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First AI-Driven Index Tracking Artificial Intelligence Innovators

Jan. 24, 2018

Jan. 24, 2018

The artificial intelligence (AI) revolution has penetrated most industries and services, with machines now handling an increasing number of tasks that only humans could once do.

AI is the science of creating computer programs with human-like cognitive skills, such as recognizing patterns or drawing conclusions. AI is behind the iPhone’s face identification feature, Amazon’s Alexa intelligent assistant and Google’s self-driving cars. Empowering those processes are groundbreaking tools such as artificial neural networks, machine learning and natural language processing (NLP).

As disruptive as AI is in the digital world, the economic potential for the firms that produce the technology is equally as explosive. Tractica, a market intelligence firm, forecast last December that annual worldwide software revenue from AI technologies will grow from $3.2 billion in 2016 to $89.8 billion by 2025.1

Plus, there’s the economic benefit for businesses that adopt knowledge-based systems in their operations, accelerating sales and lowering costs. In 2016, these adopters invested between $26 billion and $39 billion in AI, according to McKinsey & Co.2

Overall, AI technologies could boost labor productivity in some countries by up to 40% in 2035, according to a report by Accenture.3 The consulting firm analyzed 12 developed economies and concluded that AI has the potential to double their annual economic growth rates through 2035.

An index for AI innovators and adopters
For equity investors, accessing the AI megatrend has been a difficult task. Investing in single stocks offers only limited and often illiquid alternatives; betting on sectors is inefficient. There is a plethora of AI-driven companies and start-ups, which may or may not be the next Apple or Google. Investors need the right concepts based on transparent criteria to help them discern a media hype from an investable and promising opportunity.

To generate accurate exposure to AI’s business impact, STOXX launched the STOXX® AI Global Artificial Intelligence Index on Jan. 23. The index selects companies from a wide range of industries that invest heavily in the increased development and adoption of AI-related technologies, via an innovative selection process that relies itself on an AI system.

As such, the STOXX AI Index is the first thematic index to select its constituents by means of AI technology. It is derived from all constituents in the STOXX® Developed and Emerging Market Total Market Index.

A partner that’s leading in semantic analysis AI
STOXX has partnered up with Yewno, an award-winning data research company, whose knowledge-graph algorithm identifies which awarded patents relate to AI. This is the stepping-stone to detect the pioneers – both producers and adopters – securing those patents.

AI producers are those whose main business revolves around designing intelligent programs. Examples include software developers and semiconductor manufacturers.

AI adopters are companies leveraging AI technology to offer services and products such as automotive companies designing self-driving cars or drugmakers employing machine learning to improve diseases diagnosis. These companies also generate intellectual property as they discover innovative AI applications for their own field.

The path to expanded knowledge
Knowledge graphs are a framework to identify and extract concepts or ideas, rather than just keywords, from a universe of unstructured data. This artificial system mimics the workings of the human brain – thanks to computational linguistics, neural networks and machine-learning algorithms – but with exponential speed and scope. It can thus infer connections between information points that might otherwise remain undiscovered, leading to more findings.

Yewno’s smart map assists in determining which intellectual property patents worldwide are related to AI, facilitating the creation of a score of each company’s involvement with AI patents. The technology searches for ideas that lead to common connections, rather than conducting a narrow search led by precise words, which may yield too few results.  

The knowledge graph connects companies that use similar technologies and services by extracting information based on their AI-related patents.

Getting the constituents with smart precision
Company selection in the STOXX AI Global Artificial Intelligence Index is based on two measures: AI exposure and AI contribution.

AI exposure refers to the number of AI-related patents registered by a company relative to all patents granted to them. AI contribution is the number of AI-related patents registered by a company relative to all AI patents granted globally over the same period.

Those companies that appear in the top 75% of both groups are eligible to enter the index, provided they fulfill minimum liquidity criteria. Index constituents are equally weighted.

“AI technologies present an unrivalled investment opportunity, yet these technologies are often black boxes for investors,” said Matteo Andreetto, chief executive officer at STOXX. “The new STOXX AI Index is a transparent, rules-based and progressive approach that tracks artificial intelligence using artificial intelligence technology. It is a digital disruption in AI investment itself.”

Building, and benefitting from, the path to tomorrow
The STOXX AI Index brings an innovative approach to thematic investing and applies it to one of the most exciting growth stories of our times. The index helps to share the value created by the long-term trend towards automation, and by virtue of its conception becomes itself a participant in the AI revolution. 


Featured indices
STOXX® AI Global Artificial Intelligence Index

1 Tractica, ‘Artificial Intelligence Market Forecasts,’ Dec. 21 2017.
2 McKinsey Global Institute, ‘Artificial Intelligence – The Next Digital Frontier?’, June 2017.
3 Accenture, ‘Why artificial intelligence is the future of growth,’ Sep. 28, 2016.

 

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