For several months now, artificial intelligence (AI) has been making big headlines. Many are raving about the technology's enormous economic potential. Should the expectations be fulfilled, quirion's ETF portfolios will be right there for the market's development.
Whether a moment was "historic" only ever becomes clear much later. But that 30 November 2022 will go down in the history of technology can probably already be claimed. It took just five days for the AI-based chatbot ChatGPT to reach one million users. The social media platform Twitter had needed around two years for that. Jensen Huang, CEO of graphics chip maker Nvidia, was already speaking of the "iPhone moment" for artificial intelligence. The launch of the iPhone in 2007 had paved smartphones' path to the mass market.
What exactly the market for artificial intelligence (AI) encompasses is, however, not as easy to pin down as with smartphones. Because AI is understood to mean many different things. In the broadest sense, the term ranges from assistive systems such as driver assistants, through production robots in industry, to the new chatbots that simulate human communication in a deceptively real way. AI comes with a certain autonomy of technical systems, and usually also with "machine learning," that is, the more or less independent improvement of capabilities.
Great economic potential
When it comes to the economic outlook, expectations are very high. Market research firm IDC estimates that in 2023, as much as 154 billion US dollars will be spent worldwide on AI-centric systems and services. That would correspond to an increase of 26.9 percent over 2022. By 2026, the broader AI market is expected to grow to 900 billion dollars.
The real potential, however, is seen by experts in productivity gains and in demand for AI-supported services right across the entire economy. In a much-cited study, "Artificial Intelligence in Business," the management consultancy PwC put this potential at up to 15.7 trillion US dollars that AI could contribute to the world economy in 2030. For comparison: Japan's gross domestic product in 2022 was the equivalent of around 4.1 trillion US dollars.
PwC sees particularly great opportunities for AI in healthcare, in the automotive industry, and in transport and logistics. Think of chatbots like ChatGPT, and the possible applications reach deep into everyday life: "large language models" can draft texts, from a school essay to a contract, in a matter of seconds. And the software can already write software, too.
AI stocks in high demand
Where growth is suspected, investors are on hand. Some shares of companies in the AI space have made big price jumps in recent months. To what extent the short-term movements are merely a flash in the pan is hard to judge so far. Because a lot about AI is still a thing of the future, the winners and losers are far from decided. What's more, the potentially far-reaching social consequences are only just now being hotly debated. The debate could lead to political regulation that limits the market's growth.
But should the economic momentum unfold: with quirion's global portfolio, investors are there for the ride in any case. Because every variant of the portfolio takes part in the return opportunities of the world's stock markets. And here's the thing: if a company's market capitalisation rises as demand for its shares increases, so does its weighting in the portfolio. Spreading across more than 8,000 securities keeps the risk of backing the wrong horse within tight limits.
Does AI help with investing?
Another topic surrounding AI is the ability of such systems to help with investing. At quirion, we've been using digitalisation since we were founded to make systematic wealth building simpler and more accessible. We keep a close eye on current technological developments and explore what they can do.
These possibilities do have their limits, though. AI is sometimes accompanied by the hope that, with its help, the market return can be systematically beaten. But that would require the technology to be able to predict the future. Yet neither clever market experts nor an artificial intelligence can calculate which stocks will be among the winners next week or next year. In our ETF portfolios, we at quirion stick to our goal of "harvesting" market returns through the broadest possible global diversification. That's why our investment strategy doesn't need to rely on uncertain forecasts.
Anyone who wants to give the investment trend of "artificial intelligence" a little more weight in their portfolio can do that with quirion too: it's one of our 13 thematic investments, which we offer for megatrends. The prerequisite is a particular willingness to take on risk. The return-risk profile of the thematic portfolios is, however, superior to that of individual securities or single thematic products. Because in this case too, we make a targeted selection from among the available ETFs and monitor them continuously.
