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Felix Wintle
Fund Manager
With the release of Chat GPT 4o in the last few days there is some considerable buzz around the future of AI and how it can transform people’s lives. Chat GPT 4o (the ‘o’ stands for omni - Latin for every) is already a big improvement on Chat GPT 4, and it’s well worth checking out the demos that can be found online, here are a couple to whet the appetite: This first clip shows AI in teacher mode, with an impressive ability to interact with students. And this clip showing real-time translation skills is equally exciting. It’s not just OpenAI and Microsoft showcasing their progress, Alphabet had their I/O day this week, which is their big developer conference, and this clip demonstrates what their AI engine Gemini can do.
The question is, do people really want digital assistants? Siri and Alexa have both been failed experiments, despite Alexa being widely used it has never fully realised its potential. Both have been reduced to being mostly used as a volume control or a timing device. Part of the reason for this is they were not particularly good products and the digital assistants in the above clips are clearly in a different league. We shall have to wait and see what the real uptake is for products like these.
Outside of the consumer applications, there are some big strides being made in the medical arena and this is one area where one can see AI having a big impact. A clear use case would be saving the months and years that it takes to find suitable drug candidates and bring them through to clinical trials. Cross referencing the enormous body of data that has already been generated by drug trials and seeing whether abandoned drug candidates might be efficacious in other indications, would be a good use of the technology.
Parsing through all this data would take people literally lifetimes, but AI could reduce that time from years to months. Recursion Pharmaceuticals is a small biotech company that is going down this path and counts Nvidia amongst its early backers. BioXcel Therapeutics is another but neither company has yet produced a drug from this process, and they remain stories of promise but ultimately stories of tomorrow.
So, what are the stories of today? How can we invest in the AI phenomenon today without having to make a bet on what products or services people will pay for at some point in the future? The one thing we can be sure of is that AI requires a lot of capex investment, particularly in new datacentres. The chart below shows the incredible amount of spend that the four hyperscalers have already committed to and the numbers are big. Total spend from the big tech players will reach almost $200bn in 2024, a $50bn increase on last year.
The beneficiaries of this spend are to be found in the Industrials and Utilities sectors as much as the Tech sector. Companies not only need these datacentres to be built but also require consistent power sources. The power source of choice is nuclear, as it is zero emission and can be relied upon to deliver energy consistently. Energy demand is set to surge in America thanks to AI, and the few nuclear power utilities are clear winners, we own Constellation Energy in the fund. The capex boom is happening right now and there are industrial companies, like Comfort Systems, that we’ve owned for over a year now which are specialists in new construction of maintenance of datacentres.
Whilst the big cap tech names get all the attention, we find that these less well-known companies are a great way to invest in the AI revolution today, without having to predict how AI plays out in the future.
WARNING: All information about the VT Tyndall North American Fund(‘The Fund’) is available in The Fund’s prospectus and Key Investor Information Document which are available free of charge (in English) from Valu-Trac Investment Management Limited (www.valu-trac.com). Any investment in the fund should be made on the basis of the terms governing the fund and not