25 Mar 2025
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Artificial intelligence (AI) continues to reshape industries, businesses, and societies at an unprecedented pace. Once a futuristic concept, AI is now at the core of everyday tools, driving efficiencies and sparking new innovations. However, as adoption accelerates, concerns over AI's disruptive potential, regulatory risks, and long-term impact on the tech sector, investors and jobs grow increasingly urgent.
Today, AI is deeply embedded in areas such as finance, healthcare, cybersecurity, manufacturing, and customer services. Large-scale language models like OpenAI's ChatGPT, Google's Gemini, and Microsoft’s Copilot are redefining human-computer interaction. Meanwhile, generative AI is transforming content creation, programming, and even legal documentation.
Despite these advancements, the AI threat remains complex. Cybersecurity risks, biases in AI decision-making, and the displacement of jobs are immediate concerns. Governments and regulatory bodies worldwide are grappling with how to balance AI innovation with ethical considerations and security threats. The European Union’s AI Act, the U.S. Executive Order on AI, and China’s stringent AI regulations all highlight the growing urgency for oversight.
Since we have started hearing about the AI threat, the AI sector has continued to grow in its value (as evidenced by the 94% increase in the US S&P500 IT sector versus 50% for the broad index– see the chart below) and its proven usefulness with many companies slowly embracing AI tools to help with menial tasks, as well as spending more on computer chips and data centres.
US Tech vs S&P500
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Source: Macrobond, AMP
AI models have evolved rapidly, with different models excelling in specific areas such as natural language processing (NLP), computer vision, and generative AI. As of 2025, the five most advanced AI models are GPT-4 (OpenAI), Gemini 1.5 (Google DeepMind), Claude 3 (Anthropic), LLaMA 3 (Meta), and Mistral Large (Mistral AI). A recent development is Google's release of Gemma 3, notable for its ability to operate efficiently on a single GPU while supporting over 35 languages.
Grok 3, developed by Elon Musk's xAI, is a state-of-the-art language model designed to compete with leading AI systems. It stands as a formidable contender in the AI landscape, offering advanced reasoning, coding proficiency, and real-time data analysis. Its performance metrics place it among the top AI models, each excelling in unique areas to serve diverse applications.
DeepSeek, a Chinese artificial intelligence company, launched its first chatbot application, DeepSeek-R1, on January 10, 2025, for iOS and Android platforms. By January 27, 2025, DeepSeek-R1 had surpassed ChatGPT as the most downloaded free app on the iOS App Store in the United States.
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These advancements highlight the dynamic nature of AI development, offering users a diverse array of models tailored to specific needs and applications.
AI Long-term impacts on the tech sector and investors
AI's long-term impact on the tech sector and investors is profound, driving innovation, efficiency, and new business models. Companies integrating AI are poised to achieve greater efficiencies and cost savings while emerging AI-driven industries create fresh investment opportunities. However, regulatory challenges, ethical concerns, and workforce disruptions may introduce volatility.
The US tech giants that have outperformed the market for years may not necessarily be the ultimate “winners” of the AI revolution. In the future, the benefits are likely to go to those that can effectively leverage AI’s efficiencies and declining costs. Nevertheless, it remains unclear which companies those will be. As AI reshapes industries, adaptability and strategic positioning will be crucial for sustained growth and competitive advantage in an evolving market.
A major concern surrounding technology has been its impact on the labour market and the fear that machines might replace human workers. While non-routine jobs have gradually gained a larger share of the market at the expense of routine roles (as shown in the chart below), this shift is happening at a slow pace. History suggests that while AI may eliminate certain jobs, it will also create new opportunities. The key is ensuring that individuals have the right training and skills to adapt to these emerging roles.
The Changing Australian Jobs Market
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Current as at March 2025
As always, if you have any questions or your personal circumstances have changed please do not hesitate to contact your financial adviser.
General Advice Warning - Any advice included in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.
