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​Video: Welcome to the Age of AI

Brad Neuman's Photo

Brad Neuman, CFA;

Senior Vice President
Director of Market Strategy

Alger Director of Market Strategy Brad Neuman, CFA, discusses implications of the rapid evolution and adoption of Artificial Intelligence.

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In this video, Alger Director of Market Strategy Brad Neuman, CFA, discusses implications of the rapid evolution and adoption of Artificial Intelligence.

BRAD NEUMAN: ​​​The topic of Artificial Intelligence (AI) has been exploding in popularity since the November 2022 release of ChatGPT. This chatbot prototype, developed by OpenAI, is giving us a glimpse of how AI could revolutionize the way we live and work in the future. And that future may be rapidly approaching. Microsoft recently said “The Age of AI is upon us.”
But how does AI compare to other technological innovations and how might this impact the global economy going forward?

Well, Moore’s Law states that the speed and ability of computers doubles every two years as the number of transistors on a microchip increases. When Gordon Moore wrote his revolutionary paper back in 1965, there were only 64 transistors on an integrated circuit. Nearly six decades later, Apple’s M2 chip has approximately twenty billion transistors, generating productivity that we could not fathom in the early days of integrated circuits.

While the pace of Moore’s Law is impressive, this pales in comparison to the speed at which AI programs are learning or how much computation they can utilize which is doubling every four months. Over a ten-year period, this implies AI training may grow by more than 100,000,000x faster than Moore’s Law​.1​ 

Now, to illustrate what that means in practical terms, consider a small, 6-inch plant growing at Moore’s Law would reach 16 feet tall in a decade BUT growing at the speed of AI it would reach the moon and further.

We believe AI is a general-purpose technology, meaning it can impact a wide-range of industries. Bill Gates in fact recently said that AI was every bit as important as the PC and the Internet, two astoundingly important general purpose technologies.

At Alger, we believe our research supports the notion that a broad variety of industries are clamoring to use the technology on display in ChatGPT. For example, financial services companies are interested in document summarization, retailers are interested in customer service applications, advertising companies want to use the technology to generate marketing copy, and gaming companies are investigating AI helping users contribute to game design using natural language. That is because programs like ChatGPT can turn natural language into computer code, potentially democratizing computer programming for everyone. Nvidia recently said AI adoption is at an inflection point and we believe that’s accurate.

These kinds of applications could unleash huge amounts of productivity. Microsoft found that its AI assistant Co-Pilot helped developers complete tasks 55% faster than those who didn’t use it.2 Imagine, nearly freeing up half of your time as a result of an AI assistant!

In our view, the incredible speed of AI innovation has the potential to significantly change how we utilize software and improve our lives. 

We believe companies that are at the forefront of AI innovation, such as the major cloud platforms, hardware manufacturers that drive cloud technology forward, and software companies that harness AI’s potential may benefit as we enter the next frontier of technological advancement​​.

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1 Alger Research. The calculation of AI’s growth rates compares the training computation between Dropout (2012) and GPT-3 (2020), based on PetaFLOPS /day per second. PetaFLOPS is a unit of computing speed, equal to one quadrillion FLOPS (floating operations per second) and serves as a measure of computer performance. Dropout is a regularization technique for reducing overfitting in deep neural networks and was proposed by Hinton et al. in their paper “Dropout: A Simple Way to Prevent Neural Networks from Overfitting” in 2012. Generative Pre-trained Transformer 3 (GPT-3) is an autoregressive language model released in 2020 that uses deep learning to produce human-like text, developed by OpenAI. This calculation should be considered a rough estimate.

2 GitHub, Inc. company data (September 7, 2022, press release).

The views expressed are the views of Fred Alger Management, LLC (FAM) and its affiliates as of March 2023. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. Holdings and sector allocations are subject to change. 

Important Information for US Investors: This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund and ETF shares. Fred Alger & Company, LLC serves as distributor of the Alger mutual funds.

Important Information for UK and EU Investors: This material is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit investors. This material does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this material and should be satisfied in doing so that there is no breach of local legislation or regulation.

Certain products may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to such persons or countries.

Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorised and regulated by the Financial Conduct Authority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub-portfolio manager to financial products distributed by Alger Management, Ltd.

Alger Group Holdings, LLC (parent company of FAM and Alger Management, Ltd.), FAM, and Fred Alger & Company, LLC are not an authorized persons for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA.

Important information for Investors in Israel: This material is provided in Israel only to investors of the type listed in the first schedule of the Securities Law, 1968 (the "Securities Law") and the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995. The Fund units will not be sold to investors who are not of the type listed in the first schedule of the Securities Law.

Risk Disclosures:  Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Local, regional or global events such as environmental or natural disasters, war, terrorism, pandemics, outbreaks of infectious diseases and similar public health threats, recessions, or other events could have a significant impact on investments. Active trading may increase transaction costs, brokerage commissions, and taxes, which can lower the return on investment. Technology companies may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Past performance is not indicative of future performance. Investing in innovation is not without risk and there is no guarantee that investments in research and development will result in a company gaining market share or achieving enhanced revenue. Companies exploring new technologies may face regulatory, political or legal challenges that may adversely impact their competitive positioning and financial prospects. Also, developing technologies to displace older technologies or create new markets may not in fact do so, and there may be sector-specific risks as well. As is the case with any industry, there will be winners and losers that emerge and investors therefore need to conduct a significant amount of due diligence on individual companies to assess these risks and opportunities.

The following represent the percentage of firmwide assets under management as of 12/31/22: Apple, Inc. 2.94%; Microsoft Corp 6.83%; Nvidia Corp 1.43%.

Fred Alger & Company, LLC 100 Pearl Street, New York, NY 10004 / 800.305.8547 / www.alger.com


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