Artificial intelligence (AI) is set to be a game-changer in investments, primarily because it is driving a major disruption in the technology industry and beyond, experts say.
“Historically, we’ve seen technological cycles emerge every 15 years or so, with each cycle leading to profound shifts in the economy and industries. From mainframes in the 1960s to the rise of personal computers and smartphones, each cycle has brought increased demand for key technologies like semiconductors, which have seen demand triple or quadruple during these periods. AI is triggering the next big cycle,” Wesley Lebeau, deputy head of global thematic equities department at Amundi Investment Institute, said in an interview with Khaleej Times.
AI’s influence is unlikely to stop with the technology sector; it will likely have a positive long-term positive impact on productivity and GDP growth. However, not every company will benefit equally, Amundi analysts say. “In this new AI-driven cycle, there will be clear winners and losers. Companies that are early movers in AI, possess a proprietary data advantage, and have an existing competitive edge will likely outperform. Those that fail to innovate or rely solely on adopting AI technology without a distinct advantage may find their competitive edge eroded,” Lebeau said.
For the next few months, markets will focus on economic activities and job data, playing a central role in the performance of the equity market. Direction of monetary policy will be data dependent. A key trend that is expected to gain momentum in a soft-landing scenario is the capital expenditure cycle linked to power infrastructure and grid upgrades. “As industries and governments strive to meet increasing energy demands, upgrading aging infrastructure is becoming an urgent priority. After almost two decades of stagnation, demand for electricity is booming, marking a major turning point in global energy management, fueled in particular by the exponential growth of energy-intensive facilities such as data centers in order to provide a reliable, efficient power supply,” said Vafa Ahmadi, head of global thematic equities at Amundi.
Investing in disruptive sectors can be incredibly rewarding, offering the potential for exponential growth as industries are reshaped by groundbreaking innovations. However, with great opportunity comes heightened risk, experts warn. “To successfully navigate these fast-evolving markets, investors need to consider several crucial factors that go beyond the surface-level of buzzwords. This includes understanding the underlying technology, the competitive landscape, assessing market potential addressable market, scalability and speed of adoption. Investors should consider diversifying their exposure across multiple disruptive themes, rather than concentrating all their investments in a single area. This not only reduces the risk of underperformance in one particular theme but also allows investors to capture opportunities across a wider range of innovations,” Ahmadi added.
A key sector of investments is in the circular economy. Investing in the circular economy involves supporting businesses and initiatives that aim to reduce waste, promote resource efficiency, and create a more sustainable and regenerative economy. “One of the main goals of the circular economy is to keep products and materials in circulation for as long as possible. This can be achieved through practices such as recycling a product which allows for the recovery of valuable materials from end-of-life products. Waste treatment is also an important component of the circular economy, as it aims to minimize the environmental impact of waste by recycling or converting it into energy,” Lebeau said.
In addition to recycling and waste treatment, it is also important to consider other strategies of the circular economy, such as leasing and reuse. Leasing allows consumers to rent products instead of buying them, which promotes reuse and waste reduction. “By opting for leasing, products can be used by multiple individuals successively, thereby extending their use period. Re-designing products to be reused is another key practice of the circular economy, which involves extending the lifespan of products by repairing, refurbishing, or finding alternative uses for them,” Lebeau said.
The circular economy also encourages the transition to clean energy or renewable energy sources. This can include investing in renewable energy technologies such as solar, wind, hydro, or geothermal energy. By using renewable energy sources, we can reduce our dependence on fossil fuels and reduce greenhouse gas emissions. Finally, the circular economy promotes responsible consumption and supports brands that adopt sustainable and responsible practices. “This can include purchasing durable and high-quality products that are designed to last, buying products from sustainable and ethical sources, and supporting brands that have a good reputation in terms of social and environmental responsibility. By choosing to support these brands, society can encourage other companies to adopt similar practices especially in an environment increasingly driven by social networks,” Ahmadi said.