One of the primary benefits ascribed to artificial intelligence (AI) is enhanced workplace productivity. It’s one of the reasons why AI investing ebullience is so palpable this year.
There’s no denying that highly productive firms are profitable companies — a notion that bolsters the case for AI-focused exchange traded funds such as the ARK Autonomous Technology & Robotics ETF (ARKQ). With ARKQ’s inroads to AI and automation — another pivotal piece in the productivity puzzle — the ETF could be relevant over the long-term due in part to shrinking labor pools.
Whether it’s reshoring plans or efforts to locate cost-effective labor in other jurisdictions, some US-based multinational firms are facing challenges. However, that scenario can be ameliorated by AI and automation, leading to better productivity.
“In a multipolar world, where the U.S. is looking to safeguard advantages and technologies and key areas of production, the labor pool for U.S. multinationals is contracting. Efforts to re-friend, and near-shore critical industries have strong political support. But this narrows the geographical options for companies making cheap labor, particularly for skilled manufacturing, harder to find,” noted Michael Zezas, Global Head of Fixed Income and Thematic Research for Morgan Stanley.
Zezas discussed the scenario known as the Great Productivity Race, which has implications for assets such as ARKQ. In simple terms, the Great Productivity Race is the concept that domestic companies with international exposure will need to allocate increasing amounts of capital to technologies that allow them to streamline productivity.
Translation: More large companies will commit financial resources to technologies that allow them to gain market share and keep up with customer demand. That could be the most reliable course of action in an environment of tight labor pools.
“Investors need to know that some corporate sectors will be able to handle this well and others will be challenged. Those best positioned are ones less reliant on labor and with ample resources to invest in productivity. Those more challenged rely heavily on labor and have less resources on their balance sheets,” added Zezas.
Up 9.19% year-to-date, ARKQ is already reflecting some of the enthusiasm surrounding AI and automation as long-term drivers of increased corporate productivity. The $874.4 million ARKQ is actively managed and uses a proprietary weighting methodology in an effort to identify disruptive growth companies with exposure to industries including AI, automation, manufacturing, and next-generation transportation.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.