Artificial intelligence boom to drive new investment – ​​and regulatory scrutiny | Family offices

The artificial intelligence (AI) industry is facing a tipping point as regulations change and new entrants redefine the competitive landscape.

Institutions will be following developments with great interest as they consider their next major investment.

“We believe AI will come under increasing regulatory scrutiny in many markets in the coming years – we’re already seeing this in the US and Europe. One aspect of this will be the concentration of key AI sectors, such as semiconductor manufacturing and software platforms, which are integral to AI tool development,” said Andrew Zurawski, Asia-Pacific chief economist at consultancy WTW. AsianInvestor.

The changing regulatory environment, combined with the rise of innovative startups, will likely result in a more diverse and competitive AI ecosystem.

He added that while tech giants led the initial phase of AI investment and development, history shows that disruptive new players can play a key role in shaping technological progress.

“We’ve already seen significant contributions to AI technology from some key startups, and the history of emerging technologies suggests this can be significant.”

PHASE SECOND

Despite the widespread belief that the first benefits have already been achieved, Zurawski says there is still significant opportunity.

“In our view, the early AI gains were concentrated in the share prices of a small number of large technology companies directly involved in the supply of semiconductors and the development of AI tools,” he said.

“There will likely be a second and more significant phase of AI’s impact on investors in terms of greater potential opportunities for broader equities in the medium to long term.”

Also read: AI boom expands investment landscape beyond tech giants

This outlook suggests that the AI ​​market is far from saturated, and investors should look beyond the current technology leaders to identify future growth avenues.

Matthew Cioppa, co-portfolio manager of Franklin Technology Fund, shares this view.

“Many semiconductor and hardware stocks have already benefited from the AI ​​trend, but there is a long way to go if current trends continue. In addition, we have only just begun to see broader adoption at the application level, so much of this trend is yet to come,” Cioppa said. AsianInvestor.

WIDER INTEGRATION

As the AI ​​market matures, it is likely to move from initial dominance by tech giants to more widespread adoption across sectors of the economy, Zurawski explained.

“The primary driver of these gains will be the adoption of AI technology across the broader economy and its impact on productivity, profits and returns on equity,” he said.

The move toward broader integration creates an opportunity for investors to explore AI-driven developments across a broader range of industries and companies.

The fallout will have far-reaching consequences, according to Katie Horne, chief portfolio analyst at T. Rowe Price.

Also read: Market Views: How Sustainable is Growing Energy Demand from AI?

“Complex AI requires a lot of computing power, and some companies in the infrastructure build phase use enough electricity to support a small city,” Horne said. AsianInvestor.

Increased demand for electricity will create new investment opportunities in sectors such as renewable energy and industrial cooling, she added.

DRIVING PROFITS

According to Zurawski, long-term forecasts for the impact of AI on economic growth and productivity are promising but uncertain.

Read also: Family office is looking for new managers who will focus on artificial intelligence

Key applications of AI that are expected to deliver significant economic value include product research and development, software engineering, and supply chain optimization.

“However, as we have seen, we see the potential for AI to impact most sectors of the economy, and it is likely that there will be applications that the market has not yet anticipated that will prove to have a major impact in the future,” he said.

T. Rowe Price’s Horne believes the potential of AI has the potential to transform entire industries.

“AI will likely lead to fewer jobs at companies in the long term because it is likely to increase productivity in areas such as coding, back office work, automation and call centers,” Horne said.

“We may start to see organizations shrink in size, at least temporarily, as efficiency and automation take root.”