ChatGPT has made headlines this year. It is a sophisticated artificial intelligence chatbot that gives detailed responses and articulate answers across many domains of knowledge. It has been trained  on a large volume of text to create a large language model, giving it human-like responses. The chatbot has caused a stir as it has already passed a Wharton MBA exam and a Stanford Medical School final.

Technological disruption has increased exponentially over the years. To put this in context, to reach 100 million users it took the mobile phone 16 years, Facebook five years, and WhatsApp three years. It took ChatGPT only two months. So, what is Artificial Intelligence according to ChatGPT itself:

“Artificial Intelligence, or AI, refers to the development of computer systems that can perform tasks that  would normally require human intelligence to accomplish. These systems are designed to learn and improve over time, making them capable of handling increasingly complex tasks with greater accuracy and efficiency.”

AI has the potential to help solve some of the world’s economic and social problems by boosting economic productivity and growth. AI could lead to a 14% ($15.7 trillion) increase to the size of the global economy by 2030, of which, 40% will result from increased efficiency gains from automation and the rest coming from increasing consumer demand for AI enhanced goods.

Have you ever noticed that online adverts somehow know what we are looking for? Have you ever wondered how we are able to unlock our phones with our faces or how smart thermostats save us energy by learning our behaviour? These are but a few examples of AI in our day-to-day lives.

As we learn to apply AI more broadly, we will revolutionise industries in what some have dubbed the fourth industrial revolution (Industry 4.0). For example, AI is being developed in healthcare to study vast amounts of data that could mean new drug discoveries or better diagnostics.

As AI becomes more sophisticated, it raises concerns that automation could displace many existing jobs. By the mid-2030s, it is expected that around 30% of all jobs will be automated. There will be varying effects on each industry with none being immune to the  disruption. The transport sector will be most affected with over 50% of jobs in the sector being replaced with the development of autonomous vehicles.

Over the long run, those with lower education levels will be more vulnerable to being displaced. This places a strong onus on governments and businesses to retrain workers to meet the technological advances otherwise these individuals face being left behind in the workplace.

AI also raises ethical concerns especially around bias. Humans are responsible for choosing what data the algorithms use and how the results are applied. So, it is crucial to ensure the starting data is ‘cleaned’ to make it as unbiased as possible. There have been multiple examples of when AI has gone wrong. For example, some mortgage algorithms have resulted in ethnic minorities being charged with higher interest rates.

Proposed in 2021, the EU became the first body in the world to provide draft regulation on the development and use of AI. It remains to be seen whether this will be adopted worldwide.

Company examples

1) Microsoft

Microsoft is one of the leading technology companies in the world. In 2017, Microsoft named AI as one of its top priorities. Their strategic vision changed from focusing on the smartphone market to creating intelligent clouds and providing products infused with AI. You may have noticed the editor in Microsoft Word uses AI to spot grammar errors, typing mistakes, and provide rewriting suggestions.

Microsoft initially invested $1 billion in OpenAI (the company behind ChatGPT) in 2019 and after its ground- breaking debut in November 2022, they invested a further $10 billion.

OpenAI is one of the leading AI research labs in the world, and its goal is to create the first AGI (Artificial General Intelligence – the ability to perform complex tasks that are only achievable by humans) and to democratise AI by making it accessible to everyone. They created DALL·E 2 an AI system that can create realistic images from a text description and Whisper, which is a speech recognition system with nearly human level accuracy.

Fund in focus: Trojan Ethical Global Income

Microsoft is held in the Trojan Ethical Global Income fund. The fund has a conservative quality- orientated process that focuses on total return and dividend growth. They look for reasonably valued, high-quality, sustainable and cash generative companies.

2) United Health Group

United Health is a leading US healthcare and well-being provider that that has two complementary business units. United Healthcare offers health insurance , whilst Optum combines data and technology to be able to deliver higher quality and cost effective healthcare.

Healthcare providers will often need prior approval from a patient’s insurance plan before they can get their procedure or prescription. The provider must collect information from several sources and manually confirm that the treatment is required, costing Optum millions of dollars a year and hundreds of lost labour hours. Even a small improvement in accuracy will have a big impact as they serve over 126 million individuals and over 80% of US hospitals. UnitedHealth also uses AI for predictive analytics that looks at insurance claims data to help identify any patients who are likely or at risk of developing certain medical diseases. This allows them to intervene at an earlier stage to avoid potential future expenses for individuals and employers.

More than one million people call UnitedHealth Group each day and it is common to have the caller select one of the options to reach a specific department. Using their machine learning chatbot it can understand what callers want and it can train their systems to be able to match patient issues with identified solutions or automatically route them to the right department.

Fund in focus: Sanlam Global Artificial Intelligence Fund

United Health Group is held in the Sanlam Global Artificial  Intelligence  fund.  The   fund   invests in companies that are engaged in activities associated with artificial intelligence, whether by way of research and development, in the provision of services, or in the transformational adoption of such services.

3) Deere & Company

Deere & Company (known as John Deere)  is  the one of the world’s largest manufacturers of precision agricultural equipment such as tractors, combine harvesters, planters and sprayers that helps large crop producers sow and harvest more efficiently.

Deere has been incorporating AI into their products for the last decade. In 2017, the company acquired Blue River Technology for $305 million, which produces a “see and spray” machine that can attach to tractors and uses cameras that takes 20 images per second with a high level of accuracy so that it only sprays the herbicide on weeds, leaving the crops untouched.

Deere are aiming to build a fully autonomous farming world by 2030. They announced their first fully autonomous tractor in 2022, which has six pairs of cameras that continuously scan the fields. It has been trained from hundreds of thousands of images in different conditions to allow the cameras to accuracy determine what they are observing.

Fund in focus: Baillie Gifford Positive Change and BlackRock Natural Resources Growth and Income

Deere & Company is held in the Baillie Gifford Positive Change fund. The fund invests in companies whose products and services are making a positive impact on society and the environment, while also providing investors with long-term growth opportunities.

John Deere is also held in the BlackRock Natural Resources Growth and Income fund. The fund invests in companies that are involved in various segments of the natural resources industry, including energy, mining, and agriculture.

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