Investing in Artificial Intelligence

April 2, 2020

In considering investment opportunities, we should not overlook companies that are capitalizing on the rapid advancements being made in artificial intelligence (AI). AI is the process of programming machines to mirror human intelligence, using skills such as learning and problem solving to complete tasks.1

Like the increasingly predictive nature of the Google search engine, these AI-powered systems become faster and more accurate as they receive more data. For example, Baidu dominates the search engine market in China and continues to innovate in internet-related products and services. The more consumers use Baidu to search for information, the better Baidu’s AI technology becomes at providing answers. As a result, Baidu beat out competitors in market share on all platforms in 2019.2

As AI continues to grow and mature, it will have a widespread impact across industries. AI-based healthcare companies, for instance, developed telemedicine to transform how people access doctors when they are sick.3 Rather than waiting for hours in a doctor’s office or traveling long distances, telemedicine allows you to connect with a doctor virtually and discuss the treatment or medication you need.

Transportation is another industry experiencing disruption by AI. For example, smart sensor systems are being implemented to notify drivers of potential road hazards, including other cars and pedestrians.4 In fact, the third quarter of 2019 saw the eighth consecutive year-to-year quarterly decline in vehicle-related fatalities.5 This safety improvement could partially be attributed to the dramatic increase in AI used in vehicles, making them safer and less accident-prone.

Take Tesla, for example. 2020 estimates for autopilot miles in its vehicles have already surpassed 2.2 billion and are projected to almost double in 2021.6 When Tesla drivers engage the autopilot feature, they are six times safer than if the car were operated manually.7 As the company continues to add new AI-powered features to its vehicles, the value of its products increase, which explains why the stock experienced sharp gains.8

At Exencial, we are already capitalizing on this growing trend. We have added both Baidu and Tesla, as well as numerous other AI-driven companies, to our SELECT strategy and Opportunity Fund. When evaluating companies for inclusion in these funds, we select names that are innovative and disruptive in an addressable market. Additionally, we look for companies that are poised for growth regardless of the market environment.

While we see tremendous potential in the AI sector, it is important to have a diversified portfolio that reduces risks by investing across different industries. If you have any questions about artificial intelligence and its role in your investment strategies, please contact your Exencial advisor.

1. Investopedia (1/22/20) – Artificial Intelligence (AI)
2. Statcounter (data as of 3/10/20) – Search engine market share China
3. CNBC.com (1/9/20) – Telemedicine could change the way you visit your doctor. Are we ready?
4. CNN (2/7/20) – Can smart sensor systems anticipate and avoid danger?
5. National Highway Traffic Safety Administration (12/20/19) – U.S. Transportation Secretary Elaine L. Chao announces further reductions in roadway fatalities in first 9 months of 2019
6. lexfridman.com (data as of 3/10/20) – Tesla vehicle deliveries and autopilot mileage statistics
7. CleanTechnica (1/16/20) – A Tesla with autopilot on drives ~6.4× more miles before an accident than average US car
8. Yahoo! Finance (data as of 3/10/20) – Tesla, Inc.


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