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Has artificial intelligence reached a commercial tipping point?
Mark Casey
Equity Portfolio Manager
Drew Macklis
Investment Analyst
Julien Gaertner
Investment Analyst

Publicity around ChatGPT has sparked fresh speculation around the promise and peril of artificial intelligence.


But while AI is likely on the brink of causing tectonic shifts across many companies and industries, as investors, it is vital to cut through current noise to analyse developments in the sector and the opportunities that could arise. In this piece, Capital Group portfolio managers and analysts examine recent breakthroughs in the AI space, largely in the ‘generative’ area, and whether the sector may be nearing a commercial tipping point.


A useful comparison for AI is the rise in so-called chess engines: as the chart shows, chess computers have evolved from never beating humans to defeating average players to routinely overcoming the best grand masters ever. 


Chess ability of the best computers

chart_01_Elo-ratings

As at January 2023. Sources: Chess.com (2020), SSDF (2022). Chess ability is measured with the Elo rating system, calculated based on game results. A higher rating indicates a player is more likely to win a game. The blue line in the chart represents the increasing Elo aptitude of chess computers, while the grey dotted lines indicate key levels of human ability.

In chess terms, AI is perhaps still only at the point of computers being able to beat the average human, or creating something like a first draft of a document, for example. But AI capabilities are rapidly increasing and appear to be nearing the point where deployment and impact can accelerate: through continued breakthroughs in models, along with context-specific fine-tuning, AI can start to really move the needle on economic productivity.


As the paper outlines, beyond obvious tech and ‘knowledge’ sectors, areas of potential application include supply chain management, healthcare (in drug development and scan analysis), insurance, oil and gas (looking at satellite data), utilities (for grid and load management) and autonomous farming − and AI strategy may therefore become an increasingly important part of company analysis.



Mark Casey is an equity portfolio manager with 22 years of investment experience. He holds an MBA from Harvard and a bachelor's from Yale.

Drew Macklis is an equity investment analyst at Capital Group with research responsibility for U.S. semiconductors and autos & mobility technology. He has six years of investment industry experience and has been with Capital Group for three years. He holds an MBA from Harvard Business School, where he graduated as a Baker scholar and recipient of the John L. Loeb Award, and a bachelor's degree in economics and global affairs from Yale University, where he graduated magna cum laude. Drew is based in San Francisco. 

Julien Gaertner is an equity investment analyst at Capital Group with research responsibility for enterprise software & services and technology hardware & equipment in the U.S. and Europe, and health care IT in the U.S. He has 11 years of investment industry experience, all with Capital Group. He holds a bachelor’s degree in economics and international relations from Brown University. Julien is based in San Francisco.


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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.