The AI Issue: The Strengths, Opportunities and Danger in This Year’s Hottest Sector
(Introduction)
What year is it?
It feels as though many, many moons have passed since OpenAI introduced ChatGPT to the world, ushering in the promise of a new future.
Yet, in truth… it was only seven months ago.
That’s right. In less time than it takes to fully gestate a human in utero, AI has taken over not just the cultural conversation – “Is it safe? Is it ethical?” – but also the business plans of multinational corporations.
All of a sudden, it seems that if you’re not betting big on AI, your company is going to be left in the digital dust.
Based on what we’ve seen in even just these past few months, that may well be true.
AI has certainly been good news for our portfolio. Take Whirlpool (WHR), for example. From our April issue:
While appliance companies aren’t known for their sexiness, Whirlpool has long been a leader in product innovation. Because of this, it has treated its investors well… It’s been a leader in the digitalization of the market. It’s played a key role in bringing the Internet of Things into the appliance industry. And now it’s using AI not only within its products but also within the design, manufacturing and repair services arms of its business.
The results so far have been astounding. With help from AI, Whirlpool has dramatically reduced the time it takes to engineer new products. Its manufacturing processes have grown more efficient since it employed AI to spot errors.
Per Andy, the use of AI in the company’s repair services business “has boosted the number of right-first-time fixes by more than 80% while also increasing the accuracy of parts orders by nearly 91%.”
In short, AI is already having an outsize impact on this longstanding business. It’s helped propel our shares more than 20% since we added the play to our Modern Asset Portfolio in April.
But, more importantly, this proves that the AI boom is backed by something far more solid than the chatbots and bizarre works of “art” that have permeated the internet over these past seven months.
Forget all that noise. There is real utility here… world-changing utility.
Analysts estimate that businesses already using AI are boosting their productivity by between 21% and 36%. And a Forbes Advisor survey found that 73% of businesses plan to use AI to beef up their customer service operations. More than half of respondents said they’ve started using AI to automate their production processes.
[CHART: U.S. Industries With the Highest Potential for Automation]
Looking ahead, experts believe AI holds the key to unlocking long-brewing technological advancements like autonomous cars… predictive healthcare that could greatly extend lives… and smart grid automation that could help put an end to blackouts and other disasters.
The impact will be sweeping. It’s made your author question just what sort of professional roles his progeny will step into… and whether those roles have even been invented yet.
But that’s nothing new. As economist David Autor recently noted, some 60% of today’s jobs didn’t exist in 1940.
When we look back through the ages, we see the same cycle over and over. New technologies beget new industries… and then something disruptive like the internet (or automobiles… or AI) comes along and blows it all up.
That’s why our job as investors isn’t to forecast. (Though we do occasionally dabble…) It’s to look at where the money and attention are flowing NOW.
These days, without question, they’re flowing into AI.
In this month’s issue, we take a deep look at the strengths, opportunities and lesser-known uses of AI. And, yes, we even dig into some of the concerns that have arisen as we edge closer to an AI-powered world.
By the end of Joel’s essay, you may even be ready to toss your laptop into the nearest creek. (But we hope you don’t, because after Joel’s essay we have a bonus AI pick for you this month!)
Whatever happens, we hope you enjoy reading the words that follow. You can rest assured that they were tapped out by living, breathing human beings.
Enjoy it while you can.