Artificial Intelligence in absolute focus among US tech companies – report from San Francisco 

In early June, I had the opportunity to attend the Bank of America’s technology conference in San Francisco where several major US technology companies were represented to answer questions from both investors and analysts. About 150 companies and 600 investors were present. I was certainly the only one from the Nordic region there, but Europe was also poorly represented among the investors.

Almost all discussions touched on artificial intelligence. The discussions were around what threats and opportunities the companies see that the rollout of generative AI will bring, mainly in the form of language models and image generation. It was striking how almost all companies did not see AI as a threat but only as an opportunity to create added value for their customers and conquer new markets. The CEOs of American listed companies are sometimes known to be overly optimistic in their rhetoric and rarely want to show any vulnerability. After listening to software companies, data storage companies, data management companies, semiconductor manufacturers, processor developers, cyber security companies, gaming companies and various Fin-Tech companies, I was able to extract a few observations. 

It is obvious that a strong wave of investment is already underway to enable artificial intelligence to become a bigger and bigger part of everyone’s daily lives. Significantly faster and more advanced processors are needed, while data management and storage capacity must be expanded. Right now, the clear winners are the companies that make hardware to meet the need for increased data management capacity. We have of course also seen this in the form of sharply rising share prices, particularly in the semiconductor industry. Good examples are NVIDIA, Advanced Micro Devices and Intel, all companies with exposure to the semiconductor industry but with slightly different focuses. Software companies like Adobe have also rallied as it is seen that the company’s image management software will benefit drastically when combined with generative AI. The software giant Microsoft has also seen its market value increase, both thanks to the company’s investment in the AI research company OpenAI, which developed the famous AI language model ChatGPT, but also through Microsoft’s potential to integrate AI into Teams, Office programs or the search engine Bing. There are of course industries where AI will be a threat and can disrupt existing business models. Time will tell who these are, but investors must be careful and selective. 

The second general observation from the conference was that the sales processes towards corporate customers have become much longer when it comes to the purchase of, for example, software. After previously negotiating with middle management, decisions must now be anchored much higher up in the organization. Also, the contracts are often shorter than previously.  This is a clear sign that customers are feeling the uncertainty that currently characterizes the US economy. Inflation, higher interest rates and the fear of the economy slowing down sharply. This has also been reflected in stock prices, with software companies in particular falling sharply in 2022, but the recovery has already begun. The fact that inflation has already eased, and we will soon have the interest rate hikes behind us should, in our view, provide a further tailwind for the technology sector in general. 

Marcus Björkstén
Portfolio Manager