CPD: AI growth opportunities exist beyond the Tech Sector


AI can deliver to the corporate bottom line and therefore to their clients’ investments.

Investing in long-term growth strategies means having a positive outlook on the future. It also means believing that some companies will outperform their peers in terms of revenue and profit in the coming years. You are also investing in the company’s ability to adapt and utilise new technology opportunities to enhance their products and services as time progresses.

One way to show optimism is via the re-investment rate. This has three forms (1) Capital expenditure, such as new factories, shops, server farms (2) Acquisitions, such as purchasing a competitor, supplier or (3) Research & Development, such as new products or services, new methods of production. This paper mainly focuses on understanding the output of the third factor, R&D, and in particular the investment in artificial intelligence (AI).

R&D is the home of innovation for any business. With the emergence of AI, this has the potential to create revolutionary new products and services and make companies more efficient, thus leading to higher levels of growth and ultimately higher total return for your clients.

To date, stock markets have largely rewarded the ‘manufacturers’ of AI – the technology firms who have created the capability, including semiconductor firms (Nvidia, ASML, Applied Materials), hosting firms (Microsoft, Amazon) and software firms (Microsoft, Meta, Alphabet). However, technology firms are not the only story. Many firms outside technology are using this capability today and on a path to likely building the amazing products and services of the future. Let’s call them the ‘practitioners’.

This paper aims to provide insights that to capture the productivity gains that AI will certainly offer, it will not only be the ‘manufacturers’, often on higher valuations, but the ‘practitioners’ who will benefit in the years to come.

If you arrived on Earth from Mars in 2023, and were interested in stock markets, you may be forgiven for thinking that Nvidia owned all the rights to AI! For simplistic clarification, they don’t.

Investing in growth businesses using AI will likely be good for returns. Diversification is important.

How should advisers assess long-term returns?

Equity returns are difficult to assess. On one level they are easy – ‘what was the total return?’ and ‘did it beat its peers?’. When looking a little deeper, topics such as style or volatility are added to provide a clearer picture of assessing ‘was this good?’ and ultimately ‘is it likely to be repeatable?’. I would like to offer some analysis that was conducted by an industry leader.  The analysis was focused on what drove equity returns over short and long periods to understand some of the ‘forces’ behind the numbers.

Over short-term periods of one year, the fundamentals account for around a half of the total return. The other half is valuation, representing the market trying to price the anticipated gains. However, over long periods the valuation component subsides and lets the companys’ actual business performance be the dominant force. They used Dividend growth as the measure for that growth and dividend yield as the measure for the payment back to shareholders, which for the study was assumed to be reinvested.

It showed growth to be the largest factor – but what drove the growth? Every manager should be able to identify the source of the growth. Most often it is reinvestment that feeds profitable revenue growth. If a strategy has done well with most of the return coming from valuation gain, then an element of correction is more likely.

Will AI affect returns?

Many reputable organisations have made forecasts on how AI will affect the global economy, and although the numbers vary, they all agree that there will be significant productivity gains. The McKinsey Institute estimate that generative AI alone will add between $2.6tr and $4.4tr per year, a figure equivalent to between 2% and 4% of global GDP. For comparison, this is bigger than the combined UK & Australian GDP, or the entire automobile industry. And unlike these economies, which took a long time to grow to those levels, AI is expected to do this in less than a decade.

This will likely play out, as it always does, differently over short and long-term periods. The short-term will have some valuation exuberance as market react to company’s prospects, we have certainly witnessed this with many of the technology companies. It is likely though that the longer term will be driven by the fundamentals. This favours a ‘buy and hold’ manager who is confident in the underlying business.

The new industrial revolutions – where is AI being deployed?

1. Computing

The Semiconductor Industry Association (SIA) has forecasted that their industry will reach U$1tr in revenues. The chart below displays this mix of real and projected growth in terms of eras of computing, emphasizsing the main improvements. We are clearly in the fourth era now.

Please note in the chart the steepness of the line once in era 4. The pace of change is increasing.

Also sourced from the SIA, is the analysis of demand for semiconductors in 2022, highlighting the areas of growth. Although, communication and computers have the largest demand, they have the slowest growth, a suggestion that demand is shifting from the ‘manufacturers’ to the ‘practitioners’.

Past performance is not indicative of future performance.

2. Industry 4.0

Industry 4.0 refers to the integration of digital technologies, such as artificial intelligence, cloud computing, big data, and the Internet of Things, into the manufacturing processes and products. Industry 4.0 aims to create smart factories that are more efficient, flexible, and responsive to customer needs and market changes. Industry 4.0 also enables new business models and value propositions based on data-driven services and solutions. The following image illustrates some of the key components and applications of Industry 4.0.

This transition is in many factories throughout the world are well under way and will hope for significant manufacturing capability.

