Jeremy Burge and Kathrin Forrest discuss diverse AI investment opportunities across various sectors
In an exclusive feature by Benefits and Pension Monitor with Capital Group, portfolio manager Jeremy Burge and investment specialist Kathrin Forrest explore AI investment opportunities beyond leading tech firms like Nvidia.
Burge highlights that “AI is creating opportunities for companies well beyond the big, early winners.”
AI's potential to enhance efficiency and productivity spans all sectors, regions, and industries globally.
Burge emphasizes the importance of understanding which parts of the AI value chain will benefit first, which geographies are leading in adoption, and which companies will emerge as key suppliers or suffer adverse effects.
Immediate opportunities lie in the compute segment of AI, involving semiconductor chip designers and equipment manufacturers. Nvidia, for example, has seen high demand for its GPUs used in AI model training.
Further investment opportunities include semiconductor equipment makers like Applied Materials, chip foundries like TSMC, and memory chip suppliers like SK Hynix. Forrest adds, “Other opportunities may be in the ecosystem of companies that provide specialty chemical solutions.”
The infrastructure segment, consisting of cloud companies, data centres, and networking firms, is also growing rapidly. Global spending on data centre construction is expected to reach US$49bn by 2030. Data centres' significant power needs benefit electricity providers, both traditional and renewable.
Companies like Constellation Energy and Caterpillar are exploring innovative power solutions for data centres.
AI models, such as Microsoft-backed OpenAI’s GPT-4, Meta’s Llama, and Alphabet’s Gemini, require extensive data, computing power, and specialized engineers. These models offer significant commercialization opportunities.
The application segment presents the broadest investment opportunities. Early examples include Microsoft's CoPilot, integrated into Office for a higher subscription fee. AI's potential spans all GIC sectors, industries, and sub-industries globally.
In healthcare, AI aids diagnostics, drug discovery, and patient care, with companies like Eli Lilly and Novartis partnering with Alphabet’s Isomorphic for drug discovery.
Advertising firms like France’s Publicis Groupe use AI for personalized ads and campaign optimization. Financial institutions, such as JP Morgan, integrate AI for market data analysis, portfolio optimization, and fraud detection.
Forrest notes that factors like innovation, regulation, and competitive pressures create unique opportunities and risks for companies.
Burge concludes that successful AI investment requires building a diversified, balanced portfolio that considers various market themes. “We need to get more than just AI right,” he says.
