DPAM launches a new artificial intelligence strategy
28 JUN, 2024
DPAM has launched a new investment strategy dedicated to artificial intelligence (AI), thereby expanding its global equity offering. DPAM L Equities Artificial Intelligence invests in companies around the world, whose competitive advantage and products or services are essentially linked to AI, either by enabling it or adopting it.
In the opinion of the management team, investing in AI offers a favorable risk-return profile for several reasons:
- The valuations are reasonable and the companies have outstanding business models.
- Large universe and wide set of opportunities: the applications of AI imply that there are numerous investment opportunities in various sectors and the universe is expected to grow substantially in the future.
- The traditional operators will be the most benefited: large consolidated companies that have considerable capital and large data sets are well positioned to take advantage of AI. These companies are already leaders in their fields and their investment in AI will reinforce their position in the market.
- Other secular trends as the 'tailwind': even without the success of AI, these investments are backed by other secular trends such as the cloud. The current shift towards cloud computing offers a solid growth trajectory. Generative artificial intelligence applications are likely to accelerate this transition, further boosting the prospects of cloud-focused companies.
Fund management team
DPAM L Equities Artificial Intelligence is actively managed by the global equity team, composed of Aurélien Duval, Dries Dury, Humberto Nardiello and Tom Demaecker. The managers aim to identify and analyze the main trends in AI and, based on these, select companies that enable AI, that is, companies that provide the necessary technology to provide AI services; or that are adopting AI, that is, companies that gain a competitive advantage from the use of AI or that offer products or services related to AI to end users.
In this new strategy, DPAM relies on the experience and track record of its team in multi-thematic investment, its focus on innovation and disruption, and its experience in the technology sector. The managers benefit from their already proven investment process and the pillars of their philosophy: a consistent focus on the business model, valuation discipline, and solid portfolio construction (balance between proven winners and future winners; a portfolio with the best risk/reward ratio; and a flexible allocation between sub-themes).
The main risks associated with this strategy are capital risk, liquidity risk, market risk, derivatives risk, sustainability risk, concentration risk, and exchange risk.
Generative AI is not just a futuristic concept; it is actively transforming industries today. We see applications with potential in various sectors, such as coding, contact centers, and creative design.
Humberto Nardiello, co-manager of the DPAM L Equities Artificial Intelligence strategy
AI continues to improve significantly. The technological progress of large language models (LLM) continues to accelerate. The largest models (and the improved smaller ones), driven by new advances in hardware, better and more training data, and the improvement of the models' architecture, will lead to incredible technological advances. We foresee that AI will be able to do more and more things at a level similar to or superior to humans. Recent advances in AI are expected to improve its capabilities in several key areas, such as personal virtual super-assistants, humanoid robots, and fully autonomous driving. The long-term potential of AI to transform the industry is enormous.
Dries Dury, co-manager of the DPAM L Equities Artificial Intelligence strategy
