As early believers and ‘AI maximalists’, we have long had high hopes for the technology; however, the speed and scale of initial adoption by companies across all sectors – and how quickly the benefits are feeding through to revenues – has exceeded even our expectations.

AI is no longer a future technology; a recent study found that only two years after OpenAI released ChatGPT, adoption of AI tools in the US is now 40%. AI technology has been adopted twice as quickly as the internet.

This has been a breakout year for AI investment, both from an infrastructure and an application perspective. For those yet to be convinced, who are unsure either about the technology’s transformative potential or its ability to deliver commercial returns after so much investment – the value of AI and the rationale for its accelerated buildout is continually being demonstrated by new data points which show this rapid corporate and consumer adoption.

Companies are generating meaningful revenues from the technology and delivering tangible value from its integration across their businesses. Importantly, AI is already contributing meaningfully to the earnings profiles of companies across many sectors – not just technology – and we are excited about the potential in 2025 for AI leaders to deliver truly differentiated earnings growth.

Forget defunding – de-stress the police

One of the most exciting benefits of AI that are we are already seeing is the realisation of productivity gains, most immediately and tangibly through greater output from an existing cost base. While industry commentators often cite the benefits of being freed from dull and repetitive tasks, specific examples of this opportunity have been less widely appreciated.

A good example is a recently released AI product called Draft One, developed by Axon in the US. The company, previously known as TASER International after its initial product line, produces equipment used by law enforcement agencies in particular. From Tasers, it diversified into cameras and now offers bodycams, dashcams and software.

Draft One is a multimodal AI tool, meaning it can interpret words, audio and video, that can automatically generate a police report from the footage captured by an officer’s bodycam. On returning to their station, Draft One will have already drafted the vast majority of an incident report, maybe even capturing information that would otherwise have been omitted. The officer is then simply required to complete and verify the report. From field trials in the US, the product has delivered an 82% reduction in the time taken to write reports.

This is game-changing. With US police officers spending an estimated 40% of their shifts writing reports, the potential for huge productivity improvements is obvious. Axon is charging just $85 a month for this tool, which we believe stands them in good stead to capture a significant portion of the >$12bn total addressable market for Draft One. In the three months after launch, the product had already generated a pipeline opportunity of over $100m.

Crucially, while there are clear cost and productivity benefits to the police department, perhaps a greater gain still could be a reduction in staff burnout and turnover. One of the leading reasons for resignations by police officers in the US is frustration with writing reports. This demonstrates why the AI opportunity is ultimately so exciting – it goes beyond simple cost savings or even productivity gains, and offers the ability to solve social problems in a way that technology has not yet been able to address.

Investing in AI

While the ultimate potential of AI is still emerging, examples such as Axon confirm our long-held view that the winners and losers will not be confined to the technology sector. The opportunity to invest in a diversified portfolio of winners across all sectors is a core proposition of the Polar Capital Artificial Intelligence Fund that we launched over seven years ago.

The aim was to bring our technology expertise to a global equity fund, understanding that AI disruption will bring technology-like dynamics to non-technology sectors. Identifying the winners and losers requires an active, dynamic approach that is built for a much faster pace of change than many sectors have seen before.

Opportunities will continue to exist in the technology sector, particularly for the ‘AI enablers’ that contribute to the development and infrastructure of AI. However, we believe that another opportunity – and the key differentiation of our Fund – lies in our focus on the largely non-technology ‘AI beneficiaries’ in the wider economy.

We believe these companies can benefit from faster revenue growth, higher margins or more resilient earnings outlooks – or, most likely, a combination of all three through their use of AI. Companies may be able to realise AI productivity gains in such a way that they can dramatically rearchitect their labour force and margin structures. They may unlock greater value from their proprietary data through AI or create AI-enabled products and revenue streams much like Axon has.

It is the breadth of the opportunity we are targeting that we believe sets us apart from other approaches that concentrate more on technology companies and the AI functionality itself. We are optimistic about the opportunity to build a portfolio of diversified winners into 2025 and beyond, and believe the ability to invest in the disruptive AI winners across the economy – as well as crucially avoiding the many companies that will be negatively impacted – will be key to delivering future investment returns.

