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Productivity, Democracy, Power and Truth: The Influence of AI on Markets and Investing

10 October 2023
24 min read

What You Need to Know

This note considers the macro impact of artificial intelligence (AI), which raises profound questions about how knowledge is obtained, what we mean by “truth” and what counts as “explanation.”

AI is necessarily political—it would be a mistake to narrowly frame it as a quantitative topic. While there is a narrative of boosting growth, AI could also widen the distribution of wealth, which increases second-order social risks. It also raises questions about the future of democracy and introduces new types of geopolitical uncertainty. Moreover, AI might further entrench the power of corporations versus governments and labor.

The key strategic investment challenge is pricing the potential for higher growth and profit share versus the potential for greater fundamental macro uncertainty via societal pressures and geopolitics. Markets are quick to price the former but poor at the latter. AI also raises questions on the future of employment and retirement, the passivization of short-term investment strategies and who gets to control the development of new technologies.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to change over time.


About the Authors

Inigo Fraser Jenkins is Co-Head of Institutional Solutions at AB. He was previously head of Global Quantitative Strategy at Bernstein Research. Prior to joining Bernstein in 2015, Fraser Jenkins headed Nomura's Global Quantitative Strategy and European Equity Strategy teams after holding the position of European quantitative strategist at Lehman Brothers. He began his career at the Bank of England. Fraser Jenkins holds a BSc in physics from Imperial College London, an MSc in history and philosophy of science from the London School of Economics and Political Science, and an MSc in finance from Imperial College London. Location: London

Alla Harmsworth is Co-Head of Institutional Solutions and Head of Alphalytics at AB. She was previously head of European Quantitative Strategy at Bernstein Research. Prior to joining Bernstein in 2015, Harmsworth worked for two years on Nomura's Institutional Investor-ranked European Equity Strategy and Quantitative Strategy team. Her previous experience includes seven years at Fidelity as a quantitative analyst and portfolio manager, along with stints at Nikko Asset Management and ABN AMRO. Harmsworth holds a BA (Hons) and an MA in philosophy, politics and economics from University College Oxford and an MSc in economics from the London School of Economics and Political Science. Location: London