Our views

Artificial intelligence - winter is going

Steve Bolton, Assistant Fund Manager

20 July 207

Artificial Intelligence (AI) has been around for a long time, dating back even beyond Alan Turing’s seminal work in the 1940’s. The idea that machines can conduct cognitive functions and be capable of learning and problem solving has gone through several periods of hype and disappointment. As a number of concrete applications and investment possibilities have emerged in the AI space, the latest AI winter (as periods of waning interest and development in AI are known) is on its way out.

Reasons for the latest developments are twofold. Firstly, continual advances in computing power mean that faster processers allow applications to run analysis on large data sets and produce sophisticated outputs. The end of this latest AI winter is also being backed by significant funding, not just from traditional technology firms but also start-ups and even governments.

The implications for investment markets and wider society are huge. AI is a significant step ahead of simple robotics and jobs previously thought to be safe from computers are now firmly within their sights.

As a Fund Manager, it’s always a little unnerving to hear that complex algorithms can now analyse company statements and share price movements, adjust financial models and execute profitable trades based on an intelligent interpretation of the past. All this comes at a speed much faster than a human could manage. And if I thought by taking a break from analysing companies to write this piece might lead to a career in writing, it should be noted that a number of organisations are already using AI to turn data into coherent (if dry) pieces of prose, and it‘s estimated that the majority of articles could be written by computers within 15 years.

Healthcare is another area benefitting from the latest advancements in AI. IBM’s Watson, the company’s flagship supercomputer can read 200 million pages in three seconds, meaning best in class healthcare can be shared globally, not locked away in the minds of individual specialists.

From curing disease to a cure for shopaholics, Amazon has been using AI in its customer recommendation system for years. However, they are doing much more than this, using AI in areas including machine learning andnatural language processing (NLP), which have fed into the processes behind their popular home assistant the Echo, which recently launched in the UK.

Whilst these advances can be daunting for those working in the affected industries, for society as a whole AI could be the answer to one of the Western world’s long standing economic bugbears, the challenge of boosting productivity. With history as a guide, previous disruptions may cause short-term problems, but market economies find a way of rebalancing labour to another sector over time. Today, we wouldn’t blink twice at withdrawing cash from an ATM machine, but when these were first launched; there were fears that thousands of bank tellers would never participate in the labour force again. In December, Amazon announced “Amazon Go” a shop that uses AI to remove the need for checkout workers, leading the New York post to splash its front page with the headline “The End of Jobs”. Again, this is an innovation that benefits the consumer, and again, like the lost bank tellers, checkout staff will find work elsewhere.

Whilst the debate around balance between productivity improvements and the impact on employment is important, there is a more existential debate surrounding the rise of the machines. It might currently have more basis in science fiction than science fact, but arriving at the point of singularity (the point at which machines can improve without human intervention) does bear consideration. Concerns around what computers will do once they reach human levels of intelligence are worthy of more than mere speculation. In some areas, machines are already gaining the upper hand. In 2011 IBM’s Watson captured the public’s imagination by winning a game of Jeopardy. More recently Google’s AlphaGo beat the world champion at the game of Go.

Ultimately, it may be a process of evolution, rather than revolution. We can see leadership from IBM, Alphabet and Amazon in making use of AI today to improve and compliment their existing offerings. Developments and innovation give reason for optimisation and by investing in firms such as these, investors can participate in and benefit from advancements in this area. In turn, society can benefit from improvements in healthcare, innovation, research and customer service. It looks like I could be competing with a robot for column inches after all! 

The value of investments and the income from them is not guaranteed and may go down as well as up and investors may not get back the amount originally invested. The views expressed are the author’s own and do not constitute investment advice.