Simon [00:00:09] Welcome to this Global Innovation video in which Clare and Storm are going to talk about the tech stack following their recent visit to Silicon Valley. Clare, can you remind us about the tech stack, what is it and why is this important?
Clare [00:00:25] This new technology cycle, we need a new technology stack. That starts off at the base layer with your AI infrastructure. Think of your semiconductors, your networking, the equipment to make these chips. You've then got models infused into this hardware. Think of this as giving AI its brain. On top of that, you've got engineering tools that really take these models to enterprises, customers and enables them to deploy AI. And then finally, you've got the applications. And the application layer is where the ultimate value accrues in this technology stack, but it's also where the greatest disruption arises. Now, up until really a couple of months ago, the vast majority of value in this tech stack lay in that bottom layer. We're still in the early innings of the AI build out. We are starting to see though value make its way up the technology stack and some emerging winners in that application layer. And when we think about the opportunity for agential AI, which is really what that top layer is, this is a market opportunity that is going after both software as well as services. So this is the market that's not measured in the billions, it's measured in the trillions. It's approximately $10 trillion, in fact, and we think that the greatest opportunities are in those companies actually going after the services profit pool and creating entirely new markets in doing so. For example, in the US, the labour profit pool for medical practitioners is about $450 billion. There's a company that we hold called Doximity that really started off as the LinkedIn for doctors. It's now becoming the digital office for doctors and their AI tools, they've launched something called Doximity GPT. They're halving the paperwork for doctors every single day. Now this is a supply-constrained profession, we need more doctors. So if doctors can take back half of their day and see more patients, this isn't job displacement, this is pure productivity uplift.
Simon [00:02:39] So Storm, how widespread would these benefits be for companies at the top of the tech stack?
Storm [00:02:44] So this trip was very different to the trip we had about a year ago. And the differences is that we moved from experimentation to deployment. And the way we can spot that is through revenues per employee. So that's a key metric for us going forward. This has a significant implication on the winners of the last decade because they're built on top of traditional compute. Now, if you have the winners of the next decade already deploying AI at scale into the market, that means that traditional companies that have been market leaders over the last decade, built on slow, expensive, traditional computing, and not competitive with the younger, smaller, more nimble companies that have integrated and moved into deployment of AI systems going forward. What that means is that the winners of the next decade are companies that are moving faster, they're able to deploy new products and services into the market, which are cheaper and better than the incumbents. And they're able to drive better efficiencies for their business model going forward. So that's revenue per employee. We're starting to see these two markets diverge as we sit today. And this is the first time we've really sat down in front of senior management teams and either they are meeting new demand because their products are better and cheaper because they're built on top of accelerated computing and the new technology stack as Claire talked about, or they're built on traditional computing and they are not competitive going forward. And those CEOs, CFOs are very worried about the future going forward.
Simon [00:04:12] Clare, are there any other developments you saw in Silicon Valley that changes any of your investment views?
Clare [00:04:17] Cyber security was a structural standout. We met with a lot of the ecosystem. And when we think about agential AI, the demands tied to cyber security open up a significant opportunity, because every single AI agent is a threat. And there's the dual opportunity of being able to train your own AI agents to actually hunt cyber threats as well. However, not every single company has got the right technology or indeed the right end market to capitalise on this opportunity, in our opinion. There are really three pillars within cyber security that we think are going to define the winners of the next decade. One is identity, second is cloud, and the third is endpoint. And the key competitive advantages that we're looking for in our investments are really tied to having a platform approach and a significant data advantage. Because if you're training an agent to go and hunt for cyber security threats, you've got to train it on a lot of data. For cloud, that Zscaler, they actually generate 80% of the world's security logs. So a vast data advantage versus traditional players like a Fortinet or Palo Alto. For the endpoint, that's CrowdStrike. They've got these agents installed on all the laptops and mobiles that we use every single day. And what we're seeing from CrowdStrike's embrace of AI in training these agents is a 700% faster detection time versus the industry average. And lastly, a new investment in the Global Technology Fund following our trip is SailPoint Technologies in identity. So they really control the access within an enterprise like Liontrust, saying whether Simon or Storm can see certain applications. They connect up to 27,000 enterprise applications in an organisation, which also serves as a tremendous moat. So we came away with an appreciation both of the opportunity, but also of the changing competitive dynamics in cyber security. Things are moving very quickly, it's really Zscaler, CrowdStrike that are making these waves.
Simon [00:06:39] Thank you, Clare. Thank you Storm. Thank you for watching. And we'll see you for the next Global Innovation video.
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