Harvest Portfolios Group

You might already be invested in AI, even if you don’t own tech stocks

July 27, 2023
You might already be invested in AI, even if you don’t own tech stocks

By Michael Kovacs

Artificial intelligence (AI) has grabbed investors’ interest. They’ve seen the wide range of applications for AI technology across businesses, and have invested in the software and hardware companies leading AI innovation.

That excitement has been loudest around technology stocks, but AI’s value actually goes beyond tech companies. Even if you don’t own any technology stocks or ETFs, you might already be invested in companies using AI to make their businesses more efficient and deliver value for shareholders.

We can demonstrate that by looking at a few examples of companies held in the Harvest Brand Leaders Plus Income ETF (HBF:TSX). HBF invests in a diversified portfolio of 20 large-capitalization companies with global brand recognition. That includes some of the world’s largest tech companies like Apple and Microsoft. But, to demonstrate that AI is driving value beyond tech, let’s highlight three companies from different sectors in that portfolio and show how they’re using AI: Nike, UPS, and UnitedHealth.

AI impact at Nike

The largest sports apparel company in the world is using AI in a number of interesting and innovative ways. As early as 2021 Nike was integrating AI into its retail services and internal operations.

One key use of AI for Nike is around its customer experience. While Nike has over 1,000 brick and mortar stores globally—and wholesales apparel to countless global retailers—its e-commerce business has grown significantly over the past decade. Nike has integrated an AI tool in its e-commerce site to offer online shoppers personalized recommendations for products they might like, or complimentary products that can supplement what they’re already offering. By offering personalized suggestions and recommendations, Nike can better connect with its digital customers and generate repeat business by providing them with products they value.

Those digital purchases also generate a lot of data for Nike. Through purchase volumes Nike can learn which products are popular, which aren’t, and how consumer preferences are changing. The company also uses AI tools to analyze those data and help inform their decision making in both the short and long-term.

Finally, and on a more novel note, Nike has even used AI to design a set of sneakers. While Nike is a sportswear brand, many of its shoes are considered fashion statements. Using generative AI to create totally original designs can help the company innovate in the fast-changing world of fashion.

Through e-commerce, data analysis, and fashion Nike is using AI to innovate and deliver value.

How AI is helping UPS ship unprecedented volumes

After the Nike customer buys shoes and sweatpants from Nike’s online store, there’s a good chance that UPS will ship them their new apparel.

United Parcel Service (UPS) is the largest courier company in the world by revenue and the iconic brown vans have been taking more trips than ever since the start of the pandemic. Lockdowns and the shift to work from home accelerated the global e-commerce trend, which relies on rapid logistics and quick delivery of goods.

UPS has invested in AI to keep up with its order volumes and drive efficiency in its routes. Through a system called On-Road Integrated Optimization and Navigation (ORION) the logistics company can now predict the most efficient possible routes and delivery options for its packages. ORION considers myriad factors like weather, traffic, transportation method and cost to offer UPS real-time route optimizations. This has resulted in more packages delivered with fewer miles driven and benefitted UPS’ bottom line.

What AI means for UnitedHealth and their patients

At UnitedHealth, the efficiencies and value add that AI applications can bring don’t just help shareholders, they help create better patient health outcomes.

UnitedHealth might not be as familiar to Canadians as Nike or UPS, but the US healthcare service provider ranks as the 11th largest company in the world by revenue. They provide health services through clinics and treatment centers, as well as health insurance in the US market.

Digital health has been a focus for the company in recent years, and AI technology has been key to that initiative. Through AI tools UnitedHealth has created the Agent Virtual Assistant (AVA) which includes a chatbot that can help direct calls and inquiries to ensure doctors’ and nurses’ time goes to the patients that need it most.

Data is also collected through patient interactions, with both medical professionals and AI assistants. Those data can then be analyzed with other AI tools to inform illness and treatment trends. Through data analysis and machine learning AI can help doctors predict and prevent illness in many of their patients, resulting in higher value and lower cost preventative medicine measures. This has allowed UnitedHealth to run more efficient operations and, crucially, help improve the long-term health and wellness of their patients.

Why AI goes beyond tech

The cases of Nike, UPS, and UnitedHealth demonstrate clearly that AI offers game-changing opportunities for industries as diverse as retail, logistics, and healthcare. It makes sense for investors to get excited about what AI means for all kinds of tech companies. But, its worth noting that these tech companies are building AI hardware and software in part to help companies in other industries create value.

Investors interested in AI might also want to look beyond the tech sector and see how companies with completely different business models are using AI.

I think that if most Canadian investors take a close look at their portfolios right now, they’ll be surprised at how much AI they already own.

Michael Kovacs, CEO

Michael Kovacs

Michael Kovacs is the President & Chief Executive Officer of Harvest ETFs. He founded Harvest Portfolios Group Inc. in 2009 and is a 35-year veteran of the Investment management business. Michael began his career as an Investment Advisor and for seven years managed money for individual investors before moving into senior management roles within the Investment Management Industry. He is a strong believer in providing individuals with Investment products that are equity based, have long term growth prospects and transparent portfolios. Michael has been featured in the Globe & Mail, National Post and BNN-Bloomberg. Michael is also the Chairman of the Board for Harvest.

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