tmmonline.nz  |   landlords.co.nz        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Saturday, July 13th, 10:20AM

Investments

rss
Investment News

AI: The great acceleration

Technology investing has always been a rapidly evolving sector, and 2024 will be no different. 

Friday, February 9th 2024, 12:27PM

by Mint Asset Management

By Tom Deacon, Senior Investment Analyst

Last year OpenAI set the world on a path of great acceleration, driven by rapid evolution and broader adoption of AI. Generative AI is the most significant tech innovation since the internet, and such large paradigm shifts bring disruptions that offer investable opportunities.

AI has been a transformative force for a while (remember when Netflix content recommendations started working properly? Thank deep and wide neural networks!). In 2023, AI’s endless algorithms and chip hardware became increasingly sophisticated, leading to more efficient data processing and usable output for decision-making. We expect 2024 to be an inflection point for AI with business broadening its integration - enhancing productivity and creating new opportunities in Research & Development

The development of AI ethics and governance frameworks is also important for ESG-concerned stakeholders, like us. Data privacy and algorithmic biases are among issues in play. While there are certainly risks, AI can also help stakeholders to assess impact (and risk).

While the ultimate blend of ‘investment-to-benefit’ is yet to be seen, there is likely a material uplift coming to those companies who effectively use the technology. Productivity benefits for society are potentially enormous. Revenue wise - differentiated product features will allow businesses to drive sales and enhance customer stickiness.

The balancing of technology risk, simplification, interoperability, and capability are among key drivers around the cost line that will determine eventual Return On Investment. Effective tool, or distraction? Those who fail to wield AI appropriately risk being left behind.

Cloud computing: transformation, growth and integration

Cloud platforms are crucial for deploying AI solutions, handling datasets, and providing computational power. Cloud computing already saw significant growth in 2023 with GenAI adoption requiring reassessment of data strategies - adding to discussions about planning for cloud transitions. Multiple opportunities exist across insight, analytics, modelling, security, and back office. Enterprise security – for example – can be enhanced by ‘next gen firewalls’ which allow companies to spin up  virtual firewalls at pace.

Investment strategies

Looking back, the internet revolution of the 2000’s brought dynamic industry returns. Initially, cables and hardware companies saw excess returns then internet service providers such as search and online stores. In the cloud transformation era we expect excess returns to collect among chip manufacturers / cloud infrastructure providers first and then software / service players.

We own several companies with exposure to these trends. Datacentre builder, owner and operator Next DC (ASX: NXT), Network-as-a-Service provider Megaport (ASX:MP1), and Cinema enterprise resource planning software business Vista Group (NZX: VGL). For us, these companies intersect their own unique value accretive time segments of the company maturity cycle sitting within cloud infrastructure, connectivity/data/network optimisation and cloud transformation (respectively). We expect many more investment opportunities to emerge.

Leading by example

At Mint we’ve started to investigate and implement AI into our analytical and operational processes. GenAI, for example, can improve productivity in discovery, information compilation, communication, and document comparison. Yes, these still need human oversight (!) but it allows humans to focus on the more critical steps. Another area where we are successfully deploying AI is in software development where what once required a lot of domain knowledge now simply requires accurate description of your problem and an intermediate programming knowledge.

Risks and challenges

Investing in technology companies carries significant risk. AI will only accelerate the pace of technological change, increasing the risk of disruption, competitive advantage erosion and alter the trajectory of revenue / costs. All of these create large swings in perceived value. Investors must stay informed and agile. Invest wisely or speak with an expert.

 

 

 

Disclaimer: Tom Deacon is a Senior Investment Analyst at Mint Asset Management Limited. The above article is intended to provide information and does not purport to give investment advice.
Mint Asset Management is the issuer of the Mint Asset Management Funds. Download a copy of the product disclosure statement at mintasset.co.nz

Mint Asset Management is an independent investment management business based in Auckland, New Zealand. Mint Asset Management is the issuer of the Mint Asset Management Funds. Download a copy of the product disclosure statement at mintasset.co.nz

Tags: Mint Asset Management

« The bulls are backTime to revisit banking in New Zealand? »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment

 

print

Printable version  

print

Email to a friend

Good Returns Investment Centre is brought to you by:

Subscribe Now

Keep up to date with the latest investment news
Subscribe to our newsletter today

Edison Investment Research
  • Martin Currie Global Portfolio Trust
    11 June 2024
    Manager ‘sticking to his knitting’; positive outlook
    Martin Currie Global Portfolio Trust (MNP) has been managed by Zehrid Osmani since October 2018. He runs a high-conviction, relatively concentrated portfolio...
  • SDCL Energy Efficiency Income Trust
    10 June 2024
    Answering five key investor questions
    In this note we examine five key questions investors have raised regarding SDCL Energy Efficiency Income Trust (SEEIT), prior to the release of its full-year...
  • Invesco Asia Trust
    4 June 2024
    Patiently waiting for re-rating of Chinese equities
    Invesco Asia Trust (IAT) posted a one-year NAV total return (TR) to end-May 2024 of 3.8%, below its benchmark return of 8.7%, as some of IAT’s Chinese...
© 2024 Edison Investment Research.

View more research papers »

Today's Best Bank Rates
Rabobank 5.25  
Based on a $50,000 deposit
More Rates »
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
 
Site by Web Developer and eyelovedesign.com