Artificial Intelligence (AI) and the continuing transition towards net zero have been identified as two ‘megatrends’ for fund managers next year, according to Hargreaves Lansdown.
Steve Clayton, head of equity funds at Hargreaves Lansdown said that fund managers have to look ahead: “We diversify to spread risk of course, but at its heart, fund management is about seeking rewards for taking measured risks with other people’s capital. That means trying to answer the big questions about where the world is headed and how it might impact upon businesses. At the moment, there seem to be some really big trends playing out.”
“Artificial Intelligence is an emerging megatrend and it will drive efficiencies at previously unimagined rates… anyone who doubts that AI will change things should take a look at Nvidia,” he added. “Nvidia make the chips that AI applications run on. In their latest quarterly earnings, release Nvidia reported revenues of $18 billion an increase of $12 billion against the same three months of the previous year. Analysts are forecasting that in just two years, Nvidia’s annual revenues will have grown by over $60 billion.”
“If that much is being spent on the components that enable the technology to be deployed into real world uses, it seems fair to assume that quite a lot of change is intended to happen. There will be a few big winners, processor designers, hardware producers, datacentre operators and all that. But for me it is the potential for companies to up their returns by deploying the technology to cut through bottlenecks and lift service standards that is most exciting.”
“Whole new product categories are emerging. Microsoft’s Copilot costs $30 per month but reportedly can boost productivity by far, far more. Potentially we could see hundreds of millions of workers using copilots in the future. That could add up to a lot of GDP and a lot of revenue for Microsoft too. We have positions in Microsoft and Nvidia in the HL Select portfolios. We think these businesses are some of the core beneficiaries of the early stages of the surge in AI development.”
He added that every industrial process, every day-to-day activity will need to be re-engineered to reduce energy intensity and material consumption even to get close to net zero.
“These are huge challenges but also huge opportunities,” he said. “As carbon intensity falls, efficiencies will rise.”