Artificial Intelligence (AI) has become a dominant force in 2023, with companies at the forefront of the AI revolution receiving attention and outperforming the market. In Q4 2023 earnings calls, 36% of S&P 500 companies mentioned AI, up from 31% in Q3, indicating a growing trend in the incorporation of AI into business strategies. Investors are presented with a challenge in navigating the AI hype and separating it from reality, but there are potential gains for those who can identify overlooked areas for applying AI technology.
Despite the futuristic connotations of AI, its current state is more akin to an open-ended computer program that mimics human learning by identifying patterns, making predictions, and analyzing results to improve continuously. AI is already a part of everyday life, from predictive text on smartphones to facial recognition unlocking techniques. While more advanced applications like automated vehicles and neural implants are on the horizon, the next stage in AI adoption may involve non-tech industries embracing the technology.
The potential for AI to accelerate scientific and medical research is one of the most exciting applications. AI can speed up pharmaceutical development by identifying optimal compounds, predicting drug efficacy, and cataloguing drug performance and side effects. Retailers are also leveraging AI to analyze customer behavior and manage inventory more efficiently. Ticket-sellers like Ticketmaster and StubHub use AI for dynamic pricing algorithms that adjust prices based on demand.
As AI technology continues to improve, it will replace human workers in various roles, leading to a shift in job requirements and an increase in demand for highly skilled roles like data scientists and engineers. Machines currently handle 34% of business tasks, a number expected to grow to 43% by 2027. Investors can position their portfolios for the AI revolution by maintaining market-cap weighted exposure to the US economy, allocating more heavily to tech sectors or AI-focused ETFs, or identifying financially healthy companies willing to invest in AI strategies.
The AI revolution is expected to permeate through all major industries and become a strategically necessary initiative. While many tech companies are already benefiting from AI growth, investors can also look for non-tech companies with healthy financials and a track record of R&D spending to potentially benefit from AI integration into their businesses. By identifying companies willing to invest in AI technologies, investors may find the next wave of beneficiaries in the AI revolution as it continues to reshape the business landscape. Ultimately, AI is poised to unlock efficiency and transform the way companies operate, making it a strategic focus across all industries in the years to come.
