Artificial Intelligence / Machine Learning IRF IRPs

This piece highlights IRF IRPS that are involved in AI / ML including:

 Providers that focus on the topics as technology themes and disruptions

 Providers that carry out fundamental research on stocks involved in these technologies
 Quantamental Providers that use these technologies to help identify stocks and manage
risk
 Data Providers that use these technologies to enhance their service offering

Thematic providers that look at AI / ML as themes:

 CM Research - Cyrus Maewalla and team identify themes in global TMT sectors and
highlights the winners and losers.
o Thematic piece: AI: Machine Leaning - Looks at how to invest in the machine
learning theme, a subset of the AI theme.
o Top long ideas: STMicroelectronics - sensors; Nuance Communications - Voice
APIs; iFlytek - voice APIs; Baidu - AI leader in China, a protected market; Fireeye - AI
in cyber security; Xilinx - maker of programmable chips, the next threat to Nvidia’s
GPUs; Microsoft, Amazon and Google - for their prowess in machine learning as a
service.

 Curation - Risk monitoring service, managing the exponential growth of content via
curated feeds and alerts. Produces a range of research that alerts professionals to the
peripheral risks that reside within their industries. Key themes include cyber security,
disruption in financial services, battery technology and electric vehicles, the sharing
economy and digital currencies. Set up by Nick Finegold, former CEO of Evolution
Securities.
o Writes a weekly called disruptive trends and peripheral risks
o Searching their website for ‘Artificial Intelligence’ reveals 2107 results

 Entext - Sean Maher identifies key themes and makes investment recommendations on the
back of these themes through a weekly piece. Sean has been covering AI regularly since
2013/4 as a theme. Examples of headlines from weekly pieces:
o Incumbent ‘Second Mover’ Advantage, as AI Hype Risks Reality Check...It’s striking
that Wal-Mart and GM are outperforming Amazon and Tesla, while Intel is
outperforming AMD as it reinvents itself as an AI player - some incumbents are
adapting fast to disruption risks.
o Rise of the Machines: The AI Arms Race
o Electrification and Autonomous Trends Reshaping Auto Industry….
o Structural and Cyclical Drivers Underpin Semiconductor Outperformance

 Sumberg - Team of analysts in China looking for anomalies and inflection points through in-
depth media screening. Examples of findings include:
o China names first group of national AI platforms which was announced by the
Ministry of Science and Technology – these include Baidu Autonomous Driving AI
platform, Alibaba City-brain AI platform, Tencent medical imaging AI platform, and
iFlytek smart voice AI platform to encourage create development.
 o Field of AI continues to grow quickly. iFlytek has been upgraded to BAT (Baidu,
Alibaba, Tencent) level. At the core of AI development is language and
comprehension which is where iFlytek focuses. The company will get long term
government support. Their products have not been popular in the past but have
expanded, growing their AI product range. It will be difficult for any foreign
companies to break in to Chinese AI market.

Stock-specific fundamental providers that cover companies that use AI / ML:

 Aliya Capital - Ari Shrage, former Technology fund manager at Putnam, hosts unique
corporate access events with senior managers and writes fundamental research on the
back of these calls and his own research.
o Many of Aliya’s companies under coverage uses AI / ML such as: TWTR through
machine learning to improve twitter results and improve the sign up process, YELP
and TRIP for listings/ improving pay per action, Pandora for better song results,
EXPE for listings/better advertising (higher ROI), SHOP helps their customers with
their businesses, LC is a big user of AI for better algorithms of both risk tools and
better balance of supply/demand, AMZN, CRTO, EBAY, GOOG, BIDU where AI is a
big initiative and RDFN, TREE, ZNGA, CRM, RHT, DATA, ANET, PI, MSFT.
o Example of call with Baidu scheduled for November 28th - Why join/Key topics:
Baidu is typically one of the most attended events every quarter. On the call, Ari
will discuss recent results, the competitive landscape and their investments in AI.
How should one think about their core advertising business and other such topics?
Clients listen to calls and ask questions in advance which Ari asks.

