As machines replace human hands, we see opportunity in minds.

Automation at work

October 25, 2017 • TECHNOLOGY

We view artificial intelligence as an opportunity for net growth, not the end of human labour.

Creative destruction is an essential part of capitalism, whereby new products and services displace outdated old ones. In the current lens, we can see that there is painful displacement associated with the destruction of labour-intensive jobs that are taken over by new technology.

However, theory and history indicate that creative destruction is a net positive, creating more productive and interesting jobs for the next generation. Consider this; in 1900, there were 220,000 blacksmiths and 0 auto manufacturing workers. By 1930, the number of blacksmiths reduced to 136,000, while auto workers increase to 170,000. By 1950, there were six-times more auto workers than blacksmiths[1].

Automation, and to a deeper level artificial intelligence, is quickly becoming the latest example of such creative destruction. In the next 20 years, half of all jobs involving skilled labour will be taken over by machines. Telemarketing, administrative support, even transportation - all are currently undergoing a massive transition towards automation.automation

But we see an opportunity here. Where the number of people needed on assembly lines will decrease, a greater number of people needed to manage these machines will increase; a move from blue-collar to blue- coder, if you will. Technology related jobs have grown by 30% since 2010 and now make up nearly 3% of total U.S. employment. This booming tech sector has proven to be a key driver of economic growth, as tech related wages are nearly double the national average. This influenceshigher consumer spending, which accounts for around 70% of U.S. GDP 1.

With artificial intelligence (AI) gaining critical mass, the world is starting to see extraordinary changes in technology. Intelligent machines powered by AI computers can learn, reason and interact with people. We believe NVIDIA Inc., a top holding in AGF American Growth Class, is an enabler of AI. NVIDIA has benefitted from a rapid explosion of investment in machine learning from technology companies - and we are only in the early stages.

AI today is quite pervasive in internet service companies, but there are others in tech and in other industries that are trying to catch up. One such industry is automotive, as cars race to become fully autonomous. Another is healthcare, which has largely relied on a paper filing system, creating a lot of messy and unstructured data. Now, computers can understand and analyse it to aid a doctor's diagnoses.

In the past year, NVIDIA has seen rapid growth in their data center segment, reflecting surging interest in AI from Cloud service providers who continue to build training clusters for web services. NVDIA outlined their estimate of the 2020 data center total addressable market (TAM) of $30 billion. In addition, NVIDIA estimates that their Autonomous Driving TAM is $8 billion by 2025.

A recent report from IDC[2] estimated that the market for cognitive and AI solutions will experience a compound annual growth rate of 55.1% over the next five years. Near-term opportunities for cognitive systems are in industries such as banking, securities and investments, manufacturing, retail, health care and education.

IDC also predicts that by 2019 all "Internet of Things" devices will merge streaming analytics, which would result in rapidly growing numbers of applications providing automated assistance based on machine learning, cognitive computing and AI. Technologies such as computer vision, speech recognition and natural language processing will see wider integration in areas such as drones, factory automation and automobiles.

Artificial intelligence is actively becoming another example of creative destruction, much like auto manufacturing in the 1930's. At AGF, our collaborative global perspective ensures stability in our investment decisions, whatever tomorrow may bring.


[1] Cornerstone Macro Research, May 2017

[2] IDC report, as of October 2016

Commentaries contained herein are provided as a general source of information based on information available as of October 1, 2017 and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and the manager accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Investors are expected to obtain professional investment advice.

The All World Tax Advantage Group is a mutual fund corporation that currently offers approximately 20 different classes of securities. In addition to fund diversification by investment style, geography and market capitalization, a key benefit of investing in any of the classes within the group is the possibility of sharing incurred expenses (and losses) of the combined structure potentially offsetting income earnings to minimize chance of a dividend declaration. For a more detailed explanation, please see

References to specific securities are presented to illustrate the application of our investment philosophy only and are not to be considered recommendations by AGF Investments. The specific securities identified and described herein do not represent all of the securities purchased, sold or recommended for the portfolio, and it should not be assumed that investments in the securities identified were or will be profitable.

Published date: October 30, 2017

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