Here to stay, or flash in the pan – how will AI shape markets in years to come?

Artificial intelligence was one of the top market themes of 2023. While the AI industry has been developing and growing for decades, last year, the potential of the technology exploded into the open after the launch of OpenAI’s tool, ChatGPT.

AI was already being used in industries such as biotechnology and manufacturing to enhance and streamline processes before ChatGPT launched. However, the launch of this software showed just how transformative the technology could be for businesses and individuals across the spectrum. It opened up a world only previously accessible to those with millions of dollars in capital spending capacity and access to the most advanced technology.

There's been a rush to capitalise on OpenAI’s tools. Software developers have created thousands of programs based on its technology, and other technology companies have sought to leverage its learnings into their own offerings. 

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OpenAI, which technology giant Microsoft partly owns, is now facing competition from the likes of Google and its parent company, Alphabet, which have launched their own challenger. Other companies have followed suit, capitalising on the booming interest in AI and AI-powered tools. 

How will AI shape markets? 

There is no doubt AI will continue to have a massive impact on the business world going forward. It has the potential to revolutionise economies, upend business models, and accelerate technological processes. But picking winners and losers is going to be incredibly challenging. In the same way it was impossible to pick the winners of the internet revolution two decades ago (indeed, many of the companies we know as winners of the internet revolution today didn't exist until the mid-2000s), it's impossible to project who will gain the most from the AI revolution. 

The companies already benefiting are the technology giants like Microsoft, Apple and Alphabet. These firms have already built AI tools into their systems and software they can offer to consumers. At the other end of the spectrum, chip designers, such as NVIDIA and AMD, are benefiting from increased demand for graphics processing units, which are integral for performing the complex calculations AI needs.

Processors are just one part of the hardware systems required to ensure AI technology works effectively. Memory chips are also required. Taiwan Semiconductor Manufacturing is the world's largest producer of microchips, and it stands to benefit whether or not AI continues to dominate the technological landscape. As long as computers and the internet remain dominant, TSMC’s services as a manufacturer of microchips will be in demand. 

TSMC manufactures microchips based on the designs developed by NVIDIA and ARM, giving it a unique position in the global tech landscape. Over the past few decades, it has developed a huge competitive advantage derived from its vast capital spending plans, which keep it at the cutting edge of semiconductor manufacturing. Other players like Intel have struggled to keep up. 

Winners and losers 

The winners of the AI revolution are likely to be the semiconductor designers, manufacturers and technology giants that can develop and sell AI tools. Unfortunately, some companies are not going to be able to keep up with this transition. 

The companies that stand to lose the most are those unable to keep pace with the rate of change. These could be businesses failing to invest enough in technological development and companies that have built a model around providing a service to other businesses, which can now be automated at a fraction of the cost in-house. 

Companies across the market are likely to want to capitalise on the benefits AI could bring to their operations. From cutting costs to improving productivity, AI will almost certainly impact the corporate landscape over the next decade. If one thing is for sure: if a company can improve profits and reduce costs by incorporating AI into the business, it's only a matter of time before it happens. 

As such, there will likely be winners and losers from the AI arms race. The companies that can adapt the fastest are likely to come out on top, while those struggling to adapt are likely to fall behind. Investors need to take both of these sides into the equation when reviewing their positions.

Disruption will be the name of the game going forward. AI has the potential to revolutionise so many sectors and industries. Even though those companies currently leading the race may not be safe from the changes. Intel used to be the world's foremost chip designer until ARM and NVIDIA overtook it. IBM used to be the world's most impressive technology company until Microsoft and Alphabet overtook it. Nokia and Blackberry used to be the world’s top mobile phone producers until they were overtaken by Apple, which Samsung then overtook. 

These are just some examples of how disruptive new technologies can be for businesses.