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Investing in Digital Assistants: The Next Big Thing in Consumer Tech

Written by Jason Stutman
Posted May 7, 2017

Late last year, Amazon, Google, IBM, and Microsoft put aside their differences to strike a groundbreaking partnership in the emerging field of artificial intelligence.

The full name of the technology consortium is definitely a mouthful: the “Partnership on Artificial Intelligence to Benefit People and Society.” We can refer to it the Partnership on AI for short.

Though it's gone largely unnoticed by the mainstream media, the Partnership on AI is a compelling indicator as to where the technology industry is heading. Its stated purpose is to “establish best practices on AI technologies, to advance the public’s understanding of AI, and to serve as an open platform for discussion and engagement about AI and its influences on people and society.”

Of course, the motives of these multibillion-dollar corporations aren't entirely philanthropic as they might have you believe. The AI market is on the verge of explosive growth, with annual revenue projections as high as $36 billion within less than a decade.

No doubt, there's a lot of money to be made here, not just for them, but for regular people like you, too.

This is why Apple, which is notorious for flying solo, swallowed its pride and joined the Partnership on AI in January. It's why Elon Musk is partnering with some of Silicon Valley’s most powerful companies to get an ambitious new AI startup off the ground... and why Chinese technology giant Huawei just handed a couple of lab rats at Berkeley $1 million.

It's also why Amazon continues heavily marketing and expanding its Echo line, powered by its digital assistant Alexa. It's why Microsoft is integrating Cortana, why Apple is improving on Siri, why Samsung is rolling out Bixby, and why Facebook is developing out its own messaging AI.

I could probably go on for pages, but you get the idea. The fact is there is literally no other field of research being pursued by every major tech firm like artificial intelligence is.

Already, computers use AI to beat the world's greatest chess masters, recognize faces, and understand and translate language. AI can drive vehicles with no human interference, compose music, and even diagnose disease better than today's doctors. Heck, IBM's Watson is already schooling doctors in accurately diagnosing cancer.

In a word, the difference between man and machine is becoming increasingly blurred. The gap between what we humans can do and what AI can't is undeniably shrinking, which ultimately raises the question of where we'll all fit in once it's closed for good.

Of course, the day AI becomes as capable as your average human might seem like a long way from today, but it's never too early to begin considering the investment implications of such disruptive innovation.

While you certainly won't be waking up tomorrow to a world run almost entirely by machines, the very groundwork for that day is being laid this very moment.

Digital Assistants: The Dawn of Advanced AI

Today, AI is stepping into the realm of better understanding context and relaying that information directly to users without them having to visit the source. This is already happening on the consumer scale in the form of digital assistants.

You can ask a modern AI, for instance, what the hours are at a nearby restaurant, and it will respond with an answer. Rather than just looking for keywords and providing a link, modern AI is already capable of understanding language and answering you directly — at least to some extent.

As AI continues to advance even further, so will the ability of personal assistants to communicate with their users on a deeper level. Modern AI is essentially call and response, but in the future it will be increasingly conversational and also user-specific.

For example, rather than Siri simply telling you when a restaurant is open, her successors are going to follow up by engaging in increasingly deeper dialogue. That might involve asking if you want her to make reservations for you, or if you're open to trying out a similar restaurant nearby. It might mean taking your previous buying habits, or even conversations, into account and recommending a specific menu item based on that information...

Of course, much of these specific functions are based on speculation. Exactly what future AIs will do and how they will work from a programmatic standpoint is still unclear. What we do know, at least, is that AIs will become increasingly indistinguishable from humans in how they communicate.

In the not-so-distant future, you will likely be chatting with an AI as though it were an actual person — possibly on a daily basis. At the very least, the conversations you and I have with machines will feel far more natural than they do today.

The Ears of Tomorrow's Intelligent Machines

The problem, though, is that modern electronics — at least the kind we carry around in our pockets — aren't especially good at hearing and understanding what we say. They do not understand tone, and they do not differentiate well between your voice and the sounds around you, either.

If you've ever tried to use voice-to-text features in a noisy bar or restaurant, you know exactly what I'm talking about.

This is, in part, a software issue, but it's also largely because the microphones in most consumer technology haven’t kept pace with the advances in other components such as cameras. They still aren’t great at focusing on faraway voices or filtering out background noise, and they often require too much power to be listening at all times.

As Bloomberg, BGR, and Digital Trends, among others, have all recently gone on record saying the current state of microphone technology is holding back personal assistants like Siri and Alexa.

Investing in Tomorrow's AI Today

The takeaway for investors here is that current hardware limits what conversational AI can and cannot do, which opens up incredible demand for a handful of obscure component companies.

From a growth standpoint, these firms are arguably more compelling AI investments than any of the tech blue chips of today. Taking an early stake in companies like Qualcomm (NASDAQ: QCOM) and Intel (NASDAQ: INTC) would be the historical equivalent.

According to IHS Technology, sales of MEMs mics will nearly double by 2019 as voice recognition technology becomes increasingly crucial to consumer electronics. Not only are OEMS adopting more advanced mics, but they're putting more mics in each device.

Today we're already seeing the trend of microphone arrays take hold. Apple has led the charge adding multiple mics in its iPhones (one rear-top, one front-top, and one bottom), and you can certainly expect that other OEMs will follow suit.

But the real bull case comes not just from smartphones requiring better hearing capabilities, but also from personal assistant devices at home and elsewhere. Amazon's Echo speaker (arguably the most prolific home digital assistant on the market), for instance, uses a microphone array of seven (yes, seven) microphones.

The takeway here is that looking out at a not-too-disant future, voice is poised to become a dominant interface. Orwellian fears aside, microphones will soon begin to pop up everywhere.

Until next time,

  JS Sig

Jason Stutman

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