The Winners and Losers of the AI Revolution: An Investor’s Guide

While artificial intelligence (AI) is not a new phenomenon, the explosion of interest in recent innovations like ChatGPT will quickly create both winners and losers in the technological arms race. In terms of investment impact, AI is one of the greatest tech revolutions of the last few decades—possibly the greatest tech revolution of all time.

Its impact will likely spread across many industries. The specific industries for investors to keep an eye on can be divided into two categories: those that benefit directly from the technology and those that develop and enable it.

Two camps

The AI ​​beneficiaries can also be roughly divided into two camps. On the one hand there are the companies that will use the technology to enormously increase their own productivity, to produce more with less effort, reduce costs while increasing output and ultimately improve their business model overall.

In healthcare, for example, AI could improve diagnosis, treatment, and patient outcomes; it could enable more individualized treatment pathways; it could accelerate drug discovery—the list goes on. In education, too, AI could enable more personalized lessons that lead to better outcomes. In manufacturing, AI will make processes more efficient and less wasteful. And these are just a few of the industries that could benefit from AI.

The second area is the companies that are enabling AI – those that are providing the “picks and shovels” and building the necessary infrastructure for the massive increase in computing processing power. A good example is Nvidia*, which will be a major beneficiary with its dominant position in GPU chips alongside other computer hardware and service providers. There are many opportunities in both camps, although the former is less well known. Alongside the potential winners, AI has the potential to create game-changing solutions that could render some companies redundant.

Lots of losers

As for the AI ​​losers, there are many industries that could see their value proposition or competitive advantage eroded by AI. These include content providers, software companies, business processing, human resources solutions, companies that depend on the number of employees, companies where much of the value is made up of intangible assets, and companies that are slow to adopt AI and find that their competitors own the technology and take a stake.

The fear of AI is already moving stock prices. A few weeks ago, education technology company Chegg sold aggressively after reporting that its business was being disrupted by ChatGPT. Chegg helps students with their homework and saw its value proposition undermined by allowing students to find similar answers for free via ChatGPT.

Many success stories

Nevertheless, many companies are already successfully using AI. Business information provider RELX* has long used AI in all areas of its business, and its legal team will be a key beneficiary. The company has already launched a generative AI product that uses a combination of private and public data and applies its private LLM. The more the company can increase the productivity of its customers, the more it can justify the charges for its services.

Given the rapid development of this technology, it is important for investors to further analyze AI and the sectors exposed to it, considering both its positive and negative impacts – and not just on individual companies. As it becomes more widespread, the environmental impact of the massive computing power that AI applications require will also be an important factor to consider.

www.aegon.com

*The companies are included in the Aegon Global Sustainable Equity Fund

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