Artificial Intelligence is categorized as ¨the theory and development of computer systems able to perform tasks normally requiring human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.¨ (Oxford).
History of the Artificial Intelligence
The term artificial intelligence was coined by John Mccarthy in 1955. He along with colleagues (Allen Turing, Marvin Minsky etc) had made great strides from the 1940´s-1955. Including Minksy´s work on cryptographic systems and the advent of computational equipment by Turing in the early 1940s. This superior computational power gave AI some tools to work with and thus critical mass.
From 1955 to now we have seen exponential growth in AI and its utilization in daily life. This can best be described by the hockey stick growth rate in the technological sphere as a whole. Today we have language learning software, automated driving systems, and fully quantitative trading. Yet we are simply scratching the surface. AI is certainly correlated to total Computational power and this power roughly doubles every two years (as represented by Moor´s Law). This exponential growth rate coupled with improved research in the field will create an enticing investment frontier moving forward.
Where is Artificial Intelligence today
So How will AI impact the world? According to Crunch base, there has been a 500% uptick in venture capital given to AI-based companies. Their breakdowns as to what sectors within AI are vague. However, the vast majority has gone into machine learning, Chipmakers, and platform and infrastructure providers. AI is such a broad category that an uptick in funding alone doesn’t give us enough information to work with. To find out the state of the industry we must look deeper.
According to Indeed.com, there has been a sharp uptick in the necessity for AI-related skills in prospective employees. From 2013 to 2018 we saw an annual increase of around 7% in firms desiring these skills within applicants. Leading to a total market necessity of 3.7% of total jobs desiring the skill in 2018.
State of the Industry
- In 2000 roughly 100,000 robots were sold annually within the continental United States. As of 2019, this number has grown to 345,000.
- In 2005, 6% of fund managers stated they utilized AI in decision-making practices. In 2018 this number had risen to 32% (Narrative Science)
- The automotive industry is driven by Autonomous driving. (Market for autonomous vehicles expected to hit 35 Billion euros annually by 2030)
- 69% of trades executed on the US stock market are algorithmic
- Roughly 25% of the top 100 logistical companies in the world are using AI software to predict demand on the front end, as opposed to retroactively solve problems.
Where the market is going
It’s not a question of will AI impact us. It´s to what magnitude. In the coming years, it will be involved in all aspects of life, both above and below the surface. From what we buy, where we buy it and how it gets there in the first place. AI is already analyzing our credit scores, combing through resumes, and telling us who we are most likely to fall in love with. This integration is both surreptitious and pragmatic, understood and out of sight.
Impact on the Automotive sector:
In the following years, we are starting at a few key disruptions due to AI. First and foremost are those within the automotive sphere. AI is set to revolutionize this sphere across many different verticals. The most obvious of these changes will be via automated driving systems. Tesla is spearheading this charge so much so that their company is just as synonymous with automation as it is for automobiles. We have already seen this factored into their pricing as Tesla is essentially priced as a tech company and not an automotive manufacturer.
Tesla is not alone in the autonomous vehicle market. Others are lining up to join the party. Within the past twelve months, we have seen Ford, Mercedes, BMW, Porsche, Audi, and others introduce cars with autonomous and/or semi-autonomous functionalities. Outside of the electric capacities and environmentally friendly nature of these vehicles Autonomy and the AI that drives it will be the largest factor influencing profitability going forward.
Impact on the Logistics/Supply Chain sector:
Another massive shakeup we coming at us via AI is within the logistics industries. Tesla and Mercedes have both announced audacious plans for fully Autonomous cargo trucking by 2023. This will work hand in hand with companies like TNX whos software utilizes AI to find the best pricing modules on spot prices for shipping and the peripherals. In the coming years, systems will anticipate necessity within the sector and make attempts to fill it prior to their becoming a demand issue. This, in theory, should lower pricing and help with supply chain systems globally. TNX has shown that its software can lower transport prices by 7-12% today and anticipate even greater reductions in the future.
Another possible breakthrough in the industry will be through convenience. Companies like Nuru (a US-based startup) are bringing self-driving cars to our streets that will act as last-minute delivery services. In the not so distant future its totally feasible that you could have anything you want in an urban area within a 15-minute time frame. We are quite possibly moving towards individuals being able to operate on Toyota´s famous lean production system. As individuals will truly only need to procure something at the point of use. This improved logistical functionality will give consumers the ability to cut waste and have their needs fulfilled on a minute by minute basis.
Impact on the Finance sector
AI in finance is here to stay. The best funds on Wallstreet such as (Renaissance, Two Sigma) have utilized AI for some time now. But AI´s implementation doesn´t end at a risk management level. In the not so distant future, AI will proliferate into most of the banking world both commercial and institutional. In the next five years Reuter´s has stated that all funds, you read that right all will use AI in some capacity. The technology will also overhaul the underwriting processes for loans. Taking the human element out of the equation and mitigating costs. Suddenly your credit score will not only be comprehensive but it will be forward-looking giving individuals with high prospects a better shot at getting into the financial game.
Finance is such a data-driven business with relatively small margins of error and immense profitability. Since clearly defined data drives AI and immense amounts of capital are needed to create the systems in the first place this seems to be the sector that will benefit most in the coming years. A wave of change is coming in the industry and by 2025 Wall street will seem more similar to Silicon Valley than Bridgeport Connecticut.
AI has changed the world in many aspects already. Yet we are on the precipice of paradigms changing entirely. In the following years, this technology will no longer be fringe it will drive the world around us. How will AI impact the world? In the same way that personal computing changed it. Or smartphones again in the last 10 years. We are staring down the barrel of the fourth industrial revolution. One which will be driven by the rise of machine learning and advanced implementation of AI. Computational power is growing by leaps and bounds. This along with the rise of big data is bound to create market necessity. Intuitive investors with forward-thinking investments can make out like bandits. Look into ETF´s within the sector. These seem more pragmatic and could capture the success of the sector in entirety and avoid such egregious risk. And finally focus on companies such as (Tesla, Google, and Facebook) which have roots deeper than AI itself. Yet will certainly benefit from its impact on their industry.