3. Retail channels

Retail has shifted from traditional brick-and-mortar stores to omnichannel platforms that combine physical and digital channels. Omnichannel retailing allows customers to interact with brands and products across multiple touchpoints, such as online, mobile, social media, or in-store. Omnichannel retailing also enables retailers to collect and analyse customer data, personalize offers and recommendations, optimize inventory and logistics, and enhance customer loyalty and satisfaction. The following image shows some of the benefits of omnichannel retailing for both customers and retailers.

What is the significance of this? In a world where only physical stores exist, a customer would enter a store, pick an item, usually pay with cash and leave. The merchant would have little or no information about who they were, why they bought the item, what else they might be interested in buying, and how they would stock the store to match the general needs of the customer.

In contrast, in an Omnichannel world, they would likely know the customer, their preferences, their motivations, their past purchases and possibly their future purchases. They achieve this by engaging with customers digitally through social media, email and registration, which gives them the ability to create a service rather than a container for selling products. This affects what products are offered, to whom and how stores should be arranged. This allows retailers to move from ‘for all’ to ‘for each’. More efficient, more brand value and more satisfied customers.

For instance, L’Oreal, the biggest beauty company in the world, provides ‘Phygital’ services. One of these services is a product from Giorgio Armani, Meta Profiler, which uses an AI powered camera to give a scientific analysis of skin to recommend the best products to use. This would happen in-store and let the customer buy the chosen products online or in the shop.

As David Ogilvy, the founder of the Ogilvy advertising agency, once said, “The problem with market research is that people don’t think what they feel, they don’t say what they think and they don’t do what they say.” The emergence of AI and machine learning is beginning to address the limitations of focus groups and surveys to analyse consumer behaviour. Think of the influence of Cambridge Analytica and its ability to interpret who people were and their likely political views and deliver content to change voting patterns, very powerful and also ethically questionable. Retailers now have this power at their disposal to engage much more deeply and get closer to those ‘feelings’ that Mr Ogilvy mentioned.

How will this affect returns?

Below is a depiction of some of the companies and their AI powered products that are providing health, wealth and happiness to the world.

The following sections of this document will describe some of these products in further detail. All text in italics denotes the words of the companies.

Heath – Novo Nordisk, a ‘culture of innovation’

Danish healthcare giant supported by the century old Novo Foundation. For a long time, this firm has been involved in some major treatments for the world. They have done groundbreaking research and then delivered products that address the world’s big health challenges. They clearly have a strong culture of innovation.

The firm is known for its diabetes treatments. Then they looked at the causes of the problem they were treating, mainly obesity, and launched the very successful weight loss drug, Wegovy. Now they are studying more aspects of cardiovascular disease.

Novo Nordisk are using AI throughout their whole business as shown below from research & development, through clinical development, product supply and sales activity. Their parent back, the Novo Foundation have collaborated with the Danish government and Nvidia to create one of the world’s largest super computers to allow AI research and development into the world’s largest health problems.

Recent specific analysis has been pointed around identifying cardiovascular risk in patients to ultimately to reduce life threatening heart issues.

Revenues for the firm grew by around 25% per annum, dividend growth by a similar number. The level of reinvestment coupled with a ‘culture of innovation’ will likely see this firm continue to grow strongly.

Stryker, robotics revolutionising joint treatment

US based healthcare firm who provides robot arm surgery on joints – knees, hips and shoulders. Their Mako robot has been assisting surgeons for 18 years and have delivered more than 1 million surgeries globally. AI is embedded in the product. Definition below is taken from the Styker website.

Let’s talk Mako SmartRobotics™

Mako SmartRobotics™ combines three key components: 3D CT-based planning, AccuStop™ haptic technology, and Insightful Data Analytics, into one platform that has shown better outcomes for your total knee, total hip and partial knee patients.

Mako Total Knee

The unique features of Mako Total Knee SmartRobotics™ are designed to help you optimize Triathlon component positioning and enhance functional outcomes.Intraoperatively, surgeons have the ability to assess soft tissue laxities and adjust the placement of implants to achieve the final position before cuts. With the use of AccuStop™ haptic technology, studies have demonstrated more pristine bone resections, less soft tissue damage and greater bone preservation when compared to manual cutting blocks.

Mako Total Hip

Enhance your Mako Total Hip experience through patient-specific planning to enable more accurate implant positioning to plan.6 Surgeons can visualize potential impingement by looking at the changes to their patient’s pelvic tilt in the sitting, standing and supine positioning. Using AccuStop™ haptic technology and a patient specific CT scan, Mako Total Hip enables single stage reaming and guided cup impaction to help promote accurate implant placement.

Insightful Data Analytics

Know More. Keep score. With Insightful Data Analytics.

