Is the current enthusiasm for the impact of artificial intelligence (AI) justified? According to Alison Porter, portfolio manager at Janus Henderson Investors, the question should not focus solely on how AI may influence the business model of technology companies but rather on a broader view that transcends the stock markets themselves: “Technology is not just an economic driver. It is the center of the economy and will drive major changes in the economy and politics,” she stated.
Porter was one of the speakers at the Madrid Knowledge Exchange forum, recently offered by Janus Henderson to its clients. During her presentation, she emphasized the importance for managers and other professional investors to “understand the anatomy of technology,” as she believes that a deep knowledge will be indispensable not only for determining asset allocation and portfolio risk assessment but also “for reflecting how they think about the global economy.”
How to Approach the Emergence of AI?
The expert explained that the explosion of AI has inaugurated the fourth major wave of technological innovation in history. Although she considers that we are still in the early stages of this wave, she makes several key observations about where we might be headed. The first comes from a historical perspective, noting that previous waves of innovation have had two common patterns: they emerged after periods of economic shock, as a way to find new solutions to past problems (Porter places the beginnings of this fourth wave in the 2020 pandemic) and result in technologies that are cheaper, faster, and have greater reach across different layers of the economy, with a predominantly deflationary impact in the long term.
The second observation relates to how Porter believes investors should approach investing in AI, as she considers that its future evolution is tied to three factors: data, demographics, and productivity. Regarding data, Porter emphasized two aspects: data quality and the ability to interpret it. She presented an example of effective AI use with the possibility of a “co-pilot (virtual assistant) for the Fed,” which would help the central bank interpret unemployment data, as these are estimates. “The data we depend on must be reliable. The better the data, the better the information derived from it,” Porter insisted, concluding: “AI could help the Fed achieve a soft landing.”
On the topic of demographics, the portfolio manager highlighted the progressive aging of the population in most nations around the world, not only in developed countries but also in emerging markets like China or Brazil over the next 20 years. Porter pointed out that it is estimated that by 2030, 75,000 jobs will be lost in Japan due to population aging. The expert notes that the gradual increase in the aging rate and the dependency ratio will have implications for “social security, healthcare systems, and even debt issuance.” Therefore, she asserts that AI can help improve productivity in countries exposed to this mega trend. Consequently, Porter believes that a key aspect investors should focus on to benefit from the development of AI is “identifying where new capital is being allocated in each wave of technology.”
