The importance of artificial intelligence and how to invest in the thesis through public and private markets

This year, we witnessed a historic milestone with the launch of ChatGPT by OpenAI, introducing artificial intelligence to the public. Achieving a remarkable milestone of 100 million users in just 2 months, ChatGPT broke records and revolutionized the technology universe.

At the heart of this revolution is the Large Language Model (LLM), an advanced form of AI capable of understanding complex questions and generating sophisticated answers. Imagine having a virtual assistant that simplifies everything from daily tasks to complex challenges at work.

In our Turim Letter #40, Turim sheds light on the relevance of artificial intelligence and how it is transforming our reality. Furthermore, we explore investment opportunities in this innovative scenario through both public and private markets.

The real applicability of LLM becomes evident in the corporate world, highlighting how companies adopting this technology can boost efficiency, productivity, and innovation across various sectors.

In the investment landscape, some companies are drawing attention, promising potential IPOs and demonstrating continuous growth in the AI sector. In 2023, the market has already allocated over USD 40 billion to companies directly linked to AI, shaping sectors such as health and biotechnology.

Entering the AI value chain, from software development to semiconductors, significant changes in the value generation of public companies are already observable, as seen in the cases of Amazon, Google, and Microsoft.

The benefits that artificial intelligence will bring to our daily lives are still challenging to quantify, but with the emerging technologies, we are beginning to grasp the magnitude of the revolution that lies ahead.

Who are the institutional investors?

In the financial world, institutional investors such as pension funds, endowments, foundations, and sovereign wealth funds play key roles. They manage substantial amounts of capital and have the ability to exert significant influence on asset prices and market trends.

In our second theme of the Turim Letter #40, Turim explores in detail the relationships between institutional investment management and family wealth management.

Institutional investors operate under rigorous structures and prioritize the preservation and growth of capital, aligning with the interests of beneficiaries or philanthropic and socioeconomic goals. While social foundations and endowments are dedicated to philanthropic and social causes, pension funds, also known as EFPCs, aim to secure the long-term financial well-being of workers by providing additional income in retirement. Sovereign wealth funds, on the other hand, manage state reserves to achieve long-term financial returns and protect national wealth.

Based on our experience in wealth management, we highlight notable similarities between the investment management of these entities and family wealth management. For example, both seek long-term returns, asset diversification, require detailed risk analysis, transparency, and trusted relationships. Additionally, adaptation to different market conditions, understanding regulatory changes, investment trends, and the ability to offer customized solutions are crucial for successful management.