AI has a dream (and it’s not about Electric Sheep)

Generative AI has captured the public imagination since the public release of ChatGPT-3 in November 2022. Users have been able to use generative AI to code, complete homework, and even create award winning photographs. But ChatGPT is not the only contender in the ring. Other applications can enable you to interrogate specific documents whilst others could help you write the next hit album.

In the near-term, ChatGPT will increasingly interface within our lives at work and in education. Let's start with education. The traditional model of schooling with its heavy focus on ongoing assessments is at the sharp end of the AI nascent revolution. Rather than spending weekends poring over dry textbooks, enterprising students have been turning to ChatGPT to find answers to questions and even draft whole assignments. From an investment perspective, things came to a fore in early May 2023 when Chegg - a provider of study guides - became the first listed company to issue a profit warning specifically citing the headwind from generative AI.

So how does the education landscape change in a world of generative AI? Firstly, we think that companies with strong proprietary data sets, such as LexisNexis owner RELX, should prove relatively immune over the long term. Secondly, in order to combat the use of generative AI, educational institutions increasingly turn to testing and examinations rather than ongoing coursework. This would benefit businesses such as Pearson which is a leading provider of testing services to governments and the private sector.

In the world of work, Microsoft is deeply embedded in our ways of working. It is likely its dominance is about to become further entrenched. Microsoft has invested heavily in generative AI by acquiring a stake in OpenAI (the company behind ChatGPT), and incorporating ChatGPT into its Bing search engine. More revolutionary is the upcoming launch of Microsoft's Copilot product which is expected to be incorporated into Office 365 in the second half of 2023. Copilot promises users the ability to instantly create slick presentations and reports based on the data in their Microsoft applications such as Excel, OneNote, and Outlook.

It is clear that generative AI is transforming the way we approach education and work. As sustainable investors, we recognize its potential to drive positive change in the world. However, the experience of the internet age teaches us that the impact of new technologies is not universally positive. By engaging with companies at the forefront of the AI revolution, investors can help steer the coming AI revolution in a direction that helps prioritise progress towards key sustainability goals such as ensuring a quality education for all, and providing good quality work for the world's human population.

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