Saying that artificial intelligence (AI) has become ubiquitous in 2024 is akin to stating the obvious. While the feats and imperfections of ChatGPT fuelled coffee machine chatter a year ago, generative AI has rapidly risen to prominence as a major concern. For instance, in the fourth quarter of 2023, Goldman Sachs observed that over a third of S&P500 companies discussed artificial intelligence during their quarterly earnings conference calls.

Investors are on the lookout. In celebration of International Women’s Month, Addenda recently hosted a breakfast conference on the topic of AI with female attendees from a range of sectors. Annie Laliberté, Vice-President, Global Equities, came to present her team’s vision of artificial intelligence, its potential and the risks to watch out for. “Our team has been following this trend for a long time,” she said.

Market Frenzy

The buzz created in early 2023 by the emergence of ChatGPT—developed by OpenAI, which is supported by a US$13 billion investment from Microsoft—, had a positive impact on numerous publicly traded companies in the months that followed. For instance, chip manufacturer Nvidia surged over 230% to US$495.22 from January to December 2023, while graphic software company Adobe jumped 77% to US$596.60.

Yet across various industries, the speed at which AI is expanding and diversifying its applications is raising questions related to ethics and governance. Simultaneously, it is enabling companies to innovate, resulting in compelling investment themes—provided, of course, that opportunities are subjected to fundamental and informed analysis for long-term value creation.

Finding Specific Uses Within Companies

Annie Laliberté highlighted that some companies already held in Addenda’s global equity portfolio have been using artificial intelligence for years to enhance operational efficiency. For instance, RELX, owner of legal information service LexisNexis, relies on AI for case summaries and conversational search. Laliberté said that exploring how companies can leverage AI to improve performance and operations is crucial. This topic is a focus of Addenda’s discussions with companies in which it invests. However, while AI does show potential and opportunities, it carries risks, which Addenda monitors closely as part of its company analysis.

Attendees at the conference also had the opportunity to hear from Émilie Lavoie-Charland, Associate Vice President of Claims Portfolio Analytics at Co-operators. She spoke about ethical considerations related to AI utilization, as well as the importance of clear guidelines regarding roles and responsibilities within organizations.

The coming months hold significant learning opportunities, particularly as the topic captures investors’ interest. In 2023, for the first time, the Responsible Investment Association (RIA) included questions related to this subject in its annual investor survey. While 8 out of 10 investors believed it is “very or somewhat important” for companies in their portfolios to identify and mitigate AI-related risks, half of them considered it equally important for these companies to invest in ongoing AI development (51%) and incorporate AI into their products or services (49%).

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