 Blueshift - US Channel Checking business with similar characteristics to OTR. The founder
was formerly a founder of OTR. Spends a lot of time on Technology trends and focusing on
winners and losers through in-depth interviews. Recent findings include:
o Microsoft and Intel are top beneficiaries of the current climate. Others are
struggling to change direction. IBM continues to see its hardware and consulting
business shrink, prompting it to throw everything into artificial intelligence software
and cloud delivery.
o Showed IBM’s Watson Leaving The AI World Wanting: Sources in Aug. 8 report said
IBM’s Watson will not be the dominant platform in artificial intelligence because
the company lacks focus and its technology has fallen behind competitors.
o Artificial intelligence is the new, albeit imperfect, game in threat detection and
attack prevention. Leading security vendors Palo Alto Networks, Check Point
Software Technologies, Fortinet, Juniper Networks, and Cisco Systems are all
scrambling to develop these capabilities as the attack rate escalates.
o Tech Trends You Need To Know, October 23, 2017 Report (AMZN, ANET, CDW,
CSCO, CTXS, FB, FFIV, GOOG/GOOGL, HPE, IBM, INTC, JNPR, MSFT, ORCL, VMW)
Research Question: How are network equipment companies responding to the new
marketplace being shaped by on-demand cloud computing services from Google,
Amazon and Microsoft? As the rest of its channel lags, HPE has pinned its hopes on
beating IBM, Microsoft, Amazon and Google in AI development and
commercialisation. HPE’s acquisition of Nimble Storage is expected to be a disaster.

 GARP Research - Bill Baker finds attractively valued US stocks to buy through in-depth
fundamental research.
 o Last May, he published a 50-page thematic essay entitled A Deep Dive into Deep
Learning, which discussed the emergence of speaker independent natural language
automatic speech recognisers driven by artificial intelligence. In the essay Knowles
is discussed as a likely beneficiary of this technology.
o Also written extensively on Nvidia and believes that it should be a part of any AI
portfolio.
o Suggests the most direct and immediate beneficiary of AI is Axon International. Bill
met with three of their top AI people last week in NYC and was particularly
impressed.
o There are other beneficiaries, such as iRobot.

 RedTech Advisors - Carries out primary research on Chinese Internet stocks. Recent
findings include:
o Tencent’s greatest strength is its growing diversity, with no fewer than three drivers
- mobile games, social ads and payments - helping to drive short-term growth and
meet ever-rising market expectations. Longer-term, Tencent’s 900 million users and
dominance in social media platforms such as WeChat and QQ give it a solid
foundation for developing artificial intelligence capabilities and penetrating the
market with Augmented and Virtual Reality systems. They still see some risk in
Tencent’s decentralised system, which fosters internal competition, but Tencent is
moving to address this.
o Just about all the companies in the Net space use AI in some way, and have for
years – this isn’t anything new, even though it is often pitched as new. Search has
used advanced AI for at least five years.
o More recently, the biggest space to exploit PR about AI is autonomous driving. In
this space, Baidu is the leader in China and that is where RedTech is focusing much
of their future research in the area. For instance, in January, they will host fund
managers on a China trip to meet with folks in the auto supply chain to talk about
Baidu’s role in AI and its potential competitors.
o RedTech’s research pieces on Baidu includes: Autonomous cars: Not so fast; Baidu
unveils smart home speaker; Apollo: Solid foundation - long road to
commercialization; Seeking Salvation.

 RenMac - Best known for strategy and technical research effort; recently built out a
fundamental equity research offering covering certain sectors.
o Recent findings: As the internet fracks into the real-world, Amazon's platform
services for 3P e-Com sellers – distribution (Prime), fulfillment (FBA/robotics), and
artificial-intelligence (P13N/Alexa) – will enable "App & Mortar" for 3P physical
sellers. Starting at Whole Foods, Prime Now will evolve from home-delivery to in-
store shopping and Amazon from “a search engine with a warehouse” to one with
stores. The e-Com flywheel - rising customer-acquisition costs drive 3P sellers to
Amazon gates on the path-to-purchase - will extend to o(mni channel)-Com even
though sellers then face elevated risk of private-label substitution (e.g. pillow pets).