Risks

  • Capital is at risk and there is no guarantee the Fund will achieve its objective. Investors should make sure their attitude towards risk is aligned with the risk profile of the Fund before investing.
  • Past performance is not a reliable guide to future performance. The value of investments may go down as well as up and you might get back less than you originally invested as there is no guarantee in place.
  • The value of a fund’s assets may be affected by uncertainties such as international political developments, market sentiment, economic conditions, changes in government policies, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of countries in which investment may be made. Please see the Fund’s Prospectus for details of all risks.
  • The Fund invests in the shares of companies and share prices can rise or fall due to several factors affecting global stock markets.
  • The Fund uses derivatives which carry the risk of reduced liquidity, substantial loss, and increased volatility in adverse market conditions, such as failure amongst market participants.
  • The Fund invests in assets denominated in currencies other than the Fund's base currency. Changes in exchange rates may have a negative impact on the Fund's investments. If the share class currency is different from the currency of the country in which you reside, exchange rate fluctuations may affect your returns when converted into your local currency.
  • The Fund invests in emerging markets where there is a greater risk of volatility due to political and economic uncertainties, restrictions on foreign investment, currency repatriation and currency fluctuations. Developing markets are typically less liquid which may result in large price movements to the Fund.


Important Information:
 This is a marketing communication and does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments. Any opinions expressed may change. This document does not contain information material to the investment objectives or financial needs of the recipient. This document is not advice on legal, taxation or investment matters. Tax treatment depends on personal circumstances. Investors must rely on their own examination of the Fund or seek advice. Investment may be restricted in other countries and as such, any individual who receives this document must make themselves aware of their respective jurisdiction and observe any restrictions.

A decision may be taken at any time to terminate the marketing of the Fund in any EEA Member State in which it is currently marketed. Shareholders in the affected EEA Member State will be given notification of any decision and provided the opportunity to redeem their interests in the Fund, free of any charges or deductions, for at least 30 working days from the date of the notification.

Investment in the Fund is an investment in the shares of the Fund and not in the underlying investments of the Fund. Further information about fund characteristics and any associated risks can be found in the Fund’s Key Investor Document or Key Investor Information Document (“KID” or “KIID”), the Prospectus (and relevant Fund Supplement), the Articles of Association and the Annual and Semi-Annual Reports. Please refer to these documents before making any final investment decisions.  Investment in the Fund concerns shares of the Fund and not in the underlying investments of the Fund. These documents are available free of charge at Polar Capital Funds plc, Georges Court, 54-62 Townsend Street, Dublin 2, Ireland, via email by contacting Investor-Relations@polarcapitalfunds.com or by visiting www.polarcapital.co.uk. The KID is available in the languages of all EEA member states in which the Fund is registered for sale; the Prospectus, Annual and Semi-Annual Reports and KIID are available in English.

The Fund promotes, among other characteristics, environmental or social characteristics and is classified as an Article 8 fund under the EU's Sustainable Finance Disclosure Regulation (SFDR). For more information, please see the Prospectus and relevant Fund Supplement.

ESG and sustainability characteristics are further detailed on the investment manager’s website: (https://www.polarcapital.co.uk/ESG-and-Sustainability/Responsible-Investing/)

A summary of investor rights associated with investment in the Fund is available online at the above website, or by contacting the above email address. A link to the document can be found here.

This document is provided and approved by both Polar Capital LLP and Polar Capital (Europe) SAS.

Polar Capital LLP is authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom, and the Securities and Exchange Commission (“SEC”) in the United States. Polar Capital LLP’s registered address is 16 Palace Street, London, SW1E 5JD, United Kingdom.

Polar Capital (Europe) SAS is authorised and regulated by the Autorité des marchés financiers (AMF) in France. Polar Capital (Europe) SAS’s registered address is 18 Rue de Londres, Paris 75009, France.

Polar Capital LLP is a registered Investment Advisor with the SEC. Polar Capital LLP is the investment manager and promoter of Polar Capital Funds plc – an open-ended investment company with variable capital and with segregated liability between its sub-funds – incorporated in Ireland, authorised by the Central Bank of Ireland and recognised by the FCA. Bridge Fund Management Limited acts as management company and is regulated by the Central Bank of Ireland. Registered Address: Percy Exchange, 8/34 Percy Place, Dublin 4, Ireland

Benchmark: The Fund is actively managed and uses the MSCI ACWI Net TR Index as a performance target and to calculate the performance fee. The benchmark has been chosen as it is generally considered to be representative of the investment universe in which the Fund invests. The performance of the Fund is likely to differ from the performance of the benchmark as the holdings, weightings and asset allocation will be different. Investors should carefully consider these differences when making comparisons. Further information about the benchmark can be found https://www.msci. com/acwi. The benchmark is provided by an administrator on the European Securities and Markets Authority (ESMA) register of benchmarks which includes details of all authorised, registered, recognised and endorsed EU and third country benchmark administrators together with their national competent authorities.

