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Mega forces: An investment opportunity
Mega forces are big, structural changes that affect investing now - and far in the future. This creates major opportunities - and risks - for investors.
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BlackRock Investment Institute
Digital disruption and artificial intelligence (AI)
Artificial intelligence – one of the five mega forces that we track – can automate laborious tasks, analyze huge sets of data and help generate fresh ideas. Digital disruption goes beyond AI.
Explore this interactive page and learn more about our roadmap to help assess the investment implications of artificial intelligence.
Potential to boost productivity
Artificial intelligence can automate laborious tasks, analyze huge sets of data and help generate fresh ideas. Automation has the potential to boost productivity, giving an advantage to companies, sectors and economies that harness AI. We think the full AI ecosystem will benefit over time.
Digital disruption goes beyond AI. We see other key tech innovation driving connectivity, security and physical automation and interplaying with AI.
Exponential advances
The chart below shows an exponential surge in “parameters” between OpenAI’s GPT-1 and GPT-4 model over just five years. Parameters are elements of a model learned from historical data that allow it to generate text or multimedia content based on the prompt it receives. The higher the number of parameters, the more sophisticated a model’s understanding of patterns and more nuanced its output. We expect this exponential growth to persist, suggesting the world is at the cusp of an intelligence revolution.
Investment implications
We believe the entire tech industry is pivoting business models to AI – sparking something of an arms race led by a handful of mega cap companies. As chipmakers provide the building blocks of computing, they have been seen as the immediate beneficiaries. In software, translation, summarization, text analysis and related tasks, are already being automated and commoditized. But a new generation of applications and use cases could emerge as AI technologies develop and acquire new capabilities.
We think the importance of data for AI and potential winners is underappreciated. Companies with vast sets of proprietary data have the ability to more quickly and easily leverage a large amount of data to create innovative models. New AI tools could analyze and unlock the value of the data gold mine some companies may be sitting on.
This year we have seen the market try to scope out the implications of AI-driven disruption. We initiated AI as a specific mega force investment view and think getting granular is a key way of expressing such views: These mega forces don’t map easily to traditional portfolio building blocks and can straddle sectors and regions. But broadly, we see a multi-country and multi-sector AI-centered investment cycle unfolding that we think will support revenues and margins. On 6- to 12-month view, we are overweight the AI theme in developed market equities.
The biggest investment impact may come from AI’s interaction with other tech and mega forces – the focus of future research. We believe significant investment will be needed to build out the infrastructure needed to fully harness AI.
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Grabbing the wheel: putting money to work
The new regime of greater volatility is full of opportunities. Seizing them requires a dynamic and selective approach that blends the economic outlook with mega forces and more.
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