Global Courant
The use of artificial intelligence has taken the world and markets by storm, but what are the megapower trends driving innovation? Gargi Chaudhuri, head of iShares Investment Strategy at BlackRock, analyzes the components behind the rise of AI, including semiconductor chip stocks, and looks ahead to other forms of innovation.
Video Transcription
BRAD SMITH: Our next guest says trends like demographics and artificial intelligence aren’t just going to affect current returns in the future. So how do you play it? And we are now talking about some mega powers. We now have Gargi Chaudhuri, head of iShares investment strategy at BlackRock. Gargi, nice to have you in the studio with us today.
GARGI CHAUDHURI: Wonderful to be here. Thank you.
JULIE HYMAN: Don’t you feel like saying mega power, you should… it should echo mega power, power, power, power, power.
BRAD SMITH: It should rattle off the walls in the studio.
JULIE HYMAN: Precisely.
GARGI CHAUDHURI: Next time we’ll make sure we do.
BRAD SMITH: Maybe help us define mega power just to get the conversation going.
GARGI CHAUDHURI: Yes absolutely. So think about big themes — themes that are with us today that will stay with us in the medium to long term and will shape our investment landscape in every part of the market. So it’s not just a story about the stock market. It can be part of your stock market allocations, your fixed income market allocations or your private market allocations. And it’s going to be ubiquitous across different sectors, different industries and, as I said, different asset classes.
So we’re at BlackRock, we’re focused on two specific megapowers right now, which were, as you mentioned, AI and demographics and the shifting demographics. But there’s more, you know, when you think about the geopolitical fragmentation that’s taking place, when you think about the transition in climate that’s happening. So there’s all these broad mega forces that we think will impact investors today. They come mega fast as we say in our report. But they will also be with us for a very long time and change the investment landscape.
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JULIE HYMAN: And we’re still trying to get our arms around the AI megapower, because while AI isn’t new of course…
GARGI CHAUDHURI: It’s not.
JULIE HYMAN: — large language models that are used in an effective way are new. And I’m really struck as we’ve just started learning about how many different industries are trying to deploy this. So how do you feel about it from an investment perspective? I mean, if everyone is doing AI, just buy everyone.
GARGI CHAUDHURI: Right. So, you know, when we look at how investors have implemented AI in their portfolios — and by the way, to your point, this has been around for a long time, but we had that transformer technology that’s about a few years old that allowed us to use this generative AI which is obviously a lot smarter and it continues to — it’s going to get smarter and smarter and allow us to have more human, smarter behaviors, if you will.
And investors have navigated that in the large cap tech space so far, right? That makes sense. We’ve seen the performance and that’s how it’s become part of investor portfolios. If we think about it, this is why it’s a mega power. When we think about where AI can go in the next five months, but really five, 10 years, I don’t think this is just a story about semiconductor chips.
This is a story about how this could affect healthcare, how this could affect financial services, how this could affect the art world. So you know, just a quick example, and I’m sure we’ve all used ChatGPT, so that’s, you know, very normal to think about and it’s such a hype right now.
But I just went for my annual physical and I did a mammogram, and there was actually an option where you could have a breast cancer risk for women determined by AI. And that was in a hospital in New York City. And I clearly said yes, and it gives you a percentage chance of breast cancer. And it is read by AI. So they take your data and compare it to 10,000 different people who have similar characteristics to mine and they look at my ultrasound and they compare it to others. I thought that was really cool.
JULIE HYMAN: And that’s probably the first time ever offered to you.
GARGI CHAUDHURI: For me, yes. I mean, I wasn’t… I think this was the first time I went this year. It wasn’t available to me last year, not by AI. So I… and this is just a little thing that happened to me two days ago, and that’s why I’m talking about it. But I think the implications are in the early stages. So I think this has been huge in — you know, when we talk about semiconductor chips.
But I think when we think about the broader market implications, we have to think back to the Internet in the 1990s and 2000s. It didn’t just impact the tech industry, it impacted every industry. It affects how we work today. So I think that’s why it’s a mega power. And currently we’re telling investors to look at iShares ETF tickers like IRBO, which allocates to the AI developers and the AI enablers.
And that’s a way to access the entire value chain, as opposed to a specific large-cap technology company, which, by the way, obviously has had a huge run and, Angelo’s point earlier, is a great way to access quality, cash flow, profitable businesses.
BRAD SMITH: And so for as much attention as there has been around the chips…
GARGI CHAUDHURI: Uh-huh, yes.
BRAD SMITH: –as part of the wider AI or generative AI sort of totem pole or pillars, if you will–
GARGI CHAUDHURI: Yes.
BRAD SMITH: –there is– it also sounds like sort of the next wave of focus that will be really centered around the companies that have the most data.
GARGI CHAUDHURI: Right.
BRAD SMITH: As well as index within their own AI products.
GARGI CHAUDHURI: And the data processing capacity.
BRAD SMITH: Certainly.
GARGI CHAUDHURI: So when you — when the data — so the facilitators of AI. So yes, the companies that have the most data and the ability to process that data, all the cloud companies, if you will. And then you’re… the next version of this or if I come back to the show hopefully in a few years or next year, we’ll talk…
BRAD SMITH: Let’s not wait so long, yes.
GARGI CHAUDHURI: We’ll talk about all the different industries. And– and sometimes, again, this has to be something that we actively think about. All the different sectors that are beneficiaries and non-beneficiaries, we need to talk about that too. So which parts of the market cannot embrace AI? Who’s coming in kicking and screaming, and which companies have had the opportunity to embrace AI and actually the talent to deploy AI effectively?
So I think it’s on the rise again. And we’ve talked about this before — are we getting the same run-up that we’ve seen since Nvidia reported earnings in May? I mean, I don’t know if it’s going to have this kind of shot. It may not look like it. But is this something we’re going to talk about for the next five years? I think it will be very pervasive in our lives.
JULIE HYMAN: And it’s also a good reminder when you talk about that anecdote, like if you’re an investor and you’re interested in this, you’re in the hospital and you get that report, okay, find out who’s got the data. Who is behind it, right, and find the names of these companies and try to find out what they do. Interesting.
GARGI CHAUDHURI: Precisely. And then don’t do that with one company, but look at the theme behind it. And you know, I always tell my friends this: If you like a certain idea in the market, like electric vehicles, buy that theme instead of buying one stock. Buy the theme. So in this case the AI enablers and developers as a theme so going up and down the value chain of all the different types of businesses we think are currently in the space that can benefit the most as opposed to playing in it a very narrow road, which has worked brilliantly by the way, but I think there is more room.