 Summit Redstone - Four senior analyst covering US Semiconductor, Hardware and

Software companies; they each have Silicon Valley corporate experience and Jagadish was
formerly at Arete Research.
o There are two categories involved in AI/ML. First, is the enabler of AI/ML providing
the infrastructure for example in computer power, memory, disk space or
connectivity (networking). Such companies include: Intel, AMD, Nvidia, Micron,
 Western Digital, Seagate, Broadcom, NetApp, Nutanix, Mellanox, Pure Storage,
Splunk.
o Second, companies that buy products from infrastructure enablers and build the
AI/ML into their products. These companies include: Proofpoint, Mimecast, Palo
Alto Networks, Checkpoint Software, Commvault, Teradat, Vmware, Service Now,
Shopify, Zendesk, Varonis Software, Qualys, Cognex.
o As a second derivative AI chips drive rising capex spend and semicap companies
such as ASML, Applied Materials, Lam Research are beneficiaries.
o Example of research: Upbeat Wafer Fab Equipment outlook (2017-’20) - As era of
Artificial Intelligence and Big Data evolve, Applied Materials is bullish on WFE
spending for the next 3 years and updated its outlook with a $90bn WFE spending
for 2017+2018. In 3D NAND where two major market drivers prevail (growing
NAND content/mobile device and a rapid HDD to SSD conversion), AMAT expects
NAND WFE to be sustainable at $15bn (40% bit growth) in a baseline scenario while
climbing closer to $25bn (60% bit growth) in an optimistic scenario. With materials
enabled scaling (more pairs, multi-tiers, vertical and lateral scaling) happening over
the next 3-4 years, and only half of the 2D to 3D conversion complete, AMAT sees
itself benefiting from a broad portfolio offering (deposition, etch, CMP). In foundry
where spending is happening all around – trailing edge (IoT and CMOS image
sensors), leading edge (apps processor), future nodes (HPC/A.I. chips), AMAT
expects to benefit from a combination of rising capital intensity (7nm -2x vs 28nm),
increasing die sizes (A.I. chips > 700mm2) and share gains. In patterning as it relates
to Foundry/Logic customers, AMAT sees the market growing to over $4bn with its
patterning share rising to 34% (~20% share now) by 2020 despite EUV introduction
as resolution and edge placement issues will need to be addressed by multi-
patterning. As it relates to China where WFE spending is most inefficient, AMAT
sees an incremental $1-$1.5bn in domestic spending next year with sustainable
multiyear spending thereafter. In all, in semis over the next three years, AMAT sees
its revenues growing from $9.5bn in FY17 to $11.5bn by FY20 of which $1bn in
incremental revenues will be from its existing leadership semi business while the
remaining $2bn in incremental revenues will be from high growth semi business.

 Value Investment Principals - Sandy Mehta and his team in India find deeply discounted
stocks. They have 40 live investment recommendations.
o NetApp is a stock with biggest focus on AI.
o Stocks such as Sony and Kulicke & Soffa benefit from general spending on
semiconductors and computing power. These are indirect AI plays.

Stock-specific Quantamental providers which incorporate AI / ML to identify stocks:

