Generative Artificial Intelligence
Robertson Velez, Portfolio Manager for CIBC Asset Management discusses the future of Artificial Intelligence and what it means for investors.
Generative artificial intelligence – What investors need to know
[Generative artificial intelligence – What investors need to know]
Portfolio Manager, Global Equities
CIBC Asset Management]
What's unique about my background is that I come from two worlds. After graduating from university with my computer engineering degree, I spent the first 12 years of my professional career as an engineer where I designed semiconductor chips in the computer graphics industry.
I later graduated from an MBA program and I switched to finance, where I have spent the last 15 years on the “buy” side covering technology stocks as an analyst and then as a portfolio manager.
[What is generative AI?]
Artificial intelligence is not a new field.
[An older-looking computer display screen with a headline of text reading “Welcome to Eliza}”, and underneath a text conversation between two characters (“You”, and “Eliza”,) in which they discuss “You’s” problems with men. A small, two-wheeled robot slowly maneuvering through a hallway (Auat Cheein F, Lopez N, Soria C, di Sciascio F, Lobo Pereira F, Carelli R, CC BY 2.0, via Wikimedia Commons). An empty self-driving car driving on the street.)
We’ve actually been doing it for many decades. What has changed is that with the most recent iteration, which is generative AI, we're able to do a lot more. Write essays, write code, create videos, create graphics.
[A computer application interface. Topmost line of text reads “Write an essay about the history of finance”. In a box below, an essay with the title “Title: The Evolution of Finance: A Journey Through History” appears, and an essay begins self-generating.]
And this has the potential to allow us to interact with machines in a whole new way.
[How will AI use evolve?]
We have seen AI used in voice recognition, image recognition, chatbots and recommendation systems.
[A woman carrying her newborn baby boy asks a question to a smart speaker. A brain scan image showing four different angles of a brain. A ‘chat’ app interface showing a text conversation between a woman and a chatbot, with the woman booking a reservation at a restaurant.]
Going forward, looking at generative AI, I see three areas where we would see potential new use cases.
[Potential use cases for generative AI:
1. Content creation and productivity
2. Search queries
3. Data analytics and customer interaction]
One is in productivity. Word processors, spreadsheets.
[Changing data on spreadsheet. Young professional woman sitting at an office desk using a desktop computer showing charts and graphs. A woman looking at data on screen; the data is reflected in her glasses.]
They would incorporate generative AI to help create content. And this can be applied to graphics creation as well as coding.
Secondly, I see potential in revolutionizing search where users can put in more complicated queries and get better, more structured answers to those queries. And that would revolutionize the way that we interact with businesses online.
And third, there's also the potential for all these businesses to make use of its troves of data that it's collected about its customers and use that data, and generative AI to be able to serve those customers and interact with them in a much more comprehensive way.
[A drone POV of a busy urban pedestrian crossing, with minimalist graphics overlaid onto the people walking around. A busy shopping mall with graphics of moving numbers overlaid on top.]
[Lessons from previous tech innovations]
So in previous technology revolutions, investors often fall into the trap of overestimating the short term and underestimating the long term. So in the case of the internet for example, we did see a sharp correction in 2000 because investors were overly exuberant about the short-term promise of the internet.
[MSCI World Information Technology vs. MSCI World
(Data Source: †Morningstar Direct June 19, 2023)
A chart with two line graphs: one plotting “MSCI World/Information Tech GR USD” and one plotting “MSCI World GR USD”. Date range on the x-axis is 1995 to 2004. Y-axis shows values for “Growth of $10,000”, with values ranging from $0 to $90,000. The line graph for “MSCI World/Information Tech GR USD” animates to show a sharp rise then drop from about 1998 to 2002, with the value beginning at about $20,000, rising to a high of about $80,000, then dropping back down to about $20,000.]
But you look out the next two decades, the potential of the internet has been realized by more than the expectations in the initial hype.
[The previous chart now zooms out to show a date range from 1995 to past 2020, and values from $0 to over $250,000. Starting in the mid 2010’s, the value of “MSCI World/Information Tech GR USD” begins spiking upwards to a high of nearly $250,000 at the current date.]
So it's important for long-term investors to have a clear view of the potential of new technologies both in the short term and the long term.
[Threats of AI?]
I think every new technology is always greeted by some trepidation about the potential risks.
[An old black and white photo of a radio tower. An old black and white photo of a nuclear plant. Old black and white footage of fashionable women arriving at a location in a car. A space shuttle launch. A satellite orbiting the earth. Robotics engineers watch and discuss a robot arm in motion.]
But generally speaking, revolutionary technologies have provided more benefits than harm to society, and we've always successfully navigated the risks. I think the same applies to AI. There are clear risks in letting machines take over human functions. But what is important to remember is that AI is meant to replace human prediction, not human judgment. So as such, I think that some type of regulatory framework makes sense. But it is a fine line and a fine balance between protecting society against possible AI threats and inhibiting new technologies before the potential is realized.
I think we're still at early stages of development for generative AI, and there is a lot of noise in the near term. Practically every company claims to be incorporating generative AI into their products and services. So it's important to understand the value chain to determine which companies really benefit from generative AI and why. It's also important to be very selective in that process as performance is determined as much by what we don't own as what we do own.
So in the global technology funds, this is what we do.
[A screenshot of the webpage for the CIBC Global Technology Fund. A screenshot of the webpage for the Renaissance Global Science & Technology Fund.]
We follow a disciplined process to find these opportunities in a concentrated portfolio of stocks to generate alpha over the long term, while managing the risks in the near term.
[Talk with your advisor to learn more about
the CIBC Global Technology Fund
and the Renaissance Global Science & Technology Fund]
[The views expressed in this video are the views of CIBC Asset Management Inc. and are subject to change at any time. CIBC Asset Management Inc. does not undertake any obligation or responsibility to update such opinions. This video is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice, it should not be relied upon in that regard or be considered predictive of any future market performance, nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this video should consult with their advisor. All opinions and estimates expressed in this video are as of the date of publication unless otherwise indicated, and are subject to change. Any information or discussion about the current characteristics of this fund or how the portfolio manager is managing the fund that is supplementary to information in the prospectus is not a discussion about material investment objectives or strategies, but solely a discussion of the current characteristics or manner of fulfilling the investment objectives and strategies, and is subject to change without notice. You should not act or rely on the information without seeking the advice of a professional. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
CIBC Asset Management and the CIBC logo are trademarks of Canadian Imperial Bank of Commerce (CIBC), used under license.
The material and/or its contents may not be reproduced without the express written consent of CIBC Asset Management Inc.
†©2023 Morningstar Research Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
[The CIBC logo is a trademark of CIBC, used under license.]