The AI Portfolio: Non-Tech Companies Making AI Investments
In ten years, every company will have to be an artificial intelligence company or they won’t be competitive. While traditional tech companies have been very forward about their advancements and investments in AI, there are many “non-tech” companies that are making investments in AI as well. As a fun exercise, we put together a portfolio of publicly-traded non-tech companies that are poised to benefit from their efforts in AI.
To build our portfolio, we scraped the last earnings call of every company in the S&P 500 to see which had specifically referenced “artificial intelligence” and/or “machine learning”. We also looked at companies that had been in the news talking about specific AI-related initiatives. Before we dive into highlighting individual companies, we want to clarify a few terms about AI that are sometimes confused:
Artificial Intelligence is a general term that refers to a machine exhibiting intelligent behavior, which may include reasoning, learning, and audio/visual processing.
Machine Learning is a subset of artificial intelligence centered around giving a computer the ability to learn dynamically without human influence.
Deep Learning is a subset of machine learning, and is one of several techniques that enable more effective outcomes. For example, visual perception models use deep learning, i.e. self-driving cars are powered by deep learning systems.
Neural Networks are a component of deep learning in which a computer system is designed to mimic the way a human brain works. A neural network passes input data through a hidden layer of neuronal nodes with dynamic weights that change the output of the system.
One additional disclaimer before we start: We were former stock analysts and still pay a lot of attention to the public markets, but we never covered any of these companies or sectors. Consider our opinions here highly uneducated. Our analysis centered purely around each company’s efforts in AI and not fundamentals of the underlying business. Do you own diligence prior to any investment decision.
- IDEXX Laboratories (IDXX) – IDEXX manufactures and develops products for the animal healthcare sector. On the company’s last earnings call, management mentioned that its latest diagnostic products are utilizing machine learning so the instruments always have the ability to learn and train on new data. One product that leverages AI is their SediVue Dx analyzer.
- GlaxoSmithKline (GSK) – GSK is one of the bigger pharmaceutical companies leveraging AI and machine learning to help reduce the amount of time it takes to research and bring new drugs to market. GSK recently signed a $43M deal with Exscientia, which is a Scotland-based startup that helps automated drug design. GSK stated that Exscientia’s platform will be applied up to ten different diseases to determine if the technology can help lead the way to developing new drugs.
- Macys (M) – If any industry needs the help of AI, it’s retail. Macy’s has been strategically increasing headcount with AI expertise and has partnered with IBM Watson to create On Call. On Call is an AI-powered assistant that can answer questions about products and departments in stores. While still early, we believe that experimental AI technologies that transform the brick and mortar shopping experience will be crucial to winning in the post-Amazon traditional retail world.
- Under Armour (UA) – Under Armour is leveraging artificial intelligence to better understand their customers. UA is using IBMs Watson’s machine learning platform to develop more personalized fitness and health apps that are designed to measure and manage your well-being. By gathering health data from these apps, Under Armour will be able to provide personalized marketing strategies based on an individual consumer’s lifestyle. The company is also using AI to help design new products, including shoes.
- FedEx (FDX) – FedEx is making strong investments in AI, robotics and self-driving vehicles. FedEx has created an AI-enabled Alexa app that allows consumers to activate orders through voice commands rather than filling out traditional forms. In addition, the company has teamed up with Peloton, a private company focused on semi-autonomous driving platforms, as well as leading automakers Daimler and Volvo, to research semi/fully autonomous driving technologies. We believe the future of delivery will be focused on autonomous systems, and FedEx appears to be preparing for the same future.
- Accenture (ACN) – Over the past two years, Accenture has made significant investment in developing AI for both its internal operations as well as client offerings. Recognizing the positive impact that a strong AI platform can provide a business, Accenture has been creating tools to use in its consulting practice across various industries including healthcare, public safety, and financial services. The company has established Accenture Labs, which includes an Artificial Intelligence Research and Development group driving AI solutions for the broader business.
- Interpublic Group (IPG) – IPG is a leading advertising services company that has been aggressive in creating AI-driven businesses. The company’s Mediabrands subsidiary introduced an AI-focused arm called Society that leverages a proprietary system called HEART. HEART will enable advertisers to find “emotional resonance in social conversations” through NLP and machine learning. The company also launched the Marketing Tech Venture Studio, an accelerator that gives IPG early access to cutting edge AI marketing tech startups.