 Libra Investment Services

o There is a shift in focus towards new sources of data and how that can potentially
be integrated with existing or traditional data sets.
o The first point to note is that, whilst both Artificial Intelligence and machine
learning have become new era buzz words, the underlying concepts are far more
orthodox and have strong roots in more traditional quadratic statistical data
analysis.
o To this extent, Apollo, Libra’s platform, is based upon AI / ML and, as they develop
the front-end system more, the whole area of data visualisation and the emergence
of AI via the concepts of complex systems, clustering analysis, hierarchical risk
 parity analysis and risk management system design are all elements to which Apollo
data can be put.
o From the perspective of machine learning, this is essentially about non-parametric
algorithms, where learnt information patterns are incorporated into future
predictive variables. Apollo, with a focus upon both signal generation and measures
of degrees of significance, covariance and persistence already employs a range of
parametric and non-parametric approaches to its signal outputs. Daily regression
re-estimation leads to adaptive parameters and changing levels of factor
significance over time that provide a level of information that, when generated as
an output (the FV drivers) offer an example of Apollo AI at a stock level.
o The Apollo Margin of Safety is another example of how, by creating adaptive price
components for both the upper and lower boundaries of the FV range, allow a
metric - the Apollo value indicator (a percentile measure and therefore entirely
dependent upon and derived from the non-parametric measurement of risk implied
via the Margin of Safety) to be developed “artificially”. The ability to then compare
these levels of value across stocks, sectors, Indices, portfolios etc. is an example of
how the AI developed internally within the Apollo calculus is hence able to provide
further, otherwise unobservable, information about the relationships within and
across defined data sets.
o Whilst most financial sector related AI is based around historical return correlation
analysis from a preselected universe (and is therefore largely an input into portfolio
risk analytics) Apollo has the benefit of having its own, unique derived data sets
that provide forward looking analytics at a stock level that can be extended “up”
through the investment hierarchy to Sector, Country and market level. The existing
Apollo front end system already provides a degree of aggregated analysis which can
then be drilled down into via the bubble charts. These are also able to display other
levels of data information - size, measures of expected value, recommendation
(stars) etc. via dot size and colour on the Apollo bubble charts and visually illustrate
relative clustering or distribution of assets on the risk/return landscape both
statically and through time.

 MMB Advisors
o Reliance on machine learning has become of paramount importance to the modern
day stock picker due to the fact that no human brain (that of a PM, an analyst or a
team of analysts covering a given universe of stocks), no matter how smart or
experienced, can efficiently process an ever increasing mass of data points /
information which have become widely available nowadays.
o Dr Marco Bianchi, founder of MMB Advisers, holds a PhD in statistics and
econometrics from the London School of Economics in 1994. With over 23 years’
experience working as a quant in the finance sector, from the beginning years as
quantitative analyst at the Bank of England, Marco has gained a wealth of
experience in the practical applications of many quantitative tools in finance, with a
focus on equities.
o The formidably useful (and practical) task of machine learning is to enable stock
pickers to identify most fundamental aspects and traits to rescue them from what
would otherwise be a strong risk situation of drowning in a vast sea of data points.
The efficiency of the work carried out by any analyst is dramatically improved by
the reliance on well designed, well implemented and easy to interpret machine
learning techniques.
o MMB Advisers provide an independent research platform of machine learning to
clients (mainly traditional long/short or long only equities PM or analysts) in the
 form of access to a proprietary website. The website contains all machine learning
techniques that have been considered useful in practical applications, to help users
analyse and evaluate the explanatory power of various fundamental variables for a
universe of approximately 6,000 companies worldwide.
o The independent research service is customised to meet the needs of each
individual clients, who are allowed to define their own universes of interest and
with baskets of tickers which can also be defined at the analyst level.
o The fundamental data is sourced from market leader data providers, and MMB’s
tailor made website allows each analyst to input and store their own data points.
o Strong emphasis on R&D where new tools are constantly added to the website once
they have passed all the necessary tests. In many cases, the addition of new tools
responds to the needs of specific ad-hoc requests by the clients.

Data Providers which use AI / ML as part of their process:

 Amass Insights - Offers a differentiated consultative service with the goal of uncovering a
constant stream of alpha-generating data. They have 198 total providers within AI /
Machine Learning categories. They also deploy machine learning techniques in data
sourcing, curation/mapping, and analytical engines.

 IntroAct (/ Blueshift Research) - AI-powered corporate access for IR executives that

matches corporates with the investors most likely to buy or sell their stock in the next 90
days.

 Prattle - Language processing and machine learning are working together to analyse
3,000+ US publicly traded companies.

 ProSapient - New Expert Network where machine learning methods help analysts provide
more appropriate experts more quickly and at better prices.