Can you really know you’re getting better if you’re not keeping score? Mako SmartRobotics™ Insightful Data Analytics helps you create, analyze and track a scorecard of the things you want to improve most, like surgical time, turnover time, complications and readmissions. The program also includes a platform designed to drive engagement with your patients throughout their episode of care and automatically collects patient-reported outcomes so you can efficiently track their progress.

This technology has been a breakthrough for many people’s lives providing effective surgery. It is also a successful product for Stryker, growing 10% per annum over the past 4 years, the growth in the annual dividend grew by around the same amount.

Wealth – Visa, reducing fraud

Fraud detection is an enormous world problem. According to analysis conducted by Nasdaq it is around %0.5 trillion a year, with money laundering & illicit flows a further $3.1 trillion. AI is at the heart of reducing this number and keeping customers safe. In the words of Visa below, further analysis is provided.

On any given day, Visa processes hundreds of millions of transactions.

Whether you’re buying coffee, shopping online, or paying for the subway, our system processes that payment information, routing it among parties, authorizing transactions and managing risk all in the blink of an eye.

Every second, up to 76,000 transactions travel across more than 200 countries and territories, on a platform built on more than 300 million lines of custom code and more than 24 million route miles of private network. In the last 12 months, that platform processed $14.5 trillion in total payments volume.

An integral part of this operation, for more than 30 years, has been artificial intelligence.

Back in 1993, Visa became the first network to deploy AI-based technology for risk and fraud management, pioneering the use of AI models in payments.

Over the last 10 years, Visa has spent more than $3 billion on AI and data infrastructure to enable the safer, smarter movement of money and to proactively identify and prevent fraud.

And today, our technology platform is among the most powerful examples of the tangible benefits of AI.

With several hundred AI models in production, powering over 100 products, our AI and deep learning capabilities help to solve longstanding challenges and pain points for buyers, sellers, and financial institutions.

For instance, products like Visa’s Cybersource Decision Manager, a fraud and risk assessment tool, apply advanced machine learning to historical transaction data to spot patterns. At our Risk Operation Centres, AI-enabled capabilities and always-on experts protect Visa’s ecosystem, proactively detecting and preventing billions of dollars in attempted fraud. And Visa’s real-time deep learning model, Smarter Stand-In Processing (STIP), helps improve payment experiences during outages by mirroring issuer approvals with up to 95% accuracy. And in 2022 alone, Visa’s real-time payment fraud monitoring solution, Visa Advanced Authorization (VAA), helped prevent an estimated $27 billion in fraud.

Visa’s revenue has grown by low double-digit growth over the last five years. Removing fraudulent activity will continue to make this firm profitable.

Beauty – L’Oreal, ‘Beauty for Each’

The largest beauty firm in the world. AI has been used through each of the business areas and in particular to gain better understanding and servicing their customers through an omnichannel approach.

Below are some of their AI products in their owns words (in italics).

1. HAPTA from Lancome – Luxe

Since 2009, Lancôme has been empowering women with the most personalized solutions powered by next-generation beauty tech. As part of its mission to use tech for good and make beauty accessible for all, Lancôme continues to set the pace of innovation with HAPTA.

Bringing the science of touch to women everywhere, HAPTA is designed for those with hand-motion disorders, arthritis, Huntington’s Disease, and following stroke-related motion challenges.

This motion-stabilizing device harnesses the power of technology to assist those who have difficulty raising their arms due to limited mobility issues, and people with limited grip strength who struggle with precise application. It also helps anyone with limited wrist mobility who may find it difficult to get a comfortable angle when applying lipstick or mascara, as well as those experiencing tremors and a lack of sensation in the hands.

Unveiled for the first time at the Consumer Electronics Show 2023 in Las Vegas, Nevada for the application of lipstick, HAPTA is enhanced with new features to also works for mascara application, two of the most common forms of self-expression through beauty.

As a Beauty Tech premiere, HAPTA makes the expression of beauty more accessible, more achievable, and easier than ever before.

AI is used to allow this product to learn from your movements. Life changing technology enabling a level of independence for people throughout the world.

2. Giorgio Armani Meta Profiler – Dermatological


Imaging skin with 10 times the magnification of the human eye, the META PROFILERTM is a handheld device born from a high-performance laboratory technology used in more than 20 clinical studies to measure skincare efficacy with time. 

This high-precision tool replicates precise clinical lab measurements thanks to its combination of 18 analytical LEDs and 3 capture modes:

    • Parallel polarized mode to capture wrinkles and texture
    • Cross polarized mode to capture pigmentation disorders & tone quality
    • 3D mode to capture smoothness and skin texture

Associated with a real-time hydration sensor and an algorithm built on more than 100.000 skin captures, the META PROFILERTM high-precision camera is able to measure more than 13 different clinical skin markers (such as wrinkles, dark spots, and redness).