Third-party Data: Some information contained herein has been obtained from third party sources and has not been independently verified by Polar Capital. Neither Polar Capital nor any other party involved in or related to compiling, computing or creating the data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any data contained herein.

Country Specific Disclaimers: When considering an investment into the Fund, you should make yourself aware of the relevant financial, legal and tax implications. Neither Polar Capital LLP nor Polar Capital Funds plc shall be liable for, and accept no liability for, the use or misuse of this document.

None

As early believers and ‘AI maximalists’, we have long had high hopes for the technology; however, the speed and scale of initial adoption by companies across all sectors – and how quickly the benefits are feeding through to revenues – has exceeded even our expectations.

AI is no longer a future technology; a recent study found that only two years after OpenAI released ChatGPT, adoption of AI tools in the US is now 40%. AI technology has been adopted twice as quickly as the internet.

This has been a breakout year for AI investment, both from an infrastructure and an application perspective. For those yet to be convinced, who are unsure either about the technology’s transformative potential or its ability to deliver commercial returns after so much investment – the value of AI and the rationale for its accelerated buildout is continually being demonstrated by new data points which show this rapid corporate and consumer adoption.

Companies are generating meaningful revenues from the technology and delivering tangible value from its integration across their businesses. Importantly, AI is already contributing meaningfully to the earnings profiles of companies across many sectors – not just technology – and we are excited about the potential in 2025 for AI leaders to deliver truly differentiated earnings growth.

Forget defunding – de-stress the police

One of the most exciting benefits of AI that are we are already seeing is the realisation of productivity gains, most immediately and tangibly through greater output from an existing cost base. While industry commentators often cite the benefits of being freed from dull and repetitive tasks, specific examples of this opportunity have been less widely appreciated.

A good example is a recently released AI product called Draft One, developed by Axon in the US. The company, previously known as TASER International after its initial product line, produces equipment used by law enforcement agencies in particular. From Tasers, it diversified into cameras and now offers bodycams, dashcams and software.

Draft One is a multimodal AI tool, meaning it can interpret words, audio and video, that can automatically generate a police report from the footage captured by an officer’s bodycam. On returning to their station, Draft One will have already drafted the vast majority of an incident report, maybe even capturing information that would otherwise have been omitted. The officer is then simply required to complete and verify the report. From field trials in the US, the product has delivered an 82% reduction in the time taken to write reports.

This is game-changing. With US police officers spending an estimated 40% of their shifts writing reports, the potential for huge productivity improvements is obvious. Axon is charging just $85 a month for this tool, which we believe stands them in good stead to capture a significant portion of the >$12bn total addressable market for Draft One. In the three months after launch, the product had already generated a pipeline opportunity of over $100m.

Crucially, while there are clear cost and productivity benefits to the police department, perhaps a greater gain still could be a reduction in staff burnout and turnover. One of the leading reasons for resignations by police officers in the US is frustration with writing reports. This demonstrates why the AI opportunity is ultimately so exciting – it goes beyond simple cost savings or even productivity gains, and offers the ability to solve social problems in a way that technology has not yet been able to address.

Investing in AI

While the ultimate potential of AI is still emerging, examples such as Axon confirm our long-held view that the winners and losers will not be confined to the technology sector. The opportunity to invest in a diversified portfolio of winners across all sectors is a core proposition of the Polar Capital Artificial Intelligence Fund that we launched over seven years ago.

The aim was to bring our technology expertise to a global equity fund, understanding that AI disruption will bring technology-like dynamics to non-technology sectors. Identifying the winners and losers requires an active, dynamic approach that is built for a much faster pace of change than many sectors have seen before.

Opportunities will continue to exist in the technology sector, particularly for the ‘AI enablers’ that contribute to the development and infrastructure of AI. However, we believe that another opportunity – and the key differentiation of our Fund – lies in our focus on the largely non-technology ‘AI beneficiaries’ in the wider economy.

