As you read financial headlines, or, if you’re really interested and read a lot of earnings reports, you will see the term AI used a lot. Why? And why is it such a game-changer? While I am not a tech-wizard, my job is to understand enough of the business landscape to know the paths our future could take. After all, that is what investment is all about. So, here’s an overview of AI and why it is such an important driver of the markets today.
So, to start off, what is AI? It can get more granular than this, but it is essentially an umbrella term that refers to anything that allows a machine to do something that ordinarily requires a person. Think things like recognizing images, sounds, or the context of information.
Businesses are using these capabilities as tools to cut time and costs for analysis, development, and even prediction of demand and timing of their products and services.
Now, the interesting thing is that while headlines are going crazy and we’ve really only seen the driving force of AI in the markets for the last few years, in the strictest sense, the term AI actually was coined in 1956. Mostly it referred to machines doing anything on their own.
Of course, back then, the machines were primarily just repeating back what they had been programmed to do. For example, play a game of chess. Those were all rules that were programmed in.
We have now entered the age of machines attempting to mimic the way a mind works with “neural networks” posing, resolving, and suggesting solutions to problems. And every year they get better and better at it. This allows human interactions with machines to provide faster, more accurate data, increasing capabilities of all of us to create new things.
It is this capability to grow (with human assistance) that is providing all the excitement. First, the computing power needed for AI to run as fast as possible and to even experience it, requires processing hardware in the form of GPUs. GPUs are really good at hardcore math. Companies selling that hardware have benefited. The creation of the frameworks, tools, networks, computing farms, and a horizon of demand that seems to be endless. AI is creating new businesses and speeding up industries like never before.
Now, are there concerns with AI? Of course!
Regulators are debating and trying to figure out how to protect intellectual property rights. The output from AI still isn’t perfect. It can make mistakes.
What is exciting for investors is to know that, due to the efficiencies and benefits of AI, companies will be able to potentially create and adapt quicker. This will help their profitability. How much of that potential growth has been added to investors’ calculations already? It will be an interesting thing to watch.
Obviously, my team and I stay on top of all this information. While AI is a significant factor, it is not the only factor we are watching as we look to the future. If you have any questions, please reach out.
