The Rise of Artificial Intelligence

Manifestations of artificial intelligence (AI) stretch back as far as Greek mythology however, it has only taken off in a huge way in recent years. As interest in this field grows more, big-name companies, such as Google, Yahoo, Apple, Intel, and IBM are competing to acquire private AI technology development companies, with nearly 140 companies having been acquired already. Market research firm Tractica has predicted that spending on AI will grow from $640 million in 2016 to $37 billion by 2025.

A front runner in the development of AI has been the UK, where London-based venture capital company Octopus Ventures first invested in the natural knowledge answer engine Evi (now the technology behind Amazon’s Echo) in 2008. The firm continues to be an active investor in AI, selling products, such as the app Swiftkey, to high profile companies like Microsoft. Octopus Venture’s Investment Director, Luke Hakes, believes that their AI successes are why the UK is now the inspiration for other countries in how AI can be commercialised, and this growing interest will have the effect of more funding being put into AI companies.

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As well as seeing the AI market itself grow exponentially, other companies are experiencing growth off the back of AI’s success. Companies who develop and make chip technology have seen a revival as the demand for new AI products had prompted the need for chips tuned to carry out very specific functions, and with the ability to store and synthesise information in novel ways. Companies such as Advanced Micro Devices, Intel, and Nvidia have all benefited from this growth, with Nvidia’s latest quarterly results stating that it has nearly tripled sales of chips to data centers involved in AI. 21% of the company’s revenue is now from computing tasks that include AI, amounting to $409 million for the last quarter.

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Growth in this sector is being spurred on as well-established companies implement AI technologies to enhance their user experience. Facebook has developed its own AI program, DeepText, that analyses posts to understand the context of them, recognises faces in photos to make it quicker to tag people, and is even able to identify people and their voices in video content. Outside of the online sector, much research is being carried out into the use of AI in the transport field. By 2035 around 76 million vehicles with some level of autonomy will be in use, comprising a market that will be worth $77 billion.

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Although much of the development into these technologies is relatively new, investment in AI seems to be strong and stable, with a predicted steady increase in the future.

(Please note: James O’Leary does not currently hold a position in Google, Twitter, Intel, IBM, Advanced Micro Devices or Nvidia. Henry James International does not currently own a position in Google, Twitter, Intel, IBM, Advanced Micro Devices or Nvidia for any client portfolios. James O’Leary does currently hold a position in Apple. Henry James International does currently own a position in Apple).

pixaAll content in this blog represents the opinion of James O’Leary

The International Equity Portfolio

The big story in the news this week was the extraordinary loss reported by BHP Billiton. The Anglo-Australian mining giant recorded the worst loss in its history to the tune of around $6.4 billion annually. Along with an unavoidable dam collapse in Brazil, the company has suffered due to the continued slump in commodities prices.

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Also in the news, further stories keep trickling in detailing post-Brexit fall-out. Although the UK economy appears to be dealing with the situation far better than had been predicted by some, many sectors – such as IT, Finance, and Corporate Property – have been feeling the heat, with the pound still on shaky ground, international deals being pulled out of, and jobs being cut.

 

Last week, RBS announced that a large IT project originally due to be undertaken by Indian tech firm Infosys would no longer be going ahead triggering an “orderly ramp-down” of around 3000 employees. Banks and Finance firms are creating significantly fewer jobs too, moving roles to outside of the UK, according to recruiters Morgan McKinley.

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Despite this, our International Equity Portfolio performed reasonably well last quarter, returning 1.43% (pure gross) and 1.20% (net) versus 0.05% for the benchmark. For one year the portfolio returned -6.29% (pure gross) and -7.28 (net) versus -9.72% for the MSCI-EAFE Index. Although stock selection and country weightings in India and Australia hindered performance, weightings in Spain, Germany and Japan boosted it, as well as selections in the communications, health technology and consumer durables sectors.

 

The Henry James International Portfolio is a large capitalization international portfolio; it takes advantage of the international economy while seeking long-term capital appreciation. As with all our Emerging Markets Portfolio  The investment process is an objective, bottom-up, quantitative screening process designed to identify and select inefficiently-priced international stocks with superior return-versus-risk characteristics. This is combined with quarterly, top-down risk-mitigating country allocation system rebalancing, in which the management team over weights highly-ranked countries and under weights lower-ranked countries. Typically, the portfolio invests in 50 to 70 stocks that pass our disciplined fundamental and quantitative criteria. The primary performance benchmark is the MSCI-EAFE.

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To learn more about this, or any of our portfolios, please get in touch via email at info@hj-intl.com, by telephone on 917-951-5170 or by heading to our website.

 

(Please note: Henry James International does not currently holds a position in RBS.  Henry James International does currently own BHP and INFY for client portfolios).

Brexit – UK in Limbo, Part 2

Just over three weeks since the Brexit results and the UK remains in a political limbo. Financially-speaking, however, things are beginning to calm down. After the initial shock, the markets have quietened, with the FTSE100 even moving ahead of where it was before the referendum. It looks like Europe has survived the immediate, violent reaction and the focus now shifts to what continued uncertainty, and a withdrawal from the EU, will mean for the UK, and the rest of the world.

Biggest question next – EU budget

The next big economic issue surrounding Brexit is the question of the EU budget. The EU’s current budget stands at €960bn for the years 2016-2020. £47.5bn should come from the UK up until 2020, but since spending that money on UK institutions such as the NHS played a central role in the Leave campaign’s argument, it is unlikely that the next Prime Minister will agree to honour that commitment for another 3 years.

The UK certainly will not stop paying until the withdrawal agreements have all been discussed and decided, but sooner or later the UK will stop contributing, and then the question will be what can be done to fill that gap. One possibility is that the EU will expand its revenue sources, past the current sugar tax and customs duties, the other is that net contributors will agree to pay more and net receivers will agree to accept less. Either way, this decision will undoubtedly have an effect on the economies of the remaining member states.