Investment Institute

Riding the wave: Investors embrace the latest AI evolution

  • 25 September 2023 (10 min read)

Amid the latest AI evolution, investors are paying close attention to generative AI, composite AI, and the opportunities they create.

The latest evolution in artificial intelligence (AI) is creating a stir among investors, with particular attention drawn towards generative AI and composite AI, and the opportunities they present.

Generative AI empowers computers to learn patterns and structure from existing text, audio, and images and create new content with similar attributes in response to prompts. On the other hand, composite AI refers to the integration of computer vision (CV), machine learning (ML), natural language processing (NLP), and other forms of AI, including generative AI. Consequently, composite AI solutions offer businesses the tools to address a broader range of challenges than generative AI alone.

Overall, the AI market value is predicted to grow from $100 billion USD to nearly two trillion by 2030.1  The introduction of tools like ChatGPT have the world buzzing about AI like never before and, in 2023, investors are increasingly intrigued by the potential of generative AI to enhance productivity and reduce costs.2

However, while generative AI solutions like ChatGPT are grabbing headlines, the rising importance of composite AI is another area offering potential opportunities for investors and use cases across industries. As the adoption of AI continues to grow each year, composite AI is proving to be a pivotal tool for businesses across a myriad of sectors and is attracting significant investor interest.

Artificial intelligence: Incredible momentum and room for additional growth

Artificial intelligence is advancing and gaining use cases, attracting more attention each year. In 2020, 50% of organizations were using AI in one or more business functions, and that percentage rose to 56% in 2021.3 Businesses commonly use AI in service operations, manufacturing, supply chain management, and risk modeling.

The launch of ChatGPT has further fueled interest in AI, with natural language text comprehension emerging as the third most-implemented AI capability, trailing only behind robotic process automation and CV.4

However, the narrative surrounding AI extends beyond mere adoption. Investment in artificial intelligence is also growing. In 2018, only 40% of AI-utilizing organizations allocated over 5% of their digital budget to AI, compared to 52% in 2022 — and 63% expect to increase their investment in AI by 2025.5

Generative AI’s potential

Thanks to generative AI’s innovative capabilities, users can bring photos to life, transform sketches into realistic imagery, restore vintage film, write intricate software code, and even craft “deepfake” videos.

Generative AI is having a particular impact on the following industries:

  • Semiconductors: Semiconductor manufacturers need time, money, and experts, as chip designs are becoming increasingly small and complex,6 with smartphone processors containing an average of ten billion transistors.7 Generative AI can revolutionize the industry, detecting defects, discovering new chip applications, and generating optimized integrated circuit architectures.
  • Manufacturing: Use cases for generative AI in manufacturing include supply and demand forecasting, inventory management, supply chain management, customer support, and rapid design generation. It can also simplify quality control, monitor production, pinpoint equipment issues, enhance product consistency, and transform how we use digital twins, allowing for faster data extraction and intuitive interactions.
  • Healthcare: Generative AI can help doctors identify diseases by analyzing medical records, lab results, MRIs, and X-rays. Solutions like Glass Health’s generative AI tool go a step further and can provide clinical plans after diagnosis.8 The adoption of generative AI in healthcare also enables personalized care, with generative AI algorithms analyzing wearable device data to produce custom recommendations and treatments.
  • E-Commerce: Generative AI can transform e-commerce with advanced chatbots capable of answering customers’ questions, suggesting products, and providing enticing coupons. Moreover, generative AI tools can create realistic product visuals, while solutions like ChatGPT can quickly produce quality product descriptions, emails, and ad copy for retailers. Ultimately, generative AI often accelerate product discovery and create a personalized shopping experience that fosters customer loyalty.
  • Metaverse: AI is helping to shape the metaverse, transforming ideas into content and experiences within these virtual environments. Generative AI could make it possible for companies to respond to customer demand and offer personalized options more quickly, at scale. As AI expands what’s possible in the metaverse, it could also lead to more demand for related software, VR headsets, and cybersecurity solutions. Global spending related to the metaverse could reach $5 trillion USD by 2030.9

Because of the profound impact and potential of generative AI, its growth and applications are rapidly expanding as businesses vie to integrate it into their offerings and workflows. By 2032, the market for generative AI is projected to soar to $1.3 trillion,10 helping boost GDP by 26% by 2030.11

This evolving technology presents an exciting frontier, projecting not only to reshape industries but also to redefine the very nature of productivity and innovation in the years to come.

