Artificial Intelligence (AI) is already a multi-billion dollar marketplace and experts are predicting phenomenal growth over the next five years. Research suggests it could contribute up to $15.7 trillion to the global economy in 2030* – more than the current output of China and India combined — but how can investors benefit from this remarkable boom?
AI is effectively an umbrella term covering the various ways technology is harnessed to complete tasks that would have previously required human intelligence.
For example, ‘Narrow AI’ refers to systems that perform a specific task, while ‘General AI’ can understand, learn and perform human intellectual tasks. Then you have Machine Learning, which often involves algorithms that enable systems to make decisions, and robotics that perform physical tasks. You may also hear about Natural Language Processing (NLP) which focuses on enabling computers to understand, interpret and generate human language.
According to tech giant IBM, it’s used to recognise patterns, make predictions and provide insights that were previously impossible due to data requirements.“In a growing number of fields, AI is serving as a companion for professionals to enhance performance and reduce the time required to become an expert,” it stated.
While AI is fast and helpful, it can also be downright unhinged when it hallucinates facts, perpetuates biases, and occasionally rewrites its own code. And yet, everyone’s investing. A staggering 82% of firms poured money into AI in 2023, despite nearly half of them admitting they were unclear on what it actually does for their business**. So how do we harness the potential of AI?
Given the remarkable AI boom we’ve seen in recent years, it won’t come as much of a surprise to see the sector’s main players are among the world’s leading companies. A few companies we’d highlight in this space would be Microsoft, Alphabet, Nvidia and OpenAI. These four companies are all key players in the AI story.
However, another core component to this story is the enablers of AI, those companies making large-scale adoption possible. Here we would highlight two semiconductor companies: Broadcom and TSMC. TSMC manufactures the advanced chips essential for AI acceleration. Meanwhile, Broadcom provides semiconductor solutions that are critical for high-speed networking, storage, and computing, enabling data centres to handle AI workloads efficiently.
However, the one most will be familiar with is ChatGPT. ChatGPT is owned and developed by OpenAI, a leading AI research company. It started as a nonprofit company in 2015 but transitioned to for-profit in 2019. However, unlike many tech giants, OpenAI is not a publicly traded company.
In February, OpenAI CEO Sam Altman rejected a $97.4 billion takeover bid led by Elon Musk, saying the company is “not for sale.” Musk, who co-founded OpenAI but later left, wants to return it to a non-profit model, though he also owns a rival AI firm, xAI.
Another area to consider is infrastructure. OpenAI is partnering with Oracle and global investors on a massive AI infrastructure project called The Stargate Project, which was announced at the White House by President Donald Trump, who billed it “the largest AI infrastructure project by far in history” and said it would help keep “the future of technology” in the US.
Shane Hurst, co-manager of the FTF ClearBridge Global Infrastructure Income fund, told me more about the AI infrastructure opportunity on a recent episode of the Investing on the go podcast.
In January, Chinese start-up DeepSeek unveiled a low-cost, high-performing chatbot that rivals products from OpenAI and other US tech giants. The free and open-source model sent shockwaves through equity markets, wiping out nearly a trillion dollars in US technology value and Nvidia losing close to $600bn in market cap, the largest single-day loss in history***.
DeepSeek claims its model costs just 3% of OpenAI’s equivalent, sparking debate about the future economics of AI. While analysts doubt it will dethrone US tech giants, they agree it highlights the innovative potential of smaller players.
“For users of AI, and in terms of the wider adoption of AI at a global level, the innovation that DeepSeek has demonstrated is a wonderful outcome,” says Chris Ford, manager of the Sanlam Global Artificial Intelligence fund, who believes access to AI without compromising the quality of the output is a significant leap forward for those looking to take AI to end users.
“The DeepSeek news is, at face value, very good news for the adoption of AI at lower prices. We have said for some time that 2025 and onwards will be all about the adoption of AI, and much less about the infrastructure. That starts now,” Chris concludes.
We are at a watershed moment for technology and humanity, according to a report from Accenture.
They predict that AI will solve new problems, create new inventions, change how we work and live, and transform industries and governments around the world****.
It’s possible to buy shares in individual companies, and handsome returns have been generated by investors who identified winners early in their lives, but this can be a risky strategy. In a fast-moving area such as AI, there’s always the possibility that today’s superstars could be superseded by the next game-changing company. However, you can still get access to these names through an investment fund with exposure to the theme.
The Sanlam Global Artificial Intelligence fund, which is managed by Chris Ford, invests in companies that are engaged in the main activities associated with AI. This includes research and development, as well as the provision of services. As an added extra, the managers actually use an AI model to find companies with the requisite business models.
Of course, there are plenty of funds available that provide access to some of the larger companies that are expected to help drive the AI story.
One such hyperscaler that we already mentioned is tech giant Microsoft. It recently announced that its quarterly revenue had risen 12% to $69.6 billion and declared it was helping customers unlock the power of AI^. Microsoft is currently the top holding in a number of Elite Rated funds, including CT Global Focus and Morgan Stanley Global Brands^^.
It’s no surprise that TSMC, which is viewed by many as the bellwether of Asian technology stocks, features in a number of Elite Rated portfolios. This includes funds such as Fidelity Asia Pacific Opportunities, FSSA Asia Focus, and Matthews Pacific Tiger^^.
Both M&G North American Dividend and WS Canlife Diversified Monthly Income have exposure to both Microsoft and Broadcom^^^, while Microsoft, Broadcom and TSMC all feature in the top 10 of JPM Global Equity Income^^.
TSMC is also the largest holding in the Schroder Oriental Income Trust^^. Meanwhile, Samsung Electronics, is the second largest holding in the portfolio, another play into the AI theme, whose key drivers include its continued dominance in semiconductor memory chips.
Finally, there are any number of companies that are less well known but actively important in these themes of AI. The Guinness Global Equity Income fund, for example, invests in Publicis, the French media & advertising agency, which is leveraging AI across its digital marketing and advertising platforms to improve ad engagement and better leverage its vast proprietary data sets***.
AI touches almost every aspect of our lives – and it’s still only just getting started. From powering corporate efficiency to revolutionising industries, AI’s rapid evolution presents a compelling investment opportunity — but also comes with risks. While some investors may seek direct exposure to AI’s biggest names, the unpredictable nature of innovation means that diversification can be a smarter approach. Investment funds with AI exposure offer a way to participate in this theme while mitigating the risks of picking individual winners.
*Source: PwC, Sizing the prize
**Source: Orgvue, 13 March 2024
***Source: Guinness Global Equity Income, January in review
****Source: Accenture, AI: A declaration of autonomy
^Source: Microsoft, 29 January 2025
^^Source: fund factsheet, 31 January 2025
^^^Source: fund factsheet, 30 November 2024
