The market for artificial intelligence is growing, but so are doubts. While some, overwhelmed by its capabilities, are calling for an immediate AI pause in order to be able to investigate the effects and dangers, others recognize it as a technology of the future. In which industries is there the greatest growth potential and can one now invest in AI at all with a clear conscience? This question is answered by Shanna Strauss-Frank, Switzerland spokesperson for the investment company Freedom Finance Europe.
Editorial
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19 May 2023
Should I or shouldn't I? When it comes to AI, investors face a dilemma. (Image: Unsplash.com)
Every year, the market for artificial intelligence grows by up to 25 percent - to an estimated $130 billion by 2025.[1] Despite Europe-wide inflation, the shortage of skilled workers and the associated budget cuts, international tech giants such as Apple and Microsoft are currently investing considerable sums in Industry 4.0. While the United Arab Emirates has even had a Minister of State for Artificial Intelligence for several years, experts complain that there is a lack of strategy in Europe. According to a survey, 54 percent of decision-makers in Swiss companies want to increase their budgets for data science, machine learning and AI in the next three years.[2]Nevertheless, the U.S. and China dominate the market for artificial intelligence, which could make companies and governments dependent on each other.
Exponential growth in the billions
"Last year, the AI market experienced significant growth in deep learning, such as audio, video or text recognition. But there is also a tremendous amount of development and investment in the machine learning segment when it comes to clustering, visualization and filtering. AI-based software accounts for the largest share of the market," explains Strauss-Frank of Freedom Finance Europe. If investments in artificial intelligence research and development amounted to just under $37.5 billion in 2019, by 2022 the investment volume was already $118 billion, and by 2026 it is expected to reach $300 billion - almost tripling in just a few years. "The global market for AI was estimated at $119 billion last year. By 2030, it is expected to grow to around $1.5 trillion at a compound annual growth rate of 38.1 percent," Strauss-Frank said, underscoring the potential. North America in particular currently dominates the AI market, he says, and cloud computing and IoT (Internet of Things) are high on the agenda here. "However, due to increasing demand in emerging markets such as China and India, the Asia-Pacific region is expected to show the highest growth rate," Strauss-Frank says.
In which industries AI is capitalized
Artificial intelligence became an issue in the automotive industry relatively early on in the wake of autonomous driving. "In many industries, AI is also used to make predictions. Be it forecasts for road traffic, or in the field of cybersecurity threat as well as predictive analyses. In the financial sector, artificial intelligence is also expected to increase fraud detection, but here it is primarily trading through algorithms that is exciting. By 2025, the market for AI in the financial sector is expected to reach $26 billion," Strauss-Frank said. The importance of artificial intelligence in e-commerce should also not be underestimated, he said: here, a market volume of $45 billion is expected by the end of the year, and software for product recommendations and supply chain management are among the most common areas of application. Added to this are chat bots, which are designed to personalize the customer experience and answer customer queries.
Great potential also in healthcare
"The processing and analysis of big data is an important driver for the development of the AI market," says Strauss-Frank, referring in particular to the healthcare industry, where AI devices can improve patient outcomes and reduce costs. A McKinsey study from 2017 shows just how great the potential is: according to the data available at the time, a medium-sized German insurance company received up to 700,000 requests for reimbursement from hospitals every year. The insurer is obliged to check these invoices - this not only requires several hundred employees, but almost every tenth invoice turns out to be incorrect. The use of AI can not only relieve staff here, but also improve the success rate. This is because the checking algorithms identify the invoices that are actually faulty and, for example, only identify claims with a high chance of success for the cashier to process humanely. "But application areas such as robotic surgery or virtual nursing assistants should not be forgotten either. The market for AI in healthcare is expected to reach $34 billion by 2025," Strauss-Frank adds. Listed Teladoc Health, one of the leading providers of telehealth services, is already demonstrating what medical treatments in Industry 4.0 can look like. "Patients can thus also receive advice from specialists at a distance. Teladoc is using AI to develop virtual care solutions and also to diagnose and treat patients regardless of their location," explains Strauss-Frank.
AI investors face a dilemma
While the potential applications are considerable, cautionary voices are also growing louder. But the call for a pause in development sounds more drastic at first glance than it actually is: "The suspension is supposed to apply primarily to a subgroup, namely the area of generative artificial intelligence such as image and text creation. However, software for data processing of inventories, for example, would probably not be affected by the halt. Investors nevertheless find themselves conflicted; on the one hand, the market is growing enormously fast, attracting billions of dollars in venture capital, private equity and corporate investment. On the other hand, the technologies are far from perfect and often reach their limits," says Strauss-Frank. Accordingly, investors must balance their desire for profit and innovation with their responsibility to consider what ethical, social and legal implications may arise. She concludes, "Researchers, companies and governments must work together to ensure that the development and application of artificial intelligence is guided by ethical principles and that appropriate safeguards are in place to avoid unintended consequences or misuse." If this is the case, investments in artificial intelligence could probably be made with a clear conscience.
Shanna Strauss-Frank, Switzerland spokeswoman for investment company Freedom Finance Europe. (Image: zVg)
Freedom Finance Europe is the only EU-based investment broker whose holding company is listed on NASDAQ. Freedom Finance Europe provides domestic and international clients with access to 15 U.S., European and Asian exchanges and offers a wide range of financial markets services to meet clients' short and long-term financial needs. Through the Freedom24 platform and mobile app, clients gain direct access to equity markets and the ability to invest in stocks at IPO prices on the secondary market.
