ARTIFICIAL intelligence (AI) has been a major investment theme in recent years, evidenced by the meteoric rise of more than 770% in Nvidia Corp’s share price over the past two years. The theme continues to be relevant to investors in 2025.

To illustrate the continued growth potential in AI, William Chang, senior client portfolio manager at Franklin Equity Group, said the rapid development and adoption of AI benefits companies in various sectors, including healthcare, financial and consumer.

During the panel session, “Global market outlook and technology”, Chang listed companies in other sectors that are benefiting from AI. These include digital banks, interactive home entertainment companies and online food ordering and delivery companies. “The infrastructure associated with AI touches on a lot of different subsectors,” he said.

AI adoption across various industries has been rising rapidly. Quoting the ETR Generative AI Survey conducted in July 2024, Chang pointed out that earlier corporate adopters of AI have significantly increased the use of generative AI (Gen AI) in various platforms — from customer support to code generation — while non-users have begun to consider Gen AI adoption themselves.

He added that AI has allowed many leading companies and organisations to cut labour costs, increase productivity and save billions.

Despite its huge earnings and growth potential, some investors are rightly concerned about the elevated valuations and share price volatility of the US tech companies, said Chang.

He pointed out that the MSCI Technology Index yielded investors a return of about 500% from 2014 to 2024, significantly higher than that of the MSCI World Index of about 200% during the corresponding period.

However, the MSCI Technology Index was once down by 35% between 2021 and 2022 when the US Federal Reserve kick-started its rate hike cycle. The index also fell by 31% in 2020 when the Covid-19 pandemic hit the world. The MSCI World Index had much lower volatility during those periods.

The key is to invest for the long term and see volatility as an opportunity to accumulate more shares of companies with good fundamentals and potential, said Chang.

As for where future investment opportunities lie in the tech sector, he said it would be software companies that enable users to interact better with AI.

“We see opportunities in the software space. I would love to say to everybody in this room, ‘Here’s your GPU (graphic processing unit). Please be more productive with it.’ But the reality is, when data centres are built, AI models are built, how do I interact with them? I need a platform. I need something that sits on top of the hardware that I can work with and be more productive. This is what we are excited about.

“The technology gives investors a much broader range of opportunities, and not just limited to companies involved in the manufacturing of semiconductor chips, like Nvidia and ASML Holding,” he said.

Namrata Jolly, managing director and head of financial services for Asia at Microsoft, resonated with Chang’s view that both the development and adoption of AI-related software have been advancing rapidly and its adoption is growing fast.

She said the impact of the technology is already felt in the banking industry where AI collates critical information for relationship managers on the go and transcribes conversations for improved customer support at call centres.

Another interesting example is how the insurance industry is leveraging AI to analyse unstructured data, such as sound and images, to virtually reconstruct accidents, which would then enable assessors to quickly and accurately form claims decisions.

“Today, such a process easily takes three to five days. But AI can shorten it to hours or minutes. Streamlined processes such as these would increase both worker productivity and the customer experience,” said Namrata.

While all this sounds great, what about the return on investment (ROI) from adopting and leveraging AI? According to the IDC & Microsoft Executive Survey, which was done in November 2023, the financial services sector estimated an ROI of US$3.41 for every dollar invested in Gen AI projects.

“Across several industries, the ROI is pretty much three times [the amount invested],” she said.

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