Three sectors being disrupted by AI revolution

Artificial Intelligence (AI) is transforming a broad array of industries across economies around the world, presenting a host of opportunities for investors.

While AI was previously challenging to access outside of the mainstream technology companies, the growing propensity for corporates of all types to invest in their own AI is opening up the market significantly.

Chris Ford, co-manager of Smith & Williamson’s recently launched Artificial Intelligence Fund, notes AI revenue growth worldwide is forecasted to grow from $1.4bn in 2016 to $59.8bn by 2025.

Ford, who manages the fund alongside co-manager Tim Day, says: “When investors consider artificial intelligence investing they may have the view that it is purely about technology companies like Google or Facebook.

But the truth is artificial intelligence has become a major area of interest - and investment - for all manner of companies, from the healthcare industry to financial services.”

Below, Ford identifies a number of sectors, and examples of stocks within them, currently included in the portfolio, on which AI is having a significant impact. He comments as follows:

1 - Healthcare

United Health Group:

“The giant US insurer is at the forefront of AI development within the healthcare industry, using AI to transform areas of business. This includes improving underwriting standards by using years of accumulated detailed medical data to better price patient risks, and enhancing its administration via automation. As well as this, United Health is also benefitting indirectly as AI is helping to improve patient outcomes.”

Align Technology:

“This medical device company owns Invisalign, the teeth-straightening company. Utilising AI, it uses image capture technology to streamline what was previously a very painful process of having braces fitted solely by dentists. Instead, the company uses image capture to create a series of mouth moulds which align teeth over time, with customers even able to receive their moulds in the post rather than have to come in and see dentists constantly for new braces.”

2 – Financial services

Ferratum:

“This German-listed online-only consumer loans company is completely changing the lending market in the various jurisdictions it is entering, thanks to AI. Using the latest technology, clients are assessed as soon as they interact with Ferratum’s various lending platforms, with algorithms at work noting what device a potential customer is using to interact with them, what internet provider they are using, and other such data.

“This gives Ferratum a powerful insight into their customers before the terms of any loan have even been discussed. AI is also embedded in the process so that the company is constantly learning from all the lending it does.”

3 - Media

Netflix:

“One of the most famous companies on the planet, Netflix uses AI in two key ways. First, it learns users’ viewing habits, using straightforward machine learning to make sure it serves customers with the content they are likely to be interested in. Second, it is developing its own content, and by learning what customers like and what turns them off, Netflix is able to create more of the types of shows the majority of its audience wants, limiting the downside risk of investing time and money in flops which fail to cover their cost of production.

“AI is key to all of the above, and is also being used to ensure the duration of content it makes fits in with customers’ changing lifestyles and the various types of device they use to view it.”

CONTACT

Chris Duncan/Nick Paler - MRM
0203 326 9907 / 0203 326 9915
chris.duncan@mrm-london.com / nick.paler@mrm-london.com

Mark Gee
0207 131 4597
Mark.Gee@smithandwilliamson.com

Disclaimer

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. The views expressed are those of the Investment Manager of the Fund and do not constitute investment advice. Examples of specific stocks are included solely to illustrate the investment process and strategies which may be utilised by the Investment Manager. It should not be considered as a recommendation or advice relating to the acquisition or disposal of investments. Please note these investments are not necessarily representative of future investments that the Investment Manager will make. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

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DISCLAIMER
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.