AI revolution will be boon to some, burden to others

Analyzing which companies will benefit from AI solutions and how easily those solutions can be integrated into the company’s workflow will be key to finding winners in the AI revolution, says Robertson Velez, portfolio manager, Global Technology Fund at CIBC Asset Management.

Valez said AI will cut both ways, offering productivity leaps to some companies and crippling costs to others.

“Most people assume AI is good for everyone,” he said in a May 29 interview. “But it is important to recognize which businesses will thrive with the adoption of this technology, and which will be disrupted by it.”

In order to find winners of the AI revolution, look to companies that will gain a competitive advantage, otherwise “this would just mean added costs for companies to stay relevant,” he said.

Listen to the full conversation on the Advisor To Go podcast, powered by CIBC Asset Management.

Velez outlined three areas that could provide opportunities for investors.

1. Semiconductors and infrastructure

Some may think that it will be difficult for semiconductor and infrastructure companies to grow, having peaked after a two-year run, Velez noted.

“Our view is that as the cost of implementing AI come down, the demand for AI actually goes up, not down. And this is supported by the continued growth in capex guidance of the major hyperscalers, like Alphabet, Meta and Microsoft.”

Velez likes Nvidia, a core AI infrastructure play, as well as Broadcom, which benefits from AI-related connectivity solutions and custom chips.

2. Enterprise software and tools

A challenge in enterprise software and tools where AI is used is migrating volumes of data into a form that is useful for AI training, Velez said. Still, he expects the market for data migration tools will grow to “be as big as the AI market itself.”

The key is to find companies that can use these tools to improve productivity, he noted. Velez likes Microsoft Copilot, which can access enterprise data to improve its Office suite of programs. He also likes ServiceNow, which uses AI to incorporate data to boost workflows, as well as Salesforce, which uses enterprise data to implement agentic AI to replace human functions.

3. Consumer applications

Direct applications of AI to the consumer can take several forms, he noted, including enhanced search engines, analytics or consumer-facing applications.

“For example, Google and Meta use AI in all its consumer-facing products to improve monetization. Apple uses AI to augment its smartphone products,” he said. “So these are some of the opportunities ahead.”

Ongoing challenges

Velez said acceptance of new AI technologies will be the main challenge going forward, as many industries are resistant to change.

“As AI is proven out in various fields of endeavour, however, such as in robotaxis or in humanoid robots, I think we will soon see an inflection point in AI adoption,” he said.

There is also continued uncertainty over U.S. trade policies and export control restrictions on U.S. companies and their allies, which restrict them from selling technologies to China, noted Velez.

Beyond losing sales in the short term, “there is a bigger risk that China will develop these capabilities on their own without relying on American platforms, making them a bigger competitive threat longer term,” he said.

“Looking past the noise, we believe that AI remains the most important technology to invest in over the next decade because of its potential to massively change the way we work to improve productivity,” Velez added.

This article is part of the Advisor To Go program, sponsored by CIBC Asset Management. The article was written without input from the sponsor.