Artificial intelligence (AI) has quickly become one of the hottest trends in the tech world. Indeed, it's hard to find a technology company that isn't talking about what it's doing with AI.
But this degree of buildup can sometimes lead investors to believe that a trend is being overhyped, and that there's a good chance it may not pan out profitably. At worst, such buzzwords become phrases that tech companies throw around even when the underlying technology doesn't have any merit, or add value to their businesses.
When it comes to AI, though, I think those fears are misplaced -- there's plenty of evidence to back up its legitimacy. Here are just five reasons why investors should take a closer look at AI -- and invest in it as soon as possible.
1. It's helping to revolutionize the automotive industry
The phrase "artificial intelligence" may conjure up images of robots walking around and performing tasks for humans, but a much more realistic use for the tech would be to chauffeur those humans.
It is estimated that driverless cars will reduce the number of vehicle-crash related deaths in the U.S. by 300,000 per decade, once the technology becomes prevalent. And that time may not be far away. The analysts at IHS Markit estimate that more than 33 million autonomous vehicles will be sold globally in 2040, a remarkable growth arc from the 51,000 they foresee being sold in 2021.
AI is the secret sauce that makes autonomous driving systems possible. NVIDIA Corp.'s (NASDAQ:NVDA) Drive PX Pegasus uses high-powered graphics processors to analyze the images and data collected by on-board cameras and sensors, allowing it to recognize and react to everything that's going on around it. Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) self-driving subsidiary, Waymo, has already used AI-powered systems to drive its vehicles 7 million miles, and each new thing one of its driverless cars learns is passed on to the hundreds of other vehicles in its self-driving fleet.
2. It's making nearly all of our devices and gadgets smarter
Digital assistants like Microsoft's Cortana, Amazon's (NASDAQ:AMZN) Alexa and Google Assistant all use AI to analyze what users are saying, and respond in useful ways. Anyone who's used a digital assistant knows that they're far from perfect. But they're improving, because they constantly use natural language processing (NLP) to learn to understand us more accurately. The more we use them, the better they get.
Tech companies are focused on voice assistants because they allow us to take our use of devices to the next level. Connect a relatively inexpensive Amazon Echo to your smart home appliances, and you can verbally send the command to put the clothes you left in the dryer through a wrinkle release cycle, turn off the lights in another room, or order a pizza.
Companies see those smart home hubs as tools to keep users connected to their ecosystems. Amazon, for example, is already benefiting from this -- the average Echo owner spends about $400 more per year on the company's e-commerce site than the average Amazon Prime member.
3. You can't miss the AI's market size
If driverless cars and smart assistants aren't your thing, then consider that artificial intelligence will increase the global gross domestic product (GDP) by 14% between now and 2030 -- a $15.7 trillion boost -- according to an analysis by PwC.
Numbers that large are difficult to comprehend. So think of it this way: PwC says that in less than 15 years, artificial intelligence will be worth more to the world economy than the current output of China and India combined. Yeah, it's pretty big.
4. It's already improving healthcare
The U.S. spends about 18% of its GDP on healthcare, which is disproportionately high compared to other wealthy nations. The aging of the baby boomers will likely put upward pressure on these costs, but AI could help the healthcare industry push them back.
Bringing AI-powered voice-to-text transcription technology to doctors offices and hospitals could reduce work time for doctors by up to 17%, according to research by Accenture. With doctors and nurses spending less time on paperwork, the U.S. healthcare system could save $150 billion in healthcare costs each year by 2026.
5. There are more upsides than downsides
Not all of the byproducts of AI's rise will be positive, of course. Some experts assert that up to 38% of U.S. jobs are vulnerable to being eliminated by automation. Additionally, Tesla CEO Elon Musk and others have sounded the alarm about the potential dangers of autonomous weapons.
Both of these are real concerns. But AI will create jobs too. Analysis from Gartner indicates that while AI will eliminate 1.8 million jobs in 2020, it will create 2.3 million jobs, too.
And while there's certainly a legitimate argument against allowing countries to develop and deploy fully autonomous weapons systems, the lives that will be saved thanks to driverless vehicles and AI-related enhancements to the healthcare system are powerful points in favor of the technology.
Artificial intelligence is well on its way to becoming a common part of our everyday lives. Even now, many of the ads you see online and the products recommended to you on e-commerce sites are picked for you by AI-powered systems.
In the coming years, particularly for technology investors, owning shares in companies that are developing hardware and software for artificial intelligence will no longer be optional, because almost all tech companies will be involved in AI in some way. That's great for long-term investors, because it means that jumping on board the AI train now will likely produce benefits for years and decades to come.