By Frédéric Lejoint.

Brice Prunas began his career in the financial sector in the late 90s. After working as an analyst in Paris and London, he launched the ODDO BHF Artificial Intelligence fund in 2018. This product is a major commercial success for the Franco-German fund manager, with assets under management now approaching one billion euros. We recently had the opportunity to meet him when he was in Brussels.

Should we believe in the artificial intelligence revolution?

Brice Prunas: "This will be a golden age for investors who have the courage to invest in the opportunities offered by AI and digital assets (crypto, blockchain, etc). Wealth inequalities are set to increase between those who invest in AI and those who do not. For the moment, we're still only building the infrastructure. To use an analogy, avenues are being built and houses are being built, but people are not yet living in this city".

What does this AI infrastructure consist of?

B.P.: "The data centres use a large number of cutting-edge technologies, including NVidia graphics processors priced at $40,000 each. The physical limits to this development are the significant energy requirements, estimated at between 90 and 250 gigawatts for the US market over the next few years. Another way of putting this equation is to say that one gigawatt of electrical power currently generates $40 billion in sales for NVidia. The investments made by all the major US companies now include a component relating to the production of electricity to power data centres".

What are the most exciting developments to be expected in AI?

B.P.: "Architecture is in the process of being built, but the use of AI is still a long way ahead of us, and it will be structuring our societies for decades to come. Clearly, it's the applications in the medical field that excite me the most, with meteoric progress to be expected and a significant increase in life expectancy. Similarly, AI will also enable us to make significant advances in new materials or in our understanding of the physical laws of the world, and enable us, for example, to remove the obstacles still surrounding the development of reactors based on nuclear fusion. I am also convinced that there is an opportunity in digital assets, particularly because companies will be talking to each other via their AI, and digital currencies will be used to carry out transactions".

Which companies have their fate in their own hands when it comes to AI?

B.P.: "On the road to future developments in terms of AI, there are only a small handful of companies that have mastered their environment: Alphabet , NVidia, Tesla and OpenAI. The latter group is also the next company to become a hyperstaler when it is floated on the stock exchange. Six months ago, it was valued at 300 billion dollars, a figure that has now risen to 500 billion dollars with the contracts recently announced with AMD and Oracle . Paradoxically, companies like Microsoft and Amazon do not have their destiny in their own hands, because they do not have their own AI model either. Now, in our fund, Microsoft represents a larger position than Tesla because of the governance risks associated with Elon Musk and a high valuation".

Do sustainability restrictions prevent you from investing in certain companies?

B.P.: "The fund qualifies for Article 9 of the SFDR legislation, which is the most demanding in terms of sustainability. This approach encourages us, for example, to avoid certain companies whose approaches may be controversial, such as Palantir because of its links with the defence industry, Uber because of its social practices, or US health insurers who use AI to limit reimbursements to policyholders as much as possible".

Even so, there will be negative consequences..

B.P.: "AI has consequences at a societal level, with certain sectors set to see labour replaced by capital. The American university system is now conceptually bankrupt, as it has never been so difficult for a young graduate to find a job. For working people, the main risk is that they will eventually be replaced by someone who will make more effective use of the possibilities offered by AI. As for the risk that AI could pose to human civilisation by attaining a form of consciousness, I think it is fairly low in the short to medium term. On the other hand, the probability is close to 100% that AI will be used by humans to develop security flaws or dangerous pathogens".

Is AI a bubble waiting to burst?

B.P.: "I lived through the Internet bubble in 2000. At the time, companies had no turnover and even less profit, whereas AI companies today generate billions of dollars in cash flow. What's more, we have very few IPOs today, whereas even the smallest site was looking to get listed quickly at the end of the 90s. On the other hand, infrastructure development is starting to cost a lot of money, and the cash flows of some companies are now clearly under pressure. That said, the flow of investment doesn't seem set to dry up any time soon, because no company or state wants to be left behind".

How do you translate this into the management of your fund?

B.P.: "Our fund is a product that also invests in all the sectors that will benefit from the deployment of algorithms, and which are rich in usable data, such as the financial and healthcare sectors, and which account for 40% of assets under management. This gives us better resistance to downward movements in the technology sector (as in 2022). The fund remains heavily focused on the United States, due to a lack of opportunities in Europe and regulatory problems in China. My portfolio of 60 lines is mainly invested in around thirty champions set to grow for many years to come, accounting for 75% of total assets. Alongside these, I also have around ten small nuggets with extraordinary potential, weighted between 0.5 and 1% of assets under management. In the next five years, two or three of these small companies active in digital assets or synthetic biology will see their share price increase tenfold. Finally, I also have around twenty lines aimed at more tactical positioning if an opportunity arises in the market, which partly explains our relatively high turnover".