The META PROFILERTM service is an in-store, 10-minute diagnostic consultation that analyzes the consumer’s skin in high precision for a tailor-made CREMA NERA routine and personalized Armani “Meta SculptTM” face treatment recommendation.

The consultation begins with a skin-capture phase: an Armani beauty Face Designer places the META PROFILERTM device on 4 specific facial zones to capture skin measurements in high precision: forehead, cheeks, crow’s feet, and pigmented areas.

 Then, the consumer is presented with his/her skin vital force index, categorized into 4 skin criteria: structure, tone, balance, and texture. objectivize skin’s potential to revive and protect against the aging process from a visible point of view.

Based on these results, the consumer will receive a tailor-made CREMA NERA product recommendation routine, associated with personalized gestures; The consumer may also book an in-store 45-minute “Meta SculptTM” facial protocol, a powerful massage service to stimulate & sculpt facial fascia.

This firm clearly understand their customer’s needs and deliver a high quality and high touch solution. This also shows the power of Omnichannel client experience. L’Oreal are trying to stop their customers expensive ‘trial & error’ approach to addressing their skin care needs. Likely more cost effective for customers and more efficient for L’Oreal.

Company revenues in 2018 were €27bn, the equivalent number in 2023 was €41bn. This reflects the connection this firm has with its customers and the experience they have with the products. The combination of an omnichannel model, desirable products and effective innovation has facilitated the firm’s growth.


Strategies that invest in companies that increase their revenues and profits by putting money back into their business each year to either grow their capacity or create new products and services can be a good investment. AI can enhance each part of the financial measures of a firm by (1) reaching more potential customers (2) have more understanding of what makes people buy their products and services, (3) be more efficient by automating tasks or organising production and distribution lines (4) new products & services through research & development spend.

AI will have a huge impact on our lives and our investments. This technology will not only belong to the ‘Manufacturers’ in technology sector but also to the ‘Practitioner’ firms who provide solutions to the world’s problems.

Financial advisors should consider investing their clients’ savings in investment strategies with exposure to companies leveraging the power of AI to deliver growth. Those will not be limited to technology companies. By incorporating such investments, advisors can offer exposure to innovative technologies while mitigating risks associated with sector-specific fluctuations, potentially enhancing the overall resilience and growth potential of their clients’ portfolios.

By Neil Sutherland, Dundas Global Investors, Edinburgh.


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Disclaimer : This document has been prepared by Apostle Funds Management Pty Limited (“Apostle”) (ABN 16 129 922 612) (AFSL No. 458375). The Apostle Dundas Global Equity Fund (ARSN 093 116 771) is issued by K2 Asset Management Ltd (“K2”) (ABN  95 085 445 094)(AFSL No. 244393), a wholly owned subsidiary of K2 Asset Management Holdings Limited (ABN 59 124 636 782). This material and the content of any offer document for the investment are principally governed by Australian rather than New Zealand law. This material may contain information provided directly by third parties which include Dundas Partners, LLP (AFSL No. 527238). This material is for information purposes only. It is not an offer or a recommendation to invest and it should not be relied upon by investors in making an investment decision. Offers to invest will only be made in the product disclosure statement (“PDS”) available from https://www.k2am.com.au/forms-apostle-dundas and this material is not intended to substitute the PDS which outlines the risks involved and other relevant information. Any investment carries potential risks and fees which are described in the PDS. An investor should, before deciding whether to invest, consider the appropriateness of the investment, having regard to both the PDS in its entirety and the investor’s objectives, financial situation and need. This information has not been prepared taking into account your objectives, financial situation or needs. Please note that past investment performance is not a reliable indicator of future investment performance. No representation is made as to future performance or volatility of the investment. In particular, there is no guarantee that the investment objectives and investment strategy set out in this presentation may be successful.  Any forward-looking statements, opinions and estimates provided in this material are based on assumptions and contingencies which are subject to change without notice and should not be relied upon as an indication of the future performance.  Persons should rely solely upon their own investigations in respect of the subject matter discussed in this material. No representations or warranties, expressed or implied, are made as to the accuracy or completeness of the information, opinions and conclusions contained in this material.  In preparing these materials, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available to Apostle. To the maximum extent permitted by law, all liability in reliance on this material is expressly disclaimed. This document is strictly confidential and is intended solely for the use of the person to whom it has been delivered. It may not be reproduced, distributed or published, in whole or in part, without the prior approval of Apostle. Third party distributors may be used to market the investment to New Zealand investors. Where this occurs, this material can only be provided to New Zealand persons that the New Zealand distributor is authorised to deal with under New Zealand law, and is not available to any person to whom it would be unlawful to make such offer or invitation.

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