Artificial intelligence (AI) and robotics have been around for some time. But joining these disciplines can create intelligent robots with a range of implications. In fact, we have already seen the emergence of semi-autonomous vehicles, drones, and AI-driven facial recognition software.
For purposes of this analysis, we define AI as the broad concept of machines/robots performing tasks that require varying levels of intelligence for humans to perform. Machine learning is a form of AI, that provides machines and robots with data so they can train themselves to use and apply data to specific tasks.
As computers have become more powerful and data more readily available, advances in AI and machine learning have followed. We believe the combination of these disciplines with robotics can have a significant economic- and business-related benefit. Beyond industry-specific applications, the convergence of AI and robotics will likely have a global impact.
Advancements in AI/robotics will likely be instrumental in finding a solution to the declining global working-age population, a topic we touch on later.
Outside of the traditional tech-heavy industries, AI and robotics are likely to affect diverse industries over the coming decades.
Impact on the Automotive Industry
There are a number of technical, legal, and ethical challenges to autonomous vehicles (AVs), or self-driving cars, so they are likely years away from safely driving us to work. We believe the path to fully autonomous vehicles is incremental, with many seemingly small innovations rather than a few large advancements. Automakers are already offering features such as forward collision warning, automatic emergency braking, lane departure warning, lane keeping assist, adaptive cruise control, and blind spot detection. Each feature represents a small step to fully autonomous vehicles, and the underlying technologies enabling them are largely dependent on AI.
The automobile industry is a significant part of the global economy, so even small changes could have an effect on the growth trajectory of AI and robotic companies driving these advancements. We believe AI-based machines will help lead to less production downtime, improved production equipment availability, lower maintenance costs, and ultimately greater productivity.
Studies have estimated that, on average, cars are parked up to 95% of their lifespan.
How consumers think about and use cars will likely change as AVs become a reality. We think AVs and ride-sharing networks could flip this dynamic. It’s interesting to note that private car ownership in the United States has declined among young drivers (ages 16–24) from 76% in 2000 to 71% in 2013, as carsharing memberships have grown 30% over the last five years.
Impact on the Retail Industry
Many sectors of the retail industry, from online sellers to big box stores, already have access to vast amounts of consumer data, including shoppers’ previous transactions, when and how often consumers shop, social media data, online viewing histories, seasonality, weather patterns, and more. Using consumer data, retailers (with the help of AI) may be able to better anticipate consumer decisions, dynamically set up targeted promotions, optimize supply chains, and eliminate some manual processes hindering getting goods to the market and the end consumer.
Recently, both Amazon.com, Inc. and Netflix, Inc. have made significant investments in this area. Amazon has automated its picking-and-packing processes, decreasing shipping times and operating costs. Netflix has employed AI-supported algorithms to personalize customer recommendations, which has helped improve the customer experience and retention.
Solution to Declining Working Age Population
The objective of advancements in AI/robotics is to make the underlying technologies versatile enough to learn on their own without explicit programming (that is, machine learning). The machine-learning capabilities of robots would be nearly indistinguishable from human capabilities but with greater efficiencies. In our view, AI-enabled robots are a likely solution to the expected shortages in working-age populations across major global economies over the next few decades.
We believe that for patient investors, investment in this area of technological evolution will allow them to get exposure to one of the most powerful trends in our world today.
This is a summary of the paper Thematic Investment Opportunity – Convergence of Artificial Intelligence and Robotics. To learn more about this topic, download the complete article or contact a Hawthorn Investment Advisor.