The rise of artificial intelligence has become a major theme in the first few months of 2023. AI has played a large role in our everyday lives for some time now, but aside from comments by companies like Nvidia, Microsoft and Google in their conference calls, many investors may know little about it.

History of Artificial Intelligence

AI is defined as “the study and development of computer systems that can copy intelligent behavior.” In a primitive form, the concept of AI goes back to the Age of Antiquity, but modern AI began in the 1950s with work by John McCarthy, Alan Turing and other computer scientists who sought to prove that computers could be programmed to mimic humans’ problem-solving capabilities. 

The surge in the field of AI has been fueled by exponentially growing amounts of data and data-processing capabilities that allow computers to better manipulate the numbers. As computers have become faster and able to process more data, AI has become more relevant. (Those of us who were teenagers in the 1980s might remember the question “Shall we play a game?” from the movie WarGames, in which AI shows through simulation that no one would win in a nuclear war.)

Types of Artificial Intelligence

There are two broad types of artificial intelligence: Narrow AI and General AI. 

Narrow AI performs a single task without sophisticated programming; think of Siri for Apple, answering questions that are asked of it. Narrow AI is based on machine learning, constructed through a set of algorithms that try to imitate human intelligence. Machine learning uses data and statistics to better “learn” the data to improve its ability to solve the task at hand. Deep learning is a type of machine learning that tries to imitate the human brain, taking the data through a biologically inspired neural network and processing the data to make connections and create patterns.

General AI is more complex and tries to mirror human intellect. It uses its ability to learn and apply knowledge learned to solve problems. We are still in the process of moving from narrow AI to general AI. This is why the field of AI is so exciting to so many people — we are still in the very early stages of what we can do with it.

A lot of companies use the term AI in their marketing efforts, but the ways it is used vary widely. Here are some examples of how industries are using AI today:

• Medicine: AI aids in producing sharper images more quickly for radiologists by using algorithms, helps to assess heart muscle functions through cardiac ultrasound technology and assists drug discovery by determining if new drugs are more effective than older ones.

• Search: AI-powered search technology refines the relevance of search-engine results, powers the ability to chat and helps users compose content. In announcing Bard, a conversational AI service in development, Google’s CEO recently said that AI will “distill complex information and multiple perspectives into easy-to-digest formats.” 

• Chatbots: Consumers benefit from AI as it is used to remove frustration from calling customer service centers and enables machines to answer frequently asked questions, take orders, track orders and direct calls.

• Maps and navigation: Services use AI to deliver optimal routes, road barriers and traffic congestion through wayfinding apps and services. Using machine learning, algorithms remember buildings, roadways and other landmarks to allow for better visuals on maps.

• Facial detection and recognition: AI powers technology that uses facial identification to unlock our devices and enables facial-recognition surveillance efforts by airport security.

• Text editing and autocorrect: Algorithms use machine learning and deep learning to identify incorrect usage of language and recommend corrections. Tools such as Grammarly can check our work before we submit papers and check our spelling to make sure there are no errors in emails.

• Social media: Applications are using the support of AI to monitor content, suggest connections and advertise to targeted users to ensure that we are plugged in. Social media AI has the ability to understand the types of content that resonate with users and suggest similar content.

• Electronic payments: Banks are leveraging AI to facilitate customers’ payment processes — making deposits, transferring money and even opening accounts.

Nearly every part of your day is touched by some form of AI. Automated learning and discovery through data add intelligence to existing products, achieve accuracy through deep neural networks and deep learning, and gets the most out of data. The goal of AI is to provide software that can reason on input and explain on output.

AI will continue to provide humanlike interactions with software and decision support for specific tasks — but it is not a replacement for humans (at least not in the near future)! As it evolves, AI will continue to provide important breakthroughs, especially in the field of medicine, for years to come.

The CD Wealth Formula

We help our clients reach and maintain financial stability by following a specific plan, catered to each client. 

Our focus remains on long-term investing with a strategic allocation while maintaining a tactical approach. Our decisions to make changes are calculated and well thought out, looking at where we see the economy is heading. We are not guessing or market timing. We are anticipating and moving to those areas of strength in the economy — and in the stock market. 

We will continue to focus on the fact that what really matters right now is time in the market, not out of the market. That means staying the course and continuing to invest, even when the markets dip, to take advantage of potential market upturns. We continue to adhere to the tried-and-true disciplines of diversification, periodic rebalancing and looking forward, while not making investment decisions based on where we have been.

It is important to focus on the long-term goal, not on one specific data point or indicator. Long-term fundamentals are what matter.  In markets and moments like these, it is essential to stick to the financial plan. Investing is about following a disciplined process over time.

Sources: AI Time Journal, Bloomberg

This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.

Using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss of principal due to changing market conditions.

Past performance is not a guarantee of future results.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

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