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Might 2023 be the Year of AI?
Every year for the past six years, Scott Galloway, a professor at New York University, has made predictions on the economy, most of which turn out to be true. For 2023, Galloway predicts1 that artificial intelligence (AI) will be the leading technology as “the performance will actually catch up with the promise.” That’s largely because AI is no longer a niche subsection of the tech industry; over the past two years, AI has been used to develop drugs, predict COVID outbreaks, and call artillery strikes in Ukraine faster and better than non-AI approaches.
According to a survey by IBM2, 35% of companies are currently using AI while an additional 42% are looking into incorporating AI into their business. Unlike trendy technologies like the metaverse or cryptocurrency, the growth of AI adoption has been steady over time2. The number of companies adopting AI has more than doubled3 in the past five years. At the same time, the average number of AI capabilities being used by companies has doubled3 over the same period; not only are more companies using AI, but those same companies are finding more uses for AI across their business.
There are several reasons for such interest. First and foremost, the companies that embed AI within their business model are outpacing their competitors. TikTok, for example, relies on AI to entertain its users only with content they want to see. As a result, it has become the preferred social media platform for Gen Z and Millennials, even eclipsing all TV and streaming services for those demographics. TikTok has experienced unprecedented growth and Galloway predicts1 its parent company, ByteDance, will reach $1 trillion in valuation in 2023, placing it just below Microsoft and right above Amazon.
Another primary reason why AI will likely be the leading technology of 2023 is the persistent imbalance in the supply and demand of employees. Even though the unemployment rate is low (3.7%), companies are finding it more difficult than ever4 to find employees. As companies realize the longevity of this shift, they will pursue AI automation at a much faster pace than they originally intended. For existing employees with changing expectations, AI can be utilized to enable the growing demands of the global, remote workforce to have more flexibility in their jobs. AI will also be used to maximize the efficiency of existing talent by automating menial tasks.
Supply-chain issues also persist as a legacy of the pandemic. Nvidia argues5 that edge AI will be more widely used to compensate for these gaps in the economy in the coming years. They even predict that by 20305, 80% of humans will engage with smart robots on a daily basis, compared to less than 10% today.
However disconcerting, it is likely that 2023 will continue to be uncertain. But because of AI’s steady evolution and adoption, a plethora of solutions exist to mitigate some of this volatility, whether that’s through increasing efficiency, automating tasks, reducing costs, or all of the above. Our portfolio management takes all of these conditions into account when implementing our strategies.
The TrueShares Technology, AI, and Deep Learning ETF (LRNZ) is actively managed, focusing on fundamentals and long-term growth in the sector over temporary trends. Roblox, for example, has been considered in the portfolio, with consistent capital reinvestment, strong revenue growth, and increased usership over time. Now, Galloway predicts1 Roblox may get acquired by Disney in 2023. If AI shapes up to be the leading technology of 2023, LRNZ can be a great entry point in this nascent yet omnipresent investment category.
Sources:
1 - https://vimeo.com/779992170
2 - https://www.ibm.com/downloads/cas/GVAGA3JP
5 - https://blogs.nvidia.com/blog/2022/12/19/edge-ai-trends-2023/
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