Morgan Stanley
  • Wealth Management
  • July 1, 2024

Artificial intelligence – the winners and losers

With some stocks climbing to new highs, we dig into the debates surrounding markets, inflation and where to next.

Artificial intelligence (AI), and particularly generative AI, is currently one of the most disruptive forces in business. At the Morgan Stanley 6th Australia Summit 2024, Nick Griffin, Founding Partner and CIO from Munro Partners and Trent Masters, Portfolio Manager, Aphinity Investment Management discussed the key players within the AI sector. Like any sector, it has the ability to create winners and losers depending on the speed and effectiveness of the adoption of new business models.

Why AI matters for investors

For investors, AI will likely be one of the most important themes of the next decade, as it is still at an early stage, investors need to sort the winners from the losers and decide how to trade the theme.

Where can investors find compelling AI opportunities? For many, this means focusing on a handful of tech stocks known as the “Magnificent 7” as the main beneficiaries of advances in AI. Our panelists discussed the role the following organisations will play in the expansion of AI. 

Nvidia

If AI’s explosive growth continues, investors will look to “move up the stack” to the most important semiconductors on the planet – the high-performance semiconductors, which only three companies are currently capable of building, Nvidia, Advanced Micro Devices and Intel.

In terms of Nvidia, Nick Munro believes that semi-conductors still hold the key to a digital future, and that artificial intelligence will move into every single organisation on the planet. Munro believes that Nvidia is “the key AI enabler” and could be the largest company in the world one day.

Importantly, Nvidia is not just a hardware company, they are a software company as well. In much the same way as Apple, it is a software company selling hardware. Munro is very much of the view that Nvidia is the hardware and software company to support AI and is likely to be the dominant supplier for years to come. Currently halfway through maximising their hardware opportunity, Nvidia hasn’t really accessed their software opportunity as yet.

Trent Masters, Portfolio Manager, Aphinity Investment Management agrees with this outlook and added that Nvidia is able to scale their revenue successfully while accelerating their product development. Masters also pointed to Nvidia’s commitment to release a new AI chip architecture every year, rather than every other year, and to putting out new software that could more deeply entrench its chips in AI software.

Microsoft

Rapid adoption of generative AI technology has triggered-rocketing demand for AI data centres capable of handling more advanced tasks than traditional data centres. Munroe highlighted Microsoft’s commitment to build StarGate, a data centre project that could cost up to US$100 billion and include an AI supercomputer set to launch in 2028.

The strength of the Microsoft ecosystem – such as Microsoft’s integration of chatbot ChatGPT into Teams, is also a core strength of the company.  

Google

Google Search has long been regarded as the go-to source for seeking information, but a new contender, OpenAI's ChatGPT, could change this.

While search functionality is a large portion of Google’s business revenue, the introduction of AI is changing the way we search for information.

While both Google and ChatGPT strive to provide users with information, they rely on different methods: Google draws upon web-based sources, while ChatGPT uses its AI capability to generate responses.

Google’s reliance on their search functionality could mean they may need to innovate and change their approach. Watch this space. 

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