We recently wrote about ChatGPT, the first ‘killer’ app showcasing the power of generative artificial intelligence. ChatGPT had been hailed a revolution and while it certainly looks to add value in certain areas, such as education, we felt that it had its limitations and would be unable to replace everything at once (fund managers included!). A glance at Google trends data suggests that the ChatGPT excitement is waning somewhat – although we must note that users can visit its site and app directly.
However short-lived interest in the ChatGPT app turns out to be to be, it has propelled AI into the mainstream. There will undoubtedly be further applications that will revolutionise how we go about our daily work and leisure. We think that AI will be the next computing paradigm. ChatGPT is the first iteration and there will be much more to come.
The AI opportunity: Phases, scale and uncertainty
As investors, we have an opportunity to benefit from this paradigm shift. Looking at other examples we see a clear parallel with mobile computing in the 2000s. There were three phases, driven by companies that developed the technologies and delivered exceptional returns to investors:
- Early success came from the semiconductor companies that enabled mobile phones. Semiconductors are the foundational building blocks of technology and enablers of these paradigm shifts. They included Qualcomm (makers of the 3G / 4G technology) and ARM (the UK semiconductor company whose technology powers 95% of the world’s smartphones).
- Next came the infrastructure and devices that house the semiconductors. This began with Research in Motion (the parent company of Blackberry) and included Apple and Samsung, which continue to dominate the handset industry with their range of iPhone and Galaxy smartphones.
- Finally came the wave of companies providing software and services. Google and Meta are two examples of companies that adapted and developed apps for the mobile. Today there are many more mobile app companies that started with the advent of the iPhone and could not have been created without GPS and internet access.
Applying the same framework to the AI landscape, we believe that it is too early and too uncertain to know what exactly the infrastructure and application layers will look like. It took many years after the initial smartphones for the software and services to properly emerge.
What matters to us is not the certainty of what AI will look like in 20 years and who the winners will be. Nobody knows. What is important is that we understand the scale of the opportunity of AI and use that insight to find great companies even if it is very early for AI and we do not know quite what the use case will be and how the devices and applications will look.
This ability to understand the opportunity, accept the uncertainty and analyse what it means for the companies we invest in is at the core of our investment approach. It is what has led us to invest in leaders in digital transformation, e-commerce, digital advertising, software applications, AI and the metaverse.