The age of artificial intelligence is here


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Key Takeaways

  • Artificial intelligence is ushering in a significant new era of commerce, presenting unprecedented opportunities and risks for investors.
  • Entire industries could be transformed in ways that could disrupt some companies while elevating others. 
  • Large tech companies are getting ahead of the AI wave with strategic investments.

Artificial intelligence may be the most transformative and disruptive advancement since the Industrial Revolution. AI is poised to fuel the next wave of innovation and potentially provide new opportunities for companies and investors.

It’s been predicted for years, but the coming age of automation is starting to happen now thanks to advances in sensors, hydraulics and artificial intelligence, mostly in the field of machine learning.

These machines are already transforming manufacturing, transportation, health care and hundreds of other elements of daily life on both personal and industrial levels. They are in use in schools, homes, hospi¬tals and cars, and they are changing the way the world works.
For some, machines are a threat, especially to jobs. But AI also has the potential to improve the standard of living around the globe, provide companies with new profit opportunities and reward investors.

“There are periods of fundamental change that can transform the way we live and work,” says Capital Group portfolio manager Rob Lovelace. “Today it seems as if we are in the middle of another revolution, and clearly these changes pose significant challenges and opportunities for long-term investors.”

Many AI applications are likely to increase productivity, improve transportation and enhance the quality of life for millions of people. But this technology will also create profound challenges. While it may increase productivity, it will replace some jobs and impact income. But, in many cases, AI will be critical to people’s futures, and employees will be working with AI, not replaced by it. In fact, Hollywood now uses AI technologies to help bring its man-versus-machine movies to the screen.

Artificial Intelligence Comes of Age

After decades of ups and downs, AI is getting smarter. The credit goes to the development of machine learning and deep learning, as well as the increasing capability of microchips, an explosion in the amount of available information and the ability of supercomputers to analyze data.

Machine learning is a field of study that gives computers the ability to learn without being explicitly programmed. It enables such features as Amazon’s recommendation algorithm. It’s similar to data mining. Machine learning uses data to detect patterns and adjust program actions accordingly — essentially the machine draws an inference from the data. Facebook’s News Feed uses machine learning to personalize each member’s feed, for example, and make changes when exposed to new data.

Deep learning is a type of machine learning that uses artificial neural networks that loosely mimic how our brains work. The machine thinks in layers, with each layer capable of analyzing data at a deeper level of complexity and abstraction. Deep learning requires tremendous amounts of data and processing power, neither of which were available until the era of big data and cloud computing. Now, thanks to deep learning, AI is moving closer to delivering human-level capabilities envisioned decades ago.

AI and Robotics Are Redefining How Work Gets Done

The robots aren’t coming — they’re already here. Industrial robots have been around in the thousands for decades. Now, agribots, service robots, robo-advisors and co-bots are becoming part of the landscape. Soon, various forms of automation are likely to roll, or walk, out of laboratories and into the real world.

The accelerating pace of automation has sent robot sales soaring. Between 2010 and 2015, sales of industrial robots increased 16% a year. In 2015, nearly 254,000 industrial robots were sold worldwide. Still, only about 10% of manufacturing is done by robots. By 2025, robots will account for 25% of manufacturing. This paradigm shift potentially may be among the most disruptive in history, with the possible displacement of human labor presenting a profound challenge for business and society.

“The world is on the cusp of a new revolution in manufacturing,” says Dickon Corrado, investment analyst at Capital Group.

Kaitlyn Murphy, Capital Group investment analyst, adds, “We’re seeing an explosion of innovation in the auto industry. We’ll have self-driving cars on the road in not too long, and a lot of companies are going to benefit from the
process it takes to get there.”

Google, Intel and Apple Are Among Companies on an AI Buying Spree

Since 2011, about 140 private companies working to advance AI technologies have been acquired by larger entities, with more than 40 acquisitions taking place in 2016. Corporate giants like Google, IBM, Yahoo, Intel, Apple and Salesforce are competing in the race to acquire private AI companies.

AI has been largely conceptual for years. The recent acceleration of acquisitions speaks partly to the significant, and relatively recent, advances in the practical uses of AI for consumers and companies. Businesses are now exploring AI’s possible applications in big data analysis for marketing, customer relationship management and more.

The recent investments hint at the potential for new profits for companies, and also at developments that could reshape the business world and personal lives. These are opportunities for investors who are properly positioned for the trend as it develops.

Download The Long View to learn about AI and its potential impacts.

Any reference to a company, product or service does not constitute endorsement or recommendation for purchase and should not be considered investment advice.

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