Generative AI: Investment Opportunities in Technological Evolution
The technology sector moves quickly, driving change across society. It’s an industry we’ve all become increasingly reliant on, so the Allianz Technology Trust (ATT) tries to identify any long-term investable themes, one of which is generative artificial intelligence (AI). AI looks set to rapidly reshape how entire industries operate and ATT hopes to benefit through exposure to one of the sector’s major suppliers.
Key takeaways
- The ATT seeks to gain exposure to technological growth and innovation by taking a stake in a major semiconductor provider.
- Being based in Silicon Valley means the ATT team are surrounded by cutting-edge technological ideas, with innovation running through every street.
- Nvidia has gone from strength to strength, delivering some very strong guidance in 2023 that was solidly above investor estimates.
Technological innovation is driving society forward more quickly than ever and investors are keen to gain exposure to these exciting themes. The tech sector can be volatile, but it has delivered significant long-term outperformance and spawned some of the most successful businesses in history. The world is becoming increasingly reliant on tech, which gives the sector unique growth characteristics and potentially makes it much less cyclical than in the past.
The Allianz Technology Trust (ATT) takes a thematic approach to investing in tech, identifying long-term positions with the potential to deliver growth and innovation. One of these themes is generative AI and to access it, ATT has taken a stake in one of the most advanced AI platforms in the world.
ATT’s long track record
ATT was launched over 25 years ago to capitalise on the technological innovation which was on the brink of revolutionising the world. Back in 1995 – ATT’s first year of trading – the hotly anticipated launch of the DVD saw the VHS trundled to charity shops on every high street, only for streaming to send DVDs the same way 15 years later. Technology has moved on enormously since then, and ATT has a long track record of spotting exciting new tech opportunities.
The trust is run from San Francisco by Mike Seidenberg and his team. Being based on the US West Coast puts the team within striking distance of the unique microcosm, Silicon Valley, a city where innovation runs through every street. In both San Francisco and Silicon Valley, the best new ideas are nurtured and met with funding from eagle-eyed investors on the look-out for cutting-edge ideas. There’s an abundance of new tech in the area as established innovations continuously spawn fresh ones, and it’s become an important model for other global innovation hubs throughout the world.
Mike takes a holistic approach to analysing the investment landscape. Together with his team, he carefully identifies long-term structural trends and then looks for the high-potential companies he expects to benefit from those trends in the future. This is a meticulous and thorough process which currently gives the trust exposure to various exciting themes including artificial intelligence (AI), cloud-based services, cybersecurity and electric vehicles. AI is particularly interesting as it looks set to rapidly reshape how entire industries operate.
Picks and shovels
AI allows computers, or computer-controlled machines, to carry out tasks otherwise performed by humans. However, generative AI is slightly different to its earlier form as it can learn from existing data to generate new, original content. Recent breakthroughs mean generative AI is starting to reshape entire industries, driving innovation at an unprecedented speed. As companies move into the intelligence era, generative AI has the potential to be truly game-changing.
Mike believes the American tech behemoth, Nvidia, is a current key player in this field. He comments,
“With the world’s most advanced AI platform, Nvidia is the classic ‘pick-and-shovel’ provider for artificial intelligence. The shares did well in 2023 as a result. We wait to see what happens as more customers embrace the power of its platform and as it invests to try and maintain its competitive lead.”
Nvidia has gone from strength to strength, delivering some very strong guidance in 2023 that was solidly above investor estimates, despite already high expectations. Strength was driven by tremendous growth for AI products and a supply chain that has ramped far more quickly than investors assumed. The tech behemoth currently has a place in ATT’s portfolio, which is regularly reviewed according to prevailing market conditions.
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Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. Competition among technology companies may result in aggressive pricing of their products and services, which may affect the profitability of the companies in which the Trust invests. In addition, because of the rapid pace of technological development, products or services developed by these companies may become rapidly obsolete or have relatively short product cycles. This may have the effect of making the Trust’s returns more volatile than the returns of a fund that does not invest in similarly related companies. Past performance does not predict future returns. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer and/or its affiliated companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable at the time of publication. A security mentioned as example above will not necessarily be comprised in the portfolio by the time this document is disclosed or at any other subsequent date. The Management Company may decide to terminate the arrangements made for the marketing of its collective investment undertakings in accordance with applicable de-notification regulation. This is a marketing communication issued by Allianz Global Investors GmbH, an investment company with limited liability incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42/44, D-60323 Frankfurt/M. Allianz Global Investors GmbH is registered with the local court of Frankfurt/M under HRB 9340 and is authorised and regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de). The summary of Investor Rights is available at https://regulatory.allianzgi.com/en/investors-rights. Allianz Global Investors GmbH has established a branch in the United Kingdom, Allianz Global Investors GmbH, UK branch, 199 Bishopsgate, London EC2M 3TY, www.allianzglobalinvestors.co.uk, deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website (www.fca.org.uk). Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.
Allianz Technology Trust PLC is incorporated in England and Wales. (Company registration no. 3117355). Registered Office: 199 Bishopsgate, London, EC2M 3TY.
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