- AI is transforming industries, boosting productivity, and reducing costs across the economy.
- The rapid adoption of AI has made its deployment more economically feasible and impactful, creating opportunities for early adopters and positioning AI as essential for future innovation and growth.
- Investment opportunities are strongest in companies leading or leveraging AI technology, with success tied to innovation, competitive barriers, strong management, and high returns on invested capital.
The wait is over. AI is transforming every industry, signalling a technological shift on par with the advent of electricity. This transformation impacts all facets of the economy by reducing costs and enhancing productivity, with AI expected to touch every area of GDP. As AI continues to mature, its presence will become a standard aspect of the economy, driving what could be the most deflationary wave in history and fundamentally altering productivity growth.
How did we get here?
The journey to this point has been enabled by accelerated computing, which outpaced traditional computing's ‘Moore's Law’ with exponential increases in performance. Nvidia’s accelerated computing technology, which is 100x faster and substantially cheaper than older systems, has enabled breakthroughs in AI. This leap in processing power has transformed the development of AI models, making it possible to produce complex outputs in seconds rather than days.
AI models are rapidly becoming more intelligent and cost-effective. OpenAI’s GPT-4 and its successors now surpass human-level reasoning, overcoming past limitations. The significant drop in AI inference costs, combined with increased sophistication, makes widespread adoption economically viable across industries.
The rapid adoption of AI technology has a direct impact on investment returns. While traditional software investments, such as Salesforce, can take years to yield returns, AI solutions often pay back in just days. As AI integration becomes essential in various industries, companies that successfully adopt and implement AI are expected to lead in productivity and innovation, delivering significant value to customers and investors.
For investors, opportunities lie in companies that are either developing or benefiting from the new AI-driven technology stack. This includes semiconductor manufacturers, AI model creators, and software developers. Companies like Broadcom and Arista are innovating infrastructure-level solutions, while Tesla and others are expanding the potential of AI models. Airbnb and Morgan Stanley show how AI can create efficiencies and enhance service delivery, showcasing its widespread influence across sectors.
Historically, early innovators reap the greatest rewards, as evidenced by the iPhone’s impact on the smartphone market. AI's current "iPhone moment," led by tools like ChatGPT, underscores the value of first-mover advantage and long-term growth.
Though not every great innovation is a great investment
To make our watchlist of 200 companies supporting our three funds, companies must meet strict criteria:
- Innovation: is this company driving down prices for customers or enhancing the quality to price ratio.
- Barriers to competition: if everybody can replicate it, then no one makes any money.
- Management: we need to see both vision and execution. This piece is vital at present – companies need to be aligned with this new innovation cycle.
- ROIC: we need to see this all come through in strong returns on invested capital.
Companies that meet these standards align with major innovation trends we believe will drive stock performance over the next decade.
Positioned for the future
The ongoing AI revolution represents a once-in-a-generation investment opportunity, where success will be defined by first-mover advantage, scalability, and strong leadership. Investing in the coming years offers tremendous potential but carries significant risks. Our goal is to ensure you are positioned on the favourable side of this transformative technology shift.
About the presenters
Storm Uru
Storm is co-lead fund manager of the Liontrust Global Innovation, Liontrust Global Dividend and Liontrust Global Technology funds. He has 12 years industry experience, including as a fund manager and prior to Liontrust worked at Neptune Investment Management running global funds. He holds an BBS in finance and MBS in international business from Massey University, an MBA from Oxford University and is a CFA Charterholder. He represented New Zealand in rowing at the 2008 and 2012 Olympic Games, winning bronze in London in 2012.
Clare Pleydell-Bouverie
Clare is co-lead fund manager of the Liontrust Global Innovation, Liontrust Global Dividend and Liontrust Global Technology funds. She joined the team in 2022 and is a fund manager with 8 years of industry experience, having previously worked in global equities at Neptune Investment Management, Liontrust and in private equity research across a variety of industries. Clare holds a first-class degree in history from Christ Church College, Oxford University and is a CFA Charterholder. Formerly she also represented England for lacrosse.
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
The Funds managed by the Global Innovation Team:
May hold overseas investments that may carry a higher currency risk. They are valued by reference to their local currency which may move up or down when compared to the currency of a Fund. May have a concentrated portfolio, i.e. hold a limited number of investments. If one of these investments falls in value this can have a greater impact on a Fund's value than if it held a larger number of investments. May encounter liquidity constraints from time to time. The spread between the price you buy and sell shares will reflect the less liquid nature of the underlying holdings. Outside of normal conditions, may hold higher levels of cash which may be deposited with several credit counterparties (e.g. international banks). A credit risk arises should one or more of these counterparties be unable to return the deposited cash. May be exposed to Counterparty Risk: any derivative contract, including FX hedging, may be at risk if the counterparty fails. Do not guarantee a level of income.
The risks detailed above are reflective of the full range of Funds managed by the Global Innovation Team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.
