Investing in AI, some suggestions

AI will change the works for the better and worse. Here are some thoughts for investors, for the better.

Article updated: 8 October 2020 8:00am Author: Michael Baxter

AI won’t be and indeed isn’t always a good thing. If you like to be scared, watch the Netflix show The Social Dilemma What is especially scary about The Social Dilemma is that it isn’t fiction. AI and social media in combination is manipulating us, feeding our biases and playing to the negative side of human nature, often bringing out the worst in people.

It is not deliberate; those who run social media networks or design AI algorithms are not sitting in some remote locations, stroking a cat and laughing manically about their fiendish plan to destroy humanity. All these AI algorithms try to do is find ways to grab our attention and sell things we might be pre-disposed to buying anyway. It is just that the consequences are dystopian to their core.

Look at it in that way, and I would get why people may perceive AI as a force for evil — not deliberately evil, but evil in its outcomes.

Others might look at the way AI is changing advertising. “So what!” they might say. If AI makes advertising more cost-effective, this is not exactly earth shattering — although an effect has been to redistribute wealth from traditional media such as magazine and newspaper publishers to social media. And I am not so keen on that.

But, as they say, ‘you can’t put the AI genie back in the bottle.’

There is, however, a positive side to AI, and it is one investors need to understand. I go further. Over the next one or two decades, there will be very few successful companies that don’t utilise AI. Investors who don’t appreciate this will be left far behind.

AI for good

Consider how AI can do good.

AI is making the dream of autonomous cars real. When autonomous cars are perfected, we will see convergence with the uber economy. Few of us will own cars; we will pay for them as we use them. The economic implications will be far-reaching, indeed. This is the investment case for Uber and Lyft. Yes both companies have massive valuations, but it is the possibility of this new model applied to autonomous cars that makes them interesting. Don’t get me wrong, I wince at their valuations, but bear in mind that Tesla and Alphabet are in this space too.
AI will and indeed is, helping the diagnosis of disease and the creation of new medicines. That is what makes pharmaceutical companies interesting. In the UK, both GSK and Astra Zeneca are investing heavily in AI for that reason.

Then there is the energy business. Boris Johnson has announced plans for the UK to embrace wind-power. The good news about renewables is that they are falling in cost.
It’s the crucial point critics overlook. Their starting point in their critique is the price of energy from renewables a few years ago. They overlook how much it has fallen and seem ignorant of how much further it will fall.

Wind and solar power are falling in cost at a rate known as a learning point. See How Cheap Can Energy Storage Get? Pretty Darn Cheap and the significance of this is overlooked. Organisations such as the IEA have continuously underestimated the importance of renewables. See: Is the IEA underestimating renewables? 

But if you are thinking “but what about when it’s dark, or there is no wind?” you need to factor in AI. The renewable energy revolution is such that there will soon be occasions (if they don’t already exist) when the marginal cost of energy is zero. If that free energy can be channelled into partially non-time-sensitive applications, such as heating storage heaters, creating ice for air conditioning, desalination sea water or generating hydrogen, the implications are quite simply revolutionary. Take autonomous electric cars. If they know when it is going to be sunny or windy, via access to the weather forecast, they can select the optimal time to re-charge.

This is where AI in combination with automation technology comes in — it could transform the energy industry and create new radical applications and products — such as synthetic fuel, which wouldn’t otherwise be viable. One energy company that is investing into AI is Drax. See How artificial intelligence will change energy and AI, energy storage & companies like Drax: the answer to responsible investing

One interesting US company is Veritone, the first publicly traded pure AI company, is investing heavily in “predictive AI to accelerate the transition to renewable energy.” One to watch, methinks.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.