In December 2015, the Chairman of the World Economic Forum, Klaus Schwab wrote in Foreign Affairs Magazine that:
“We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before.”[1]
Nearly a decade on, Alexandre Zilliox, Portfolio Manager at Thematics Asset Management, an affiliate of Natixis Investment Managers, offers his perspective on where the AI & robotics sector is heading.
Alexandre Zilliox
Portfolio Manager, AI and Robotics Strategy
Thematics Asset Management (an affiliate of Natixis Investment Managers)
When it comes to AI & robotics, where are we in the hype cycle?
When we look at the fundamentals of the theme, we could argue it’s just the beginning of the wave. In terms of computing infrastructure, it is estimated that there is around $1 trillion worth of installed data centers[2]. These data centers are being modernized with AI accelerators, networking, cooling and so it will take years to modernize this installed base. When we look at software and applications it’s still very early days, it is difficult to find listed companies that have more than 20% exposure to AI directly.
How should investors be thinking about the sector?
The field of Artificial Intelligence has been an exciting place to be for investors over the last 24 months and we expect similar spikes in enthusiasm in the future as new innovations akin to ChatGPT become popular. However, this technology takes time to be adopted. Large enterprises run proofs of concept and they take time to deploy at scale. So it’s important for investors to take into account that the technological diffusion is often long. As Amara’s law cautions ‘we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run’.[3]
Is it possible to gain exposure to this theme in areas outside the traditional tech space?
It’s often the most creative applications of AI that make the headlines, such as AI powered robotic bees that could support pollination and crop development to help stem biodiversity loss against a backdrop of declining honeybee populations[4]. But behind the headlines, AI & Robotics are already being put to work in areas such as drug development and chip design.
If we look at healthcare there is a wide opportunity set, from automated diagnostics, precision medicine, drug discovery (with the help of data analytics and generative AI) to robotic surgery.
In industry there are interesting applications especially for robotics to tackle challenges faced by developed economies such as an aging population or labour shortages.
How are AI adopters vs. AI innovators shaping the current market?
We believe the situation is very different from the dot-com bubble at the beginning of 2000. We have something quite interesting that didn’t necessarily exist at the time, which is that large companies often rely on small startups that are very strong in terms of innovation and developing next generation models. We see a path where these large companies and smaller companies co-exist, on the one hand by having access to computing power and on the other by having access to the latest innovations in the industry.
In such a dynamic sector, investors have the challenge and the opportunity of identifying the long-term winners early on but more importantly trying to avoid “over-hyped” areas of the market. We have decided to only invest in those companies we believe to be the innovators, those providers of AI products and services, not in the adopters, because we think that is the best way to capitalize on the opportunity.
Tomorrow’s technology. Today’s opportunity. Thematics AM’s AI & Robotics strategy looks beyond the megacaps to find companies on the leading edge of AI & Robotics that are shifting the way we live.
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[1] Source: The Fourth Industrial Revolution, Foreign Affairs, 12 December 2015, https://www.foreignaffairs.com/world/fourth-industrial-revolution. Republished by World Economic Forum, 14 January 2016, https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/
[2] Source: Nvidia CEO Jensen Huang speaking at the World Governments’ Summit in Feb 2024,
[3] Source: https://thevirtulab.com/what-is-amaras-law/
[4] Source: https://isr.umd.edu/news/story/autonomous-drones-based-on-bees-use-ai-to-work-together
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