Fiducia Partners insights - Investing in AI

Investing in AI: The Potential and the Pitfalls

July 18th, 2019 Posted by Entrepreneurship, Investment 0 thoughts on “Investing in AI: The Potential and the Pitfalls”

This week I wanted to write about something that might provoke you to think about a new investment area. Artificial Intelligence. I can’t profess to be an expert in this sector however AI is a technology many investors and entrepreneurs are very excited about so I have done my research and am continuing to do so as the technology evolves. 

Artificial Intelligence has been big these last few years and is only set to grow as the technology evolves. According to industry research firm TechEmergence, AI technology will have the single most radical, transformational impact on business and society. We all already have virtual assistants like Siri and Alexa in our phones and in our homes. But beyond virtual assistants, a PwC report estimates that between revenue from new services and the cost savings it delivers due to improved productivity, AI will add $15.7 trillion to the global economy by 2030

For personal use Google, Microsoft and Apple have been integrating AI technology across their products but it’s also a key technology in the development of self-driving cars and algorithms that e-commerce companies use to predict what you might want to buy based on your online behaviour. It’s also already being used in healthcare to preempt health issues – I read that in one UK hospital it managed to reduce cardiac arrests by 20%. And last month Amazon was granted a US patent for drones to provide “surveillance as a service” looking for signs of break-ins or people lurking around the property so it could inform the police. 

Industrial companies are using AI to automate machinery, monitor data about production processes and make adjustments in real time, learn and operate machinery and equipment without needing human help. With the advancement of the technology there are possibilities for autonomous trucks, which will allow for 24/7 runtimes. 

There is also huge potential in the water and electricity industries where companies are looking to replace aging and no longer fit for use infrastructure with smart solutions that integrate AI, sensors and internet communication. Such solutions are likely to allow for better data and analytics leading to more efficient use of resources and reduced costs.  

But however exciting the prospects for AI are, there are still lots of unknowns about it and how the technology will evolve and be used in households and businesses in the future. As many others will be, I am cautious about the future of AI and how its use will be governed. In terms of its commercial use, it seems to be being used in some fantastic ways but the debate often comes back to its negative role in society by making jobs redundant. In the news only this week the IPPR think-tank released a report projecting that 10% of women, and 4% of men are at high-risk of losing their jobs to machines. 

Beyond the risk of job losses, there are other concerns too about how far we go with the technology.  Elon Musk this week revealed plans to connect human brains to a computer as part of his vision to allow for “symbiosis with artificial intelligence”, as he put it. This to me seems quite alarming. Elon Musk is well known to be an eccentric entrepreneur with a high-risk appetite for investing but there’s no doubt he’s involved in the cutting-edge of future technology. Perhaps what for most of us seems futuristic and alarming right now could well be the norm in 10, 20, or 50 years time. As investors we have to decide whether we’ll take the risk and invest in the unknown or if we’ll stay true to our core industries. 

One family that has taken a giant leap into AI investments is Sweden’s Wallenberg family. The family is one of the foremost investors of artificial intelligence in Europe, investing around €300m in its AI program WASP, in a mixture of AI startups and a business transformation company. Their large investment is motivated by their hope that Sweden will catch up in the global AI race which they think is necessary for the country as a whole, but also the companies they control. They can’t afford to lag behind. 

I would suggest that for most investors AI remains a niche investment area that if they can tolerate high-risk they might consider entry into. Laith Khalaf, a senior analyst at Hargreaves Lansdown, advises caution saying that investors need to try and remember the lessons of the tech stock boom which had largely been littered with failure. In essence, I think it’s not for the uninformed or those who just have a ‘fear of missing out’. Early investors of success stories will no doubt make large profits but AI is here to stay so there will also be future opportunities to get involved when there are less unknowns. 

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