The AI Revolution: What Every Investor Should Know (Part 1)

Artificial Intelligence (AI) is no longer a futuristic concept. It is a powerful technology actively reshaping the global economy. By taking on both repetitive tasks and advanced analytical work, AI is helping companies improve efficiency and gain a competitive edge. It’s essential for investors to stay well-informed about AI and the impact it can have on markets, the economy, and their investment strategies.

This is the first of a three-part series on AI’s growing role in markets and the economy. In this edition, we’ll explore:

1. What is AI?
2. How AI is advancing so quickly
3. How AI is reshaping industries
4. Balancing AI hype and value-conscious investing
5. What comes next?

What Is AI?

AI refers to a broad set of technologies designed to replicate human intelligence. These systems can analyze information, recognize patterns, interpret language, and make predictions. AI tools are powered by machine learning models which are algorithms that improve over time by processing large amounts of data.

In practice, AI can do things like suggest content on streaming platforms, answer customer service inquiries, or analyze millions of medical records to identify treatment patterns. It combines computing power with data to deliver insights or actions that would be difficult for humans to produce at scale.

AI is not a single tool or product; it’s a platform technology that enables new ways of working across virtually every industry.

How AI is Advancing So Quickly

AI’s rapid rise didn’t happen overnight. It’s the result of several powerful shifts happening at the same time, creating the momentum we’re seeing today.

One major breakthrough has been the development of deep learning, a subset of machine learning. Traditional machine learning relied heavily on human expertise to guide the system, requiring programmers to define specific rules and features. Deep learning, on the other hand, allows AI to teach itself by identifying patterns in massive amounts of data with far less human input.

Another big shift in the past few years has been the rise of generative models. As the name suggests, these models don’t just analyze—they create. Generative models power tools like ChatGPT and Google’s Gemini, and can generate text, images, code, and even music in ways that feel remarkably natural.

Advancements in computer hardware have played a critical role in AI’s rise. Specialized chips built for AI workloads are vastly more powerful and efficient, enabling tasks that once took months to be completed in a matter of days.

Fueling all these developments is the surge in available data, which grows with every online search, app interaction, and digital transaction. The world now produces more data each day than it did in an entire year just two decades ago. This constant stream of information gives AI models more to learn from, allowing them to continuously evolve and improve. Together, these advancements are bringing AI into the real world. It is no longer just a tool used by tech companies. AI is becoming a core part of how businesses across all industries operate, grow, and deliver value every day.

Source: Statista, data as of 12/31/2024

How AI is Reshaping Industries

AI has quickly become one of the most talked about forces in business today. In fact, 2024 marked the highest number of “AI” mentions in S&P 500 company earnings calls on record. This surge highlights that AI is more than just a buzzword.

Source: Google Trends, data as of 3/31/2025. Numbers represent search interest relative to the highest point on the chart for a given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular.

We’re also seeing this play out in capital allocation. Since 2019, capital expenditures by Big Tech have surged over 200%, largely fueled by expectations that AI will unlock new revenue streams and transform business models.

And it’s not limited to Silicon Valley. AI is already making its mark across a wide range of industries:

• Finance and Investing: In financial services, AI is being used to model risk, analyze market data, detect fraud, and streamline operation.   Banks and wealth firms are using AI-powered digital assistants to enhance client service and engagement. 
• Healthcare: AI is helping doctors and researchers identify patterns in patient data, personalize treatments, and detect medical anomalies earlier.
• Retail and Marketing: Retailers use AI to power recommendation engines, forecast demand, personalize shopping experiences, manage inventory, and optimize pricing.
• Manufacturing and Automation: On the factory floor, AI is reducing downtime through predictive maintenance, improving quality control and boosting safety.

As AI capabilities evolve, its influence on productivity, business models, and competitive dynamics is expected to grow across the economy.

Balancing AI Hype and Value-Conscious Investing

Companies are spending heavily on AI, but recent developments suggest that training models may become more cost-effective than previously expected. This raises questions about whether the current pace of capital investment is sustainable and introduces execution risk, even for leading firms.

For investors, this uncertainty reinforces the importance of focusing on long-term structural impacts rather than short-term enthusiasm. Many already have exposure to AI simply by being broadly invested in the market. Core index funds and diversified portfolios include companies like Apple, Amazon, Alphabet, and Meta, all of which are widely known as leaders in AI. These companies are actively positioning themselves to benefit from the long-term evolution of AI, giving investors meaningful exposure through broad market holdings.

Utilities companies are also seeing rising demand from energy-intensive data centers. And as discussed above, industries like finance, healthcare, retail, and manufacturing are embedding AI in ways that enhance efficiency, reduce costs, and improve outcomes.

At its core, AI’s greatest potential is in boosting productivity by helping companies do more with less. Higher productivity drives profitability, which supports long-term economic growth. These are key drivers of sustainable investment returns.

While AI continues to dominate headlines, investors should avoid chasing short-term hype. The focus should remain on how AI is reshaping businesses in lasting ways and contributing to long-term value across the economy.

What Comes Next for AI?

Several forces have aligned to make this a pivotal moment for AI. Breakthroughs in computing power, the rapid rise of global data, and innovations in model development are accelerating adoption across industries. As AI becomes more embedded in everyday life and business operations, its trajectory is likely to shape the coming decades. For investors, understanding where AI is heading can help in navigating near-term uncertainty and staying positioned for long-term opportunity.

In our next blog, we’ll take a closer look at how AI is showing up across public and private markets, how it may already be reflected in your portfolio, and the risks and considerations of AI.

This material should not be construed as a recommendation, offer to sell, or solicitation of an offer to buy a particular security or investment strategy. The information provided is for informational purposes only and should not be relied upon for accounting, legal, or tax advice. While the information is deemed reliable, Forty W Advisors cannot guarantee its accuracy, completeness, or suitability for any purpose, and makes no warranties with regard to the results to be obtained from its use.

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