We believe Asia is poised to lead the world in artificial intelligence (AI)
China and India have been investing recently in the area of AI and have commonalities such as growing start-up ecosystems, abundant labour, vast data, and supportive regulatory regimes which could drive AI adoption. However, we see divergent paths for these two economies – with China likely to be a growing hub for software and robotics, while India could leverage its global services expertise to develop world-class automation platforms. We estimate upside for some companies due to their AI investments, which we believe are better understood by investors.
China – a better-known AI scene, with large local ecosystem and policy push
In a 2018 Q-Series report, UBS analysts noted that China has taken the lead in some fields of AI. This has been enabled by strong policy support, a better-funded start-up ecosystem relative to other Asian economies, and entry barriers for foreign companies. However, a high dependence on external tech, a lack of cross-disciplinary skills to apply AI for industry needs, market fragmentation, and lack of a robust professional services ecosystem could hinder B2B adoption, in our view.
India is an untapped opportunity – for both global and domestic firms
India'‘s strength as a global IT services powerhouse is being leveraged by large providers to cross-sell native AI platforms. These platforms are still small, but are growing at a rapid clip. These companies are also helping global clients leverage third-party AI platforms. Global giants are leveraging the vast amounts of data generated by their Indian users to train AI algorithms. India remains a key source of talent with cross-disciplinary training and global exposure. Low R&D spending, small domestic markets and foreign competitors remain the key challenges.