By Alistair Gray

YOU cannot escape the fact that the topic of conversation around artificial intelligence (AI) and its impact on society is everywhere. For many, the question may be what will the impact be on financial markets and, more importantly, what are the risks and opportunities that come along with it.

While we often speak to clients about their exposure to artificial intelligence within their portfolios, the question often remains: how can investors really take advantage of the AI revolution that is happening?

Interest in this area is understandable given the frequent news articles and enthusiasm about the potential applications across industries. It is clear to see the opportunity AI creates and its potential ability to improve companies’ productivity, scalability, and ultimately growth.

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Based on the assumption that adoption of AI technology continues to grow, we have seen predictions that generative AI could boost GDP and raise labour productivity growth over the coming decade. Investor enthusiasm surrounding AI is evident through the historic highs of the share prices of some of the leaders in the sector, such as Nvidia and Microsoft.

So, the question for investors now is: where are the opportunities in the AI revolution and, indeed, is it a genuine revolution?

Generative AI is already used in the corporate world in a range of tasks, from checking for anomalies in hard disks, assisting with legal and compliance analytics, and to fraud detection and more. It is also contributing to science and being used in both the diagnosis and treatment stages of care.

Perhaps the most common way of gaining exposure to AI investments is through owning the large cap companies at the forefront of the AI boom and in particular the companies involved in the semiconductor supply chain.

However, we also see the potential application of AI to create opportunities outside of the semi-conductor supply chain, where companies that integrate AI technologies into their business activity have the potential to grow revenues, boost productivity, and ultimately operate more efficiently.

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There are many themes around AI which offer potential opportunities. AI enablers are businesses with meaningful investments in what one might term the “picks and shovels” underlying the boom, such as data centres and graphic processing unit (GPU) makers. This would include companies such as Apple, Microsoft, Amazon, Nvidia, Meta Platforms, Tesla, and Alphabet that have been large drivers of equity markets recently.

Data ownership is another theme that is essential to the growth of AI, and we see data becoming an increasingly valuable resource. This is demonstrated through the large price Microsoft was willing to pay for LinkedIn in 2016.

One area that has received much media attention is productivity and how AI may impact employment by reducing the need for labour. Healthcare also stands out as a sector that could benefit from AI through easing of the administrative burden that comes within the space.

AI is an exciting and fast-paced innovation that offers the opportunity to grow economies and make businesses that adapt their technology more efficient and profitable.

While we are working closely with our clients in navigating the changing landscape of AI and the opportunities associated, we remain committed to the view that a fully diversified portfolio remains the most effective way to gain exposure to long term global growth for the vast majority of investors.

However, we continue to follow the adoption of AI closely in the pursuit of being at the forefront of investment opportunities.

Alistair Gray, is wealth manager, Barclays Private Bank and Wealth Management