- Northern Trust Corporation (NTRS) – NTRS, an asset management firm, highlighted investments in robotics, artificial intelligence, and blockchain on its last earnings that will allow the company to operate more efficiently and create superior solutions for their clients. Northern Trust is specifically trying to leverage AI and big data to decrease costs, which would allow the company to charge lower management fees in order to stay competitive.
- Nasdaq (NDAQ) – Nasdaq has developed products that leverage machine learning, including their Trading Insights data analytics platform and SMARTS market surveillance platform. In a world now dominated by algorithmic trading, AI is an imperative to stay relevant as an exchange. The company expects these AI-focused products to contribute more meaningfully to results as they progress over the next few years. Nasdaq has also invested in machine learning companies, including Digital Reasoning.
- Avis (CAR) – Avis recently announced a deal with Waymo, Alphabet’s self-driving car project, to maintain, store, and deploy its fleet of 600 self-driving Minivans in the Phoenix area. Avis was chosen because of its national presence and track record of efficiently maintaining and cleaning a fleet of vehicles. As Waymo expands its service, we expect it will expand its relationship with Avis.
- Boeing (BA) – At the Paris Air Show last month, Boeing revealed plans to begin testing fully autonomous commercial jets. While many planes use auto-pilot for portions of flight today, reducing or removing pilots from the aircraft would be a significant change. In addition to autonomous jets, Boeing is also making other AI investments through its venture arm, HorizonX.
- Haliburton (HAL) – Haliburton is working to make its data more usable, laying a foundation for impactful artificial intelligence applications in the future. Haliburton recently outlined a data analytics advantage it gained simply by organizing and reading data where it was able to identify that one of its pumps was ill-equipped to handle a specific climate. We believe that companies making “dark data” accessible for learnings is a core precursor to effectively leveraging AI.
- Pioneer Natural Resources Company (PXD) – PXD, a petroleum and natural gas exploration company, has noted that predictive analytics have helped the company begin to use data in an effort to improve business outcomes. The company has plans to better leverage AI to determine where to drill and could eventually have artificially intelligent robots conduct drilling autonomously.
- Domino’s (DPZ) – Domino’s has been investing in multiple technologies in an attempt to improve its business. In autonomous delivery, the company has been testing delivery robots in Europe. In AI, Domino’s has invested in a virtual assistant that’s integrated in its mobile application, which aims to expedite and simplify the ordering process. Domino’s has also utilized AI to better route deliveries in real-time by tracking its drivers through GPS, which also happened to reduce driving incidents by 50%.
- Monsanto (MON) – Monsanto is using AI to improve crop protection techniques, recently partnering with Atomwise, a company that uses AI to accelerate the discovery and development process of medicines. Monsanto noted that the average crop protection product takes 11 years and $250 million to commercialize. AI should help to reduce both of those figures.
- Caterpillar (CAT) – Caterpillar began integrating artificial intelligence into its business a few years ago by creating an analytics and innovation division. One key use case for AI in Caterpillar’s business is in preventative maintenance of its equipment, which can reduce down time and cost of operation. Additionally, Caterpillar’s venture arm has invested in Airware, a drone-tech startup that helps companies plan flights and analyze images gathered for insights, as well as other frontier tech startups.
- Deere (DE) – In March, Deere announced a partnership with Kespry, a drone-tech startup that helps mining, construction, and other businesses gain insights from aerial imagery. Deere construction and forestry equipment dealers will offer their customers Kespry Aerial Intelligence systems for use on job sites around the world. We expect AI and robotics to have a significant impact on agriculture over the next decade plus and would expect continued exploration from Deere in the space.
Non-Tech AI Portfolio vs. S&P 500
Going forward, we will continue to track how our Non-Tech AI portfolio performs against the S&P 500. Each company will be equally weighted in the portfolio. Backtesting over the past year, our Non-Tech AI portfolio slightly outperformed the S&P 500. As detailed in the chart below, from July 1st, 2016 to present, the Non-Tech AI portfolio was up 17.1% versus the S&P 500 up 15.5%. While past performance is irrelevant in this comparison, we believe the non-tech winners in AI are going to start to demonstrate clear competitive advantages over the next several years, which will ultimately be reflected in their stock prices.
Disclaimer: We actively write about the themes in which we invest: artificial intelligence, robotics, virtual reality, and augmented reality. From time to time, we will write about companies that are in our portfolio. Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.
Loup Ventures employees may currently or in the future hold positions in any or all of the stocks listed here.