For Investors Looking Beyond Daily Market Fluctuations, AI Provides a Compelling Proposition

A senior executive at Credit Suisse reflects on the types of artificial intelligence-powered companies that offer the most promise

Michael Strobaek | 11:29  23.04.2018
Daily news broadcasts across the globe regularly end on how global markets have closed. For those watching or listening, this may trigger either a smile or a grimace, depending on the direction or the level of the market movement.

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Multi-asset portfolios, however, usually have a longer-term time horizon and seek to benefit from the predictability and sustainability of multi-year trends. This includes: demographics, transformational socioeconomic and political developments as well as technological and scientific progress.

Michael Strobaek, Chief Investment Officer of Credit Suisse. Photo: PR Michael Strobaek, Chief Investment Officer of Credit Suisse. Photo: PR Michael Strobaek, Chief Investment Officer of Credit Suisse. Photo: PR
We have identified five key long-term investment themes, or "supertrends," that will play a key role in coming years and provide interesting investment opportunities: Angry Societies (which refers to the disillusioned middle class in the Western countries), Technology, Infrastructure, Silver Economy (and the aging of the population) and Millennials. For all five supertrends, artificial intelligence will be the star protagonist.

AI, an integral part of digitalization, has tremendous growth potential, because most sectors are likely to be working with AI in the future.

The progress made by the IT industry in collecting, analyzing and managing data in real time now enables us to make intelligent machines and computer programs that can learn by themselves and solve problems that previously required human intelligence.

AI, where Israel’s high tech sector is also playing a key role (Israel boasts some 400 start-up companies that use AI technology as a core part of their offerings), is expected to touch most industries one way or another, as it is believed to significantly improve productivity, cut costs and provide a competitive advantage.

Autonomous vehicles, speech recognition and natural language processing are currently in focus, with products such as Amazon’s Alexa or Google’s home assistant gaining immense popularity. While these large companies are expected to maintain their lead, there is also a strong ecosystem for AI-related startups that have attracted strong interest from venture capitalists.

Investors can benefit from certain companies in particular. We believe it makes most sense to focus on “enablers” (companies which provide the processing power or software application vendors that facilitate AI-based IT services t) that, in our view, will be the first to benefit from the expected growth in AI usage and machine learning.

Another category of beneficiaries is made up of the cloud platform providers that already offer AI-as-a-service platforms on which companies can build their own tailor-made AI solutions. A third group of enablers includes IT service companies, which could benefit from rising corporate demand.

According to market researcher IDC, the area of software and services is expected to attract close to half of all AI revenue, with a focus on applications such as text and media analytics, search, visualization and navigation, as well as cognitive software platforms. Of the sectors, financial services and healthcare have been the first sectors to invest heavily in AI over the past decade due to the vast amount of customer data these institutions possess.

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No matter what companies investors focus on, the trend towards AI is secular in nature. Therefore, the area provides a compelling proposition for investors looking beyond the daily market movements.

Michael Strobaek is the Global Chief Investment Officer at Credit Suisse.
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