Zeroing in on the real potential of generative AI

Recently launched applications only scratch the surface of AI's potential, and the best outcomes are likely to stem from more-specific, targeted applications, says Fidelity's Kyle Weaver.

  • The November 2022 release of ChatGPT made headlines for its ability to use natural language in everyday applications, but the real news is exciting progress in the development of specialized fields, according to Fidelity Portfolio Manager Kyle Weaver.
  • "Widespread use of ChatGPT and similar apps has exposed the technology's current limitations, and also points the way toward its highest and best uses," says Weaver, who manages Fidelity Advisor® Growth Opportunities Fund.
  • In helming the broadly diversified fund since 2015, Weaver favors a mix of traditional growth stocks and value-oriented names that he believes are cheap on a three-to seven-year view—either because of expected rapid earnings growth or aggressive share buybacks.
  • Looking ahead, Weaver is most excited about applications of generative artificial intelligence that are topic-specific—cellular biology and fluid mechanics, for example—where a discrete, well-defined vocabulary and set of principles are in use.
  • In cellular biology, Weaver cites researchers at the University of Toronto who have developed an artificial intelligence system that uses generative diffusion to create proteins not found in nature. "This is the same technology behind popular image-creation platforms, such as DALL-E and MidJourney," says Weaver.
  • Weaver is similarly enthusiastic about applications in generative biology, which promises to speed drug development by making the design and testing of entirely new therapeutic proteins more efficient and flexible.
  • Weaver cites Nvidia as a primary beneficiary of the recent surge of interest in generative AI. "It stands out partly because of its integrated approach, which includes libraries of algorithms for training topic-specific applications of AI," he says. The fund held a sizable overweight position in Nvidia as of August 31.
  • Microsoft is another core fund holding, based on Weaver's optimism. He says the company's Azure cloud facility is best positioned among large data centers to benefit from increased third-party AI activity. Microsoft was the fund's largest position at the end of August, although it was a modest underweight versus the benchmark.
  • "As the market for specialized AI grows and matures, I have no doubt that other companies will develop their own libraries of algorithms for content-specific fields, opening the door to groundbreaking applications," he concludes.
  • For specific fund information such as standard performance and holdings, please go to the "Funds Managed" link on this page.

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