Why AI could be the X-factor that underpins future growth

Amid the recent fearmongering headlines around AI, investors need to keep a positive mindset about the opportunities AI presents to society, says Justin Streeter of fund manager Comgest.

If you’ve been reading headlines about artificial intelligence (AI) over the last few weeks, you could hardly be blamed for being scared. Reporting on this topic has ranged from studies spreading some alarming statistics. Goldman Sachs recently reported that AI could lead to 300 million job displacements. There have been sentiments bordering on hyperbolic fearmongering (‘AI will take over humanity’). 

However, a look back in history tells us that ’sea changes’ like the industrial revolution or the rise of the internet created similar fears and yet civilisation did not implode as a result. Instead, humans used these developments to enhance their original processes and the world became more efficient as a result. AI will present challenges but there is certainly no reason to mobilise a Luddite revolution against it. 

The conversation we should be having instead, as investors, is on the immense opportunities that this technology is creating. 

Opportune moment for AI

First of all, in a time where global GDP growth is coming under more pressure from demographic trends, resource scarcity, climate concerns and more, productivity has become the X-factor to drive growth and prosperity. In this sense, AI has come at an opportune moment and could boost the investment case for certain types of companies.  

Take the example of ‘virtual assistants’ such as Microsoft’s AI “Copilot” that is set to be integrated into Microsoft 365 or Azure. This technology has the power to speed up processes while simultaneously cutting costs, giving entrepreneurs more time and money to invest in other parts of their businesses.

This can democratise tools that were previously only available to big companies. For example, Intuit has been using AI for several years to give its small business clients a better understanding of their finances. As a result 60-70% of these clients stay in business for five years compared to 50% of small businesses in the US. In addition, leaning further into generative AI should make it even easier for entrepreneurs with fewer resources to start and manage a business, generate content and stay in touch with their consumers. 

AI is also driving improvements in the healthcare industry, which is one of the most inefficient sectors in the US (healthcare spend represented over 18% of the nation’s GDP in 2022). A major reason for this is because of the lack of a national database, which leads to lots of manual data entry and thus a lot of errors. These errors can lead to misdiagnoses, longer hospital stays and overspend, which in turn takes resources away from vitally needed care.

A number of companies are currently undertaking work with a view to improving data organisation at the national level. Microsoft recently acquired Nuance, a leader in conversational AI technology, for $20 billion in 2021. Nuance uses AI to populate patient documentation which frees up precious doctor follow-up time, allowing for more resources to be dedicated to other areas. 

Oracle is also investing, for example through its acquisition of Cerner, a leader in electronic health records, for $28 billion in 2021. This acquisition is part of Oracle’s aim to build a national health database supplemented by powerful AI tools. This will help to improve diagnoses and have impacts on spend, hospital stays and waiting lists.

In the pharma industry, AI is speeding up drug development at the discovery phase through predicting what proteins and molecules would be good fits for given ailments. Eli Lilly is one company that has already moved to take advantage here, recently striking up a $425 million partnership with Schrödinger, a biotech providing an AI-powered software technology platform. By giving drug testers a stronger starting point when it comes to protein structures, AI technology could drastically speed up the drug development process, leading to numerous improvements in treatments at a faster rate than we’ve ever seen before. This will have the knock-on effect of making the healthcare industry even more efficient, with more life-saving drugs becoming available.

Positive mindset

In summary, we should not forget that AI, as with many other developments, brings its own set of challenges. For example, it will require more investment in the realms of cyber security, education and regulation to recognise and mitigate misleading and non-genuine content. Despite this, the sensible approach to advances in AI is to keep a positive mindset. 

Although AI will be a disruptor, it also provides a way for developed economies to maintain higher levels of growth than they would have otherwise been capable of. Not only that, it also provides opportunities for technology companies and many other kinds of business who can tap AI’s potential to make their products and services more efficient. 

*Justin Streeter is portfolio manager of the Comgest US equities strategy.



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