US dominance in artificial intelligence (AI) is likely to come under increasing threat as companies in countries including the UK and China challenge the primacy of the world’s leading players, Smith & Williamson Fund manager Chris Ford has said.

US-listed businesses currently account for around 85% of the total technology market cap globally, having been at the heart of the major cycles seen since the turn of the century. However Ford, manager of the recently launched Smith & Williamson Artificial Intelligence Fund (Ai), says that while US-listed businesses will maintain a prominent role, non-US companies are likely to increase in influence during the next cycle.

“Since the start of the noughties we have had three cycles – the internet boom, the data explosion, and the cloud explosion – which saw the US take the lead role,” he says. “As a result, 85% of the value of technology companies globally is based in the US. We think this share of the market might fall as other parts of the world become more relevant when it comes to AI and technology in general.”

While Ford points out that the broad application of AI systems presents a huge breadth of opportunity right across the global economy – not only in the technology sector – it is notable that companies in countries including the UK and China are now competing with US businesses when it comes to expansion and growth. “The US will have a role to play of course, but companies based elsewhere are all doing the same R&D as US firms, and they have some extraordinary AI themselves,” he says.

“They also have access to the best graduates around the world – Baidu and Alibaba have a very big team up in San Francisco, for example – so these companies are not just looking in their own back yard.”

Ford, whose fund holds circa 35 stocks selected globally using an investment process designed by Ford and Day, says Baidu and Alibaba in China are among those he expects to increase market share. “Alibaba has, for example, built a platform to better track economic activity and then use recognition data to make assumptions about its direction,” Ford says.

Baidu is competing to be the principal AI giant in China, ahead of e-commerce giant Alibaba and Tencent, the country’s leading social media company.

China’s tech giants are already muscling their way among the world’s biggest companies, with Alibaba and Tencent both worth over $400bn in market cap[1]. That leaves them ranked 7th and 8th respectively in terms of market cap globally, although they are still dwarfed by Apple, the world’s largest company, worth some $840bn[2].

Ford says while there has been a general view that Chinese companies’ growth ambitions are purely domestic, the reality is they will want to expand globally. “There is an attitude towards Chinese companies that the limits of their goals end at the country’s borders, and we think that is simply wrong,” he says.

Both Baidu and Alibaba are within the Smith & Williamson Artificial Intelligence Fund, which invests across the globe to find opportunities.

[1] Source: Thomson Reuters as at 31.10.17.

[2] According to Google Finance, as at 30/08/17, shares in Apple were trading at $162.81, valuing the company at $840.9bn.

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