AI is automating many of the tasks that people do and has the potential to boost productivity, reduce costs, and create new innovation opportunities. Businesses that effectively leverage the technology are likely to get a benefit. Remarkedly, research by McKinsey estimates that generative AI could add the equivalent of $2.6 trillion to $4.4 trillion annually to the global economy. To help you make sense of these numbers, as a comparison, the United Kingdom’s entire GDP in 2021 was $3.1 trillion.2

About 75% of the value that generative AI could deliver is likely to come from four areas: customer operations, marketing and sales, software engineering and research and development.

Generative AI can support interactions with customers, generate creative content for marketing and sales, and draft computer code based on natural conversation prompts.3
And as the technology evolves, more ways to use it will be discovered.

Investment markets have shown a lot of enthusiasm for AI and ChatGPT technology. Since the launch of ChatGPT on 30 November 2022, the NYSE FactSet Global Robotics and Artificial Intelligence Index increased 24% to 30 June 2023. In contrast, the S&P 500 had a smaller uplift of 9% for over the same period.4

Some commentators are couching AI as part of a fourth industrial revolution that promises to increase labour productivity across the economy.5 Here’s some context.

The first industrial revolution started in the late 1700s with the mechanisation of the textile industry. The second industrial revolution, from the late 1800s, was from mass production, such as the Ford assembly lines. If you’re old enough, you may remember the third industrial revolution of the 1990s, when the internet linked desktop PCs. This spurred huge productivity growth that was re- flected in gross domestic product gains for countries across the globe together with share market growth.6

In a similar way, it may be that widespread AI productivity gains could boost economic growth and share market performance across the world.
And share market investments that specialise in the technology sector offer concentrated exposure to the AI value-chain. This value chain includes companies that are developing and integrating AI technology as well as companies that supply the hardware and software that AI relies on – such as cloud services and computer chips.

As with any innovation that captures wide-spread public attention, it’s important to be wary of market hype, inflated company valua- tions and price bubbles. So, if you’re interested in increasing your exposure to AI technologies, we recommend professional financial advice and expert investment management, so that your investment is optimised for long-term growth.