Opportunities and Challenges of AI

I am sorry Dave, I’m afraid I can’t do that….

Many people are fearful about the sudden explosion of the use of Artificial Intelligence (AI) in everyday life. We wonder if the movie 2001: A Space Odyssey, which was released in 1968, has something to do with it. The above quote is from HAL, the onboard computer that takes over the space mission and is able to kill everyone except Dave.  Will the future of AI include an epic showdown between humans and machine? We do not know the answer to that of course, but we do have a few thoughts about the potential impact of AI on the economy and the markets.

 Artificial Intelligence has the potential to significantly impact society, the economy, and investments in various ways. AI’s impact can already be felt in academics. Gone are late nights at the keyboard to finish a last-minute assignment. Students can now use ChatGPT to write about any subject and have their essay complete in seconds. ChatGPT still struggles to get everything right, but the more it learns the better its output will be. Teachers and professors are trying to adapt and decide how to deal with AI in education. Other industries will have similar challenges (and opportunities).

Similar to the Industrial Revolution, AI will create new job opportunities, but it will also result in the displacement of certain roles, requiring individuals to acquire new skills or transition into different professions. Learning to work with AI will be a significant factor that will determine employee and company success in the future. In April of this year, Goldman Sachs issued a report that AI could raise global GDP by 7% (or almost $7 trillion) over the next decade and lift productivity growth by 1.5% over that same time frame. https://www.goldmansachs.com/intelligence/pages/generative-ai-could-raise-global-gdp-by-7-percent.html

Investing in AI will be an evolving opportunity. AI-focused companies in hardware infrastructure, data analytics, healthcare, and cybersecurity are sectors with potential for the most growth. So far, the companies who have benefited the most from AI have been large tech companies, especially Microsoft, Google, and Nvidia. Many investors have benefited from the AI fueled rise in stock prices as these are some of the most widely held stocks in many mutual funds and indexes. While the future for AI and the potential benefits seems very promising, we continue to believe that portfolios need to be balanced and diversified as AI fueled stock gains will continue, until they don’t, like the tech bubble whose implosion was moderated by those who held non-tech stocks in their portfolios.

We hope you enjoy your Summer and feel welcome to call us with any questions or concerns.

The Bond&Devick Team