Thematic investments can originate from a number of different drivers: technological advancements, demographic trends, evolving consumer preferences, or changes to regional economies. Identifying these structural shifts and the associated investment opportunities can be challenging and requires a long investment lens. We believe that artificial intelligence (AI) has reached an inflection point and is poised to fundamentally change a broad segment of the economy and society over the coming decade. AI has the potential to disrupt a wide range of industries, such as health care, financial services, and retail, leading to productivity and efficiency gains for businesses. In this paper, we discuss the growing investment opportunity in AI as it becomes more ingrained into every facet of our work and lives.
AI, long the staple of science fiction, is quickly moving into the mainstream. Believe it or not, AI has been used since the 1950s to automate repetitive tasks, improve customer service, and perform predictive analysis in sectors like manufacturing, where a machine’s ability to learn complex patterns in large amounts of data enables companies to detect anomalies in factory assembly lines or aircraft engines before they fail. However, recent advancements in the cloud, computing power, and big data have been instrumental in expanding AI capabilities and making machines faster, cheaper, and more accessible, helping to accelerate adoption.
Big data refers to very large and complex data sets that can be used to discover market trends, insights, and patterns, and to help companies make better business decisions. As big data emerged, so did new cost-efficient technologies capable of storing, processing, and deriving insights from it. The onset of the pandemic in 2020 was also a pivotal moment as a limited supply of labor spurred more companies to utilize AI and automation in critical roles across the economy. The greatest increase was in health care, as the world sought more effective solutions to tackle the health crisis. The global AI market is forecast to expand from $390 billion in 2023 to $1.4 trillion in 2029 at an annualized rate of 20.1%.1
Now, the emergence of new generative AI tools, such as OpenAI’s large language model ChatGPT—able to create novel content, including audio, code, images, text, simulations, and videos—has resulted in a renewed surge of interest in AI from businesses and investors. Generative AI describes algorithms that can be used to create new outputs based on the data it is trained on rather than simply analyzing or processing existing information. Commercial applications of generative AI hold the promise of boosting productivity through the automation of a wider range of routine and more complex knowledge-based careers, such as lawyers, journalists, and architects. The time to complete tasks like drafting an article or legal document could shift from hours to just seconds, leading to greater productivity and lower costs for companies.
Generative AI could also bring immense value to a diverse range of fields that requires vast amounts of data to gain insights into their business, such as insurance, security and fraud protection, robotics, and self-driving vehicles—supporting innovation and the creation of better products and services. For instance, replacing traditional data collection methods with data generation in health care is allowing companies to train models more quickly and efficiently, helping to reduce the time and cost of developing new drugs and treatments. We believe generative AI will have far-reaching implications for the labor market, economic growth, and investors in the coming decade and beyond. At Wilmington Trust, the Investment Management team is focused on investing in the companies and industries that are capitalizing on these technologies to maintain a competitive advantage and generate sustainable, long-term returns.
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