Composite AI: An emerging powerhouse in the AI landscape

When compared with generative AI alone, composite AI platforms boast superior efficiency, heightened problem-solving capabilities, and a more holistic approach to meeting business needs. These platforms can glean insights from devices and sensors, make data-driven predictions, deliver tailored experiences, and even learn and adapt from feedback.

Sectors in which composite AI's impact is particularly noticeable include:

  • Supply chain logistics: AI possesses transformative potential in supply chain logistics, enhancing efficiency, increasing safety, and reducing reliance on human labor. It can simplify supply chain data management and analysis, as well as predict capacity constraints and consumer demand for improved planning. Composite AI solutions can even suggest inventory and operational enhancements for increased agility and resilience. For instance, a composite AI solution might uncover faster transportation routes, offer more cost-effective supplier choices, or recommend capacity adjustments based on historical trends. Japanese company Fanuc plans to harness AI through its FIELD system which will proactively collect machine data, enabling predictive maintenance and potentially achieving zero downtime.12
  • Software and hardware: Experts forecast the software segment will dominate the global composite AI market between 2023 and 2028.13 Software companies can leverage composite AI for virtual assistants, CV algorithms, and software testing. Meanwhile, the hardware industry can use composite AI for advanced robotics, improved hardware design, and self-diagnosing components.
  • Banking, financial services, and insurance (BFSI): BFSI companies are already leveraging composite AI, particularly in the form of chatbots powered by NLP, sentiment analysis, and ML. Companies are also using solutions capable of analyzing massive data sets, resulting in improved risk assessment, faster fraud detection, and increased compliance with regulations. As a result, the BFSI segment is projected to have the largest market size among verticals between 2023 and 2028.14
  • Robotics and manufacturing: Composite AI allows for more advanced robotic technology for manufacturing, leading to increased precision, flexibility, autonomy, and productivity. A common example of this comes with the automotive sector, but there are other interesting possibilities. For example, combining ML, CV, and NLP equips robots to manage tasks autonomously, thereby reducing human intervention and elevating productivity levels. Furthermore, CV and ML algorithms can be deployed to inspect products for defects and predict equipment failures. This not only ensures higher quality control but also enables proactive maintenance, significantly reducing downtime.

With its transformative potential across multiple sectors, the growth of composite AI in the coming years should come as no surprise. The market is projected to have a CAGR of 36.5% between 2023 and 2028, increasing from $0.9B to $4.4B and reflecting composite AI’s many use cases.15

Minding AI’s regulatory future

In addition to its exciting potential, it's vital to acknowledge that investment in AI also carries risks. Investors must remain vigilant about potential cybersecurity breaches and consider the societal risks tied to AI deployment. Further, federal and local regulations are another element to consider. For example, the US Office of Technology recently released a “Blueprint for an AI Bill of Rights,” indicating potential legislative regulations on AI innovation.16 And, New York City enacted a new law regulating potential for racial or gender bias relating to AI-fueled automatic employment decision tools.17  This underscores the necessity for responsible approaches to artificial intelligence, ensuring its development and application align with ethical standards and societal wellbeing.

AI: Potential opportunities

Investor interest and public curiosity are on an upward trajectory thanks to the continuous advancement of artificial intelligence. Given the increasing sophistication of generative AI and the emergence of composite AI, artificial intelligence stands on the precipice of revolutionizing a multitude of industries, from banking to manufacturing. In essence, the evolution of AI presents an intriguing opportunity for investors.

References to companies are for illustrative purposes only and should not be viewed as investment recommendations.

Risk Warning:

Investment involves risk including the loss of capital.


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