AI, the peak of the hype cycle?

The easiest way to travel while visiting various US companies was via Waymo, an autonomous ride-hailing service. It felt strange at first watching the steering wheel turn by itself. But after 30 seconds, I forgot there was no driver – the ride was incredibly smooth. The most impressive moment? The car reversed on its own to let a bus squeeze around a tight corner. It really emphasised how rapidly some industries are evolving and gives you an idea of how technology has the potential to completely transform existing business models.

There was a huge amount of hype surrounding autonomous driving technology around 2017 to 2018. It’s taken a long-time for business models to become more established and disrupt the market, which can help frame thinking around the likely pace of developments in AI.

McInroy & Wood invests directly – this means that we are responsible for selecting every business in our clients’ portfolios. This ensures we retain control and visibility of what they are invested in. Understanding businesses and their relationship with different market dynamics was the primary purpose of my trip. We aim to protect our clients' wealth by focusing on proven, high-quality businesses. We invest in AI through established companies that lead their markets. AI will help these businesses grow, but they don't depend on it to survive.

Take Autodesk, which we recently invested in. They develop design and project management software for engineering and construction companies. I visited their San Francisco headquarters and saw huge potential. Autodesk digitises every stage of a building project, helping prevent budget overruns and delays – problems that trouble construction companies worldwide. The company also benefits from labour shortages in construction. Its software automates processes like organising and sending bids to contractors. This frees up engineers to focus on actual engineering instead of paperwork. Autodesk already uses AI in its products. For example, AutoConstrain helps engineers create and analyse sketches quickly, saving them time on revisions later.

I also visited Edwards Lifesciences, a company we've owned shares in since 2019. They're a US medical device manufacturer that treats heart disease. Seeing its manufacturing process showed me how complex these devices are. They require microscopic precision. This visit reminded me why we often invest in companies that constantly research and develop new products. It creates technology that competitors struggle to copy. On the surface it’s not obvious how AI helps Edwards. However, when we dig deeper, AI is being used to detect heart disease earlier, even when patients don't have symptoms yet. This means more patients can receive treatment before their conditions become critical, while also increasing demand for Edwards’ devices.

So, is AI at the peak of the hype cycle? Maybe is the slightly unsatisfactory answer, unfortunately we don’t have a crystal ball. But we can give our clients access to AI's growth opportunities while trying to protect them if things turn out to be more hype than reality. What I saw on this trip convinced me that innovation and entrepreneurship are still thriving in the US. That culture will keep creating opportunities for long-term investors. While the big AI and technology names continue to dominate headlines, we’ll remain focused on broader opportunities that can succeed through this cycle and beyond.

The views expressed in this article are not intended as an offer or solicitation for the purchase or sale of any investment or financial instrument. The information contained in the article does not constitute investment research, investment advice or a personal recommendation, and should not be used as the basis for any investment decision. References to specific securities should not be construed as a recommendation to buy or sell these securities. This article reflects the author’s opinions at the date of publication only, and the opinions are subject to change without notice. This article has not been independently verified; no representation is made as to its accuracy or completeness, no reliance should be placed on it and no liability is accepted for any loss arising from reliance on it.