M&G’s Equities and Multi-Asset team favours three long-term structural themes; infrastructure, the low-carbon ecosystem, and innovation. M&G feels – like many other investors – AI and Generative AI are integral elements of future innovation.
Although ChatGPT was launched just late last year, the initial adoption of Generative AI technology has powered an equity market rally and offered an alternative macroeconomic narrative to one of inflation and higher interest rates.
M&G’s quarterly equities and multi-asset outlook is titled ‘Beyond Nvidia’ and surveys the opportunity for companies to harness Generative AI in the context of Nvidia’s meteoric rise so far in 2023.
Nvidia is the most high-profile AI success story so far. Nvidia shares are up 217% year-to-date as the chip maker enjoys surging demand from companies requiring additional computing power to facilitate AI innovation. M&G’s quarterly equities outlook looks beyond the chip-maker to other geographies and into different types of companies set to benefit from increased AI adoption.
Fabiana Fedeli, Chief Investment Officer, Equities, Multi-Asset and Sustainability at M&G Investments, wrote:
“While Nvidia has seen an inflection in revenue related to generative AI, given the large amount of computational power that is required to run LLMs, there are a number of other companies and industries that will benefit from this AI movement – from software to semiconductor companies, to firms providing high-speed networking infrastructure (particularly for data centres and large cloud companies). We also believe IT services companies will help their clients deploy generative AI.”
In addition to more traditional IT and technology companies, M&G presented their thoughts on four non-IT sectors well-placed to enjoy the efficiencies and innovation present by Generative AI.
Healthcare services
Healthcare services are utilising Generative AI language models to collect patient data and assist with formulating care plans. This is providing cost savings for healthcare providers and improves outcomes for patients.
Drug discovery
M&G highlight AstraZeneca’s early adoption of Nvidia’s GPUs to build Large Language Models (LLMs) for molecular biology analysis. The practice is still in its early stages but is predicted to build momentum.
Financial services
Asset managers are increasingly adopting ChatGPT to improve efficiencies in client reporting, customer service, and back-office operations.
Utility companies
The utility sector combines two of M&G’s structural themes and presents the opportunity to reduce carbon emissions by enhancing electricity distribution. AI can also reduce the amount of power lost due to outages.
Fabiana Fedeli acknowledged M&G Investments are not realigning their portfolios to focus on AI; more M&G as an organisation has embarked on the exploration of AI as an important structural driver of equity returns for clients.
“As an important disclaimer, we are not aiming to make stock recommendations based solely on AI. Not all of the stocks we mention are either owned in our investment strategies or considered timely investments. Rather, we wanted to provide our clients with examples of the possibilities that lie ahead,” Fedeli wrote.