How to invest in UK companies embracing the AI ​​revolution

Nvidia has become synonymous with the rapid rise of artificial intelligence, and its early investors have enjoyed meteoric growth in its share price along with extraordinary profits.

The California-based chip company is spearheading the AI ​​revolution and its chips are already being used by almost every major tech company in the world.

As the world’s third-largest company with a market capitalization of $3 trillion, Nvidia has been at the forefront of the growing development of artificial intelligence alongside the other six members of the “Magnificent Seven”: Microsoft, Amazon, Alphabet, Tesla, Meta and Apple.

While Nvidia’s stock has risen more than 600 percent since January 2023, and nearly 3,000 percent over the past five years, Mag Seven as a whole has grown 49 percent over the past year and nearly 80 percent over the past five.

With a combined market capitalisation of over £14.42 trillion, these seven stocks alone dwarf the UK’s FTSE 100, which has a total market capitalisation of just £2 trillion.

Not surprisingly, these companies dominate the AI ​​conversation and are making the biggest strides.

However, behind the headlines covering these big heavyweights, countless smaller companies are taking advantage of the benefits that AI offers, whether by streamlining their processes or integrating the tools into their business models.

This is Money speaks to professional investors about their favourite London-listed stocks embracing the AI ​​revolution.

Ken Wotton, fund manager of the WS Gresham House UK Smaller Companies Fund, said: ‘Despite the current gloom, we are convinced that numerous UK businesses, particularly within the agile small and medium-sized business space, can co-exist and eventually thrive as the uptake of AI accelerates.

‘Investors will play a crucial role in this phase, guiding corporate boards to fully understand the capabilities of AI and integrate this innovation to gain competitive advantage and boost productivity.’

According to Bloomberg, the artificial intelligence market is expected to reach $1.3 trillion in revenue by 2032, so companies risk being left behind if they don’t adopt this technology.

Leveraging data

Maritime software company Windward Tracks more than 2 million vessels every day to optimize customers’ supply chains and manage transportation risks.

It has implemented AI in business areas such as regulation, logistics, decarbonization, law enforcement and navigation safety.

The AIM-listed company recently launched its Maritime AI Expert, which has been built on Amazon’s Bedrock foundation and trained on 12 years of maritime data.

The company says its AI capabilities reduce vessel review and investigation times by 20 minutes on average, and can also provide actionable recommendations on the outcome.

“Its gradual expansion reflects Windward’s strategic approach to growth, balancing rapid technology adoption with careful long-term planning,” Wotton said.

‘Unlike companies that rush to adopt new technologies at any cost, which can often carry greater risks, Windward’s methodical approach has allowed it to integrate new technologies thoughtfully and effectively.’

Meanwhile, tool and equipment rental company Fast Hiring has turned to AI to optimize its operations, saving time and costs.

Speedy’s use of AI allows it to predict where it can generate the most sales by distributing its kit to the areas with the highest demand, as well as reducing its inventory.

The company said it now achieves an average monthly savings of 4 percent on its inventory, while meeting 8 percent more demand. Decisions on product distribution also now take just one hour instead of a week.

Its AI system also identifies where potential gaps in your inventory could arise and automatically orders replenishment to prevent them from occurring.

Peel Hunt analyst Andew Nassey said: “We are convinced that Speedy’s leadership in AI has significant benefits for customers and the business. We strongly suspect that a large number of less-prepared businesses will increasingly become aware of Speedy’s growing competitive advantage in this space.”

Paul Jackson, Speedy’s digital technology and transformation director, told This is Money: “AI enables Speedy to optimise its operations, focus on high-impact areas where there are strong opportunities for growth and efficiency, and make decisions quickly and accurately. This not only offers cost benefits, but also enables us to better serve our customers.

‘By analyzing more than 300 billion data points every day, we identify trends we wouldn’t have otherwise easily seen and make quick decisions that significantly improve processes across the company.’

Software company Call to the network Provides customers with a system that can monitor appointment data in real time.

For its healthcare clients, such as NHS trusts and social care companies, this means reduced waiting lists and the ability for staff to allocate their time to the most important tasks.

The company is inevitably wary of the potential risks of AI making the wrong decision, so it wants to ensure it is using the tool to assist human judgment, rather than replace it entirely.

Wotton said: “Netcall ensures safety and efficiency by promoting a balanced integration of AI, including human oversight. This strategy optimizes operations and protects against potential data protection and privacy issues.”

An alternative model

Instead of jumping on the AI ​​integration bandwagon, real estate trust Segro seeks to reap the benefits of the AI ​​boom and instead aim for growth by meeting the increasing demand for new data centers.

Earlier this year, the company said it will develop 24 new data centres in the UK and Europe, and plans to invest much of its £900m capital raising to do so.

According to real estate consultancy JLL, the global market for edge IT and data centre infrastructure is expected to reach $317 billion by 2026, more than double its value four years ago.

The European data center market is projected to triple in size by 2028.

In March, Tom Glover, Head of Data Centre Transactions for EMEA at JLL, said: “In a world increasingly driven by the internet, data and AI, demand for the real estate to make this all possible will only continue to rise. We have seen record levels of data centre take-up, demand and pre-leasing in 2023, and we expect 2024 to be another amazing year for activity in the sector.”

Freeing up time for employees

Businesses are also embracing AI as a way to replace or speed up menial or time-consuming tasks.

Consumer review website Trustpilot has integrated AI into its systems to recognize fake reviews, which have long plagued the site, and rank the reviews in terms of relevance.

Chris St John, deputy director of the AXA Framlington UK Select Opportunities Fund, said: ‘At its core, Trust Pilot is about promoting companies, encouraging people to trade with them online and trust them as a counterparty.

“But if we take it a step further, it should learn how companies improve their own customer service; to do this, it needs to benefit from huge amounts of data and information provided by its customer base.”

The company launched its AI features in April and has since said it expected annual recurring revenue to rise 17 per cent to £78m.

Recruitment company Roberto Walters It also seeks to make the most of AI to reduce the number of time-consuming tasks its consultants must complete.

The introduction of AI means that the writing of job adverts, legal documents and property transactions are now done autonomously.

Freeing up more time for your human employees means they can spend more time developing relationships with clients and candidates.

St John said: “The similarity with a lot of these companies is that they are very data-rich. They have huge amounts of data, but data is absolutely useless unless you can turn it into insights. AI is very, very good at that.”

While businesses can increasingly benefit from AI as costs fall and systems become more widely available, there are still some that have been slow to adopt the technology.

Wotton said: ‘These tools have the potential to leapfrog companies that are lagging behind, while empowering those that are ahead to drive gains in productivity, scalability, efficiency and customer experience.

“It’s clear that AI is relevant to businesses of all sizes and sectors. Leadership teams need to be bold in embracing AI in ways that best fit their business – those that don’t will end up being left behind.”

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