Key Takeaways
- Stocks less vulnerable to AI disruption could include those in regulated, capital-intensive sectors with room for efficiencies, according to analysts.
- Banks, telecoms, and utilities appear among the sectors with the most potential upside from AI efficiencies, they note.
- Healthcare, transport, and logistics also look poised to gain from a streamlining of processes.
As artificial intelligence threatens to disrupt industries from software to law, the hunt is on for investors to identify those sectors with the most to gain.
The case for “AI enablers” is clear: Generative model developers, chipmakers, and data centers are all essential for the buildout and adoption of the next-wave technology. But beyond that, identifying the successful “AI appliers” is less clear-cut.
“When it comes to the beneficiaries, it’s a very thin line between who is going to benefit and who is going to lose out in an AI world,” says Marc Schartz, European equity portfolio manager at Janus Henderson Investors.
Here, a general rule of thumb could help determine the companies and sectors most likely to benefit, according to analysts: They are highly regulated and capital-intensive industries, whose main services are not going to be made redundant by AI but whose sizable workforces could be redeployed—or removed—from manual tasks.
Banks Could Be AI Winners
“There are two industries which we think fit the bill here,” Schartz says. “The first one is banks: There’s room for optimization, but banks are also very highly regulated and capital-intensive. It’s unlikely that an AI start-up will displace banks tomorrow.”
Santander SAN could be a major beneficiary, according to Joel Copp-Barton, senior client portfolio manager at Invesco, with the Spanish bank having already targeted a EUR 1 billion boost from AI-led efficiencies over the coming years.
BBVA BVA and Lloyds LLOY also stand out as strong use cases, says Copp-Barton, who cited solid underlying fundamentals. Meanwhile, Morningstar chief European markets strategist Michael Field flags significant upside potential for both NatWest NWG and Svenska Handelsbanken SHB.A, noting that the largest banks are the ones best placed to invest in AI.
Schartz also highlights the potential for telecoms companies, which are some of Europe’s biggest employers and with important inventories of physical infrastructure. Copp-Barton agrees, highlighting the scope for streamlining among telecoms and utilities firms more broadly: “They’ve got loads of labor, loads of data and loads of processes.”
Analysts flag upside potential for major players such as Deutsche Telekom DTE, as well as energy and technology firms like Schneider Electric SU and Siemens Energy ENR.
In some cases companies can reinvent themselves for the new AI era, according to Schartz. Nokia NOKIA is a clear example, he says: The Finnish company was in a “dire existence” for many years after the first mobile phone wave, and is now emerging as a leader in the optical networking needed for communication between data centers.
Transport, Logistics, and Healthcare
Other industries set to benefit from a similar streamlining of processes include transportation and logistics, according to Invesco’s Copp-Barton.
“There could be advancements in the processes that make it better and more robust, especially if you’ve got heavy assets. In a warehouse, it’s all about processes and if you can do those better, more efficiently, quicker, then there’s big advantages,” he says.
Healthcare firms, and particularly drugmakers, should stand to gain, too, according to Morningstar’s Field. “Healthcare is probably a big one that maybe we’re not talking about enough. The barriers are quite high. AI can filter through clinical trials and changes profitability,” he says.
In some instances, that adoption is already unfolding, says Hywel Franklin, portfolio manager of the Mirabaud Discovery Europe Fund. One example is Scandinavian healthcare provider Ambea AMBEA, which uses AI to enhance scheduling and administrative tasks and return staff to caregiving, he notes.
“Across the continent, businesses are benefiting from automating routine tasks, accelerating research, and communications processes, improving customer service and streamlining compliance checks,” according to Franklin.
Analysts expect that AI implementation to continue apace over the coming months, even as more jobs are put at risk of redundancy or dislocation. However, they note that it may be two to three years yet before the biggest developments bear out. “It’s more years than months for the real impacts to come through,” says Copp-Barton.
