The Impact of Artificial Intelligence on Markets

August 25, 2025 | Evan Frazier, CFA, CAIA, Senior Research Analyst

Over the last several decades, artificial intelligence (“AI”) has evolved from a theoretical concept into a transformative force across a variety of industries. The 1940s saw the advent of the digital computer, which was followed years later by the first artificial neural network, a computational model inspired by the structure of the human brain that consists of algorithms that attempt to recognize relationships in data. In more recent years, researchers have developed “deep learning” systems (i.e., neural networks with many layers) capable of increasingly complex tasks including image recognition, reading comprehension, and predictive reasoning. Given the advances in the space, it should not come as a surprise that the use cases of artificial intelligence are now vast, with AI tools now implemented across fields including health care, retail, finance, and entertainment. Researchers and corporate executives are not the only ones to have noticed the remarkable potential of AI, however, as investors have flocked to the space in droves over the last several years.

This newsletter outlines the growth of AI as an investment theme, including performance, valuations, and earnings growth of AI-related companies and equities, other segments of the market that may stand to benefit from advances in AI, and potential risks for investors.

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