Given the limited size of the current market, we believe direct beneficiaries in this stage will be software companies and robotic process automation industries with a first-mover advantage. In the medium term, the AI industry will eventually consolidate given the outsized number of startups focused on AI. But as industry standards emerge, there will only be a few potential winners.
There will also be indirect beneficiaries, such as healthcare, hi-tech engineering and select services companies, due to improved efficiencies in research and development. For example, with deep learning and predictive analytics tools, AI can significantly reduce the costs and time of drug development in the pharmaceutical industry by predicting the therapeutic use of new drugs, thus driving huge efficiency gains.
Conversely, where there are winners, there are also losers. Without adapting to the changing landscape and adopting AI into current business models, industries like retail and automotive will be most at risk of falling behind. As mentioned earlier, AI's rise will have a more profound effect on certain industries, the companies of which will likely live or die based on their ability to cope with rapid technological changes.
In the next chapter, we go into more detail about AI's impact on these sectors.