The pace of corporate investment and innovation in artificial intelligence is moving so fast and the pervasiveness of AI in consumers' everyday lives continues to grow at such a rapid pace that there are multiple opportunities for investment, according to Fidelity's Ali Khan.
"The market appears to be quick to declare the winners in AI, but I believe there will be multiple industry leaders who benefit from their investments in this technology," says Khan, portfolio manager of Fidelity® Select Software and IT Services Portfolio.
Khan has been watching closely as developments in AI—the ability of machines to perform tasks with human-like intelligence—have rocketed to the forefront of headline news in recent months after years in the making. As examples, he cites Google Maps and Waze, which recommend travel routes, as well as Netflix and Amazon.com, which recommend what media programs to watch or buy.
In managing the fund, Khan seeks to purchase good businesses at the right prices, particularly those with an above-average growth rate and that trade at a below-average valuation. He leverages the perspectives of Fidelity's team of 20 technology analysts around the world.
"During the past several years, companies have poured billions of dollars into AI research to leverage the immense amount of data being collected through the internet," says Khan. "These same companies have earmarked several billion more to continue their AI advancements."
Citing use cases across nearly every segment of the market, including retail, financial services, telecommunications, and health care, Khan believes AI is "one of the most influential trends driving the technology industry today."
In late November, OpenAI, which is a private company and not listed on any stock market exchange, launched the first version of its AI chatbot, ChatGPT. It allows users to generate original conversational text pulled from sources across the internet. Then, in February, Microsoft launched its own AI-powered chatbot, Bing, which was developed in partnership with OpenAI and ChatGPT. Meanwhile, Google parent Alphabet released an experimental version of its chatbot, Bard, just the day before Microsoft's Bing announcement.
The fund counts Microsoft and Alphabet among its largest holdings and overweights (versus the industry benchmark) as of July 31.
"I believe both are well-positioned to leverage their data and investments to rapidly innovate within this potentially lucrative area of technology," says Khan.
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