ChatGPT and the AI hype wave: more proof that investors ignore tech at their peril

The wider world seems to have discovered ChatGPT. In doing so, it also seems to have realized technology is progressing at a truly spectacular rate.

This apparent wake-up call makes me wonder where a lot people have been for the past decade or more. After all, this is not a transformation that has happened overnight.

I have been talking about the likely implications of game-changing advances in tech – AI foremost among them – for years. So have many of my fellow investment professionals, including Manulife’s Colin Fitzgerald and BoA's Haim Israel .

We have suggested again and again that innovations such as AI and machine learning will bring disruption on a scale very seldom witnessed. We have also said they will dramatically reshape our own industry.

Yet many investors appear to be among those surprised by the current explosion in hype. They may have listened with interest to what we said, but it turns out they never quite believed the gale of creative destruction could blow so fiercely. 

It is just three years since Cambridge Judge Business School, of which I am a Fellow, produced a landmark report on AI in financial services. As the chart below shows, it found most providers expected AI to be of significant strategic importance to their business by 2022.

They were right. AI is now increasingly impacting how investors generate alpha, performing ever more of the “heavy lifting” in arenas such as risk management and delivering benefits at every stage of the value chain.

More widely, AI-related opportunities are emerging at pace in the micro-cap, small-cap and mid-cap segments. And mega-cap tech players can still muscle in on the action via their deep pockets, in-house research and capacity for M&As.

All this very much reminds me of the late ’90s, when the internet finally found its way into the mainstream. As someone who had spent the ’80s communicating with like-minded chatroom geeks via an acoustic coupler attached to my Commodore 64, I experienced the full smugness of an early adopter.

Of course, it is right to say I was not ahead of the curve on that occasion because I was some kind of budding investment visionary. I was ahead of the curve because I was a nerd. But you get the idea.

Just as it was a quarter of a century ago, the message for investors today is that we overlook tech at our peril. Arguably more so than ever before, it is the principal engine of change – and its impact on every aspect of our day-to-day lives is only likely to grow.

The future is already here: how financial services providers perceived the strategic business importance of AI at the start of this decade

Source: Cambridge Centre for Alternative Finance: Transforming Paradigms: A Global AI in Financial Services Survey, 2020