We believe these companies can benefit from faster revenue growth, higher margins or more resilient earnings outlooks – or, most likely, a combination of all three through their use of AI. Companies may be able to realise AI productivity gains in such a way that they can dramatically rearchitect their labour force and margin structures. They may unlock greater value from their proprietary data through AI or create AI-enabled products and revenue streams much like Axon has.

It is the breadth of the opportunity we are targeting that we believe sets us apart from other approaches that concentrate more on technology companies and the AI functionality itself. We are optimistic about the opportunity to build a portfolio of diversified winners into 2025 and beyond, and believe the ability to invest in the disruptive AI winners across the economy – as well as crucially avoiding the many companies that will be negatively impacted – will be key to delivering future investment returns.

Related Fund

Risks

  • Capital is at risk and there is no guarantee the Fund will achieve its objective. Investors should make sure their attitude towards risk is aligned with the risk profile of the Fund before investing.
  • Past performance is not a reliable guide to future performance. The value of investments may go down as well as up and you might get back less than you originally invested as there is no guarantee in place.
  • The value of a fund’s assets may be affected by uncertainties such as international political developments, market sentiment, economic conditions, changes in government policies, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and regulations of countries in which investment may be made. Please see the Fund’s Prospectus for details of all risks.
  • The Fund invests in the shares of companies and share prices can rise or fall due to several factors affecting global stock markets.
  • The Fund uses derivatives which carry the risk of reduced liquidity, substantial loss, and increased volatility in adverse market conditions, such as failure amongst market participants.
  • The Fund invests in assets denominated in currencies other than the Fund's base currency. Changes in exchange rates may have a negative impact on the Fund's investments. If the share class currency is different from the currency of the country in which you reside, exchange rate fluctuations may affect your returns when converted into your local currency.
  • The Fund invests in emerging markets where there is a greater risk of volatility due to political and economic uncertainties, restrictions on foreign investment, currency repatriation and currency fluctuations. Developing markets are typically less liquid which may result in large price movements to the Fund.


Important Information:
 This is a marketing communication and does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments. Any opinions expressed may change. This document does not contain information material to the investment objectives or financial needs of the recipient. This document is not advice on legal, taxation or investment matters. Tax treatment depends on personal circumstances. Investors must rely on their own examination of the Fund or seek advice. Investment may be restricted in other countries and as such, any individual who receives this document must make themselves aware of their respective jurisdiction and observe any restrictions.

A decision may be taken at any time to terminate the marketing of the Fund in any EEA Member State in which it is currently marketed. Shareholders in the affected EEA Member State will be given notification of any decision and provided the opportunity to redeem their interests in the Fund, free of any charges or deductions, for at least 30 working days from the date of the notification.

Investment in the Fund is an investment in the shares of the Fund and not in the underlying investments of the Fund. Further information about fund characteristics and any associated risks can be found in the Fund’s Key Investor Document or Key Investor Information Document (“KID” or “KIID”), the Prospectus (and relevant Fund Supplement), the Articles of Association and the Annual and Semi-Annual Reports. Please refer to these documents before making any final investment decisions.  Investment in the Fund concerns shares of the Fund and not in the underlying investments of the Fund. These documents are available free of charge at Polar Capital Funds plc, Georges Court, 54-62 Townsend Street, Dublin 2, Ireland, via email by contacting Investor-Relations@polarcapitalfunds.com or by visiting www.polarcapital.co.uk. The KID is available in the languages of all EEA member states in which the Fund is registered for sale; the Prospectus, Annual and Semi-Annual Reports and KIID are available in English.

The Fund promotes, among other characteristics, environmental or social characteristics and is classified as an Article 8 fund under the EU's Sustainable Finance Disclosure Regulation (SFDR). For more information, please see the Prospectus and relevant Fund Supplement.

ESG and sustainability characteristics are further detailed on the investment manager’s website: (https://www.polarcapital.co.uk/ESG-and-Sustainability/Responsible-Investing/)

A summary of investor rights associated with investment in the Fund is available online at the above website, or by contacting the above email address. A link to the document can be found here.

This document is provided and approved by both Polar Capital LLP and Polar Capital (Europe) SAS.

Polar Capital LLP is authorised and regulated by the Financial Conduct Authority (“FCA”) in the United Kingdom, and the Securities and Exchange Commission (“SEC”) in the United States. Polar Capital LLP’s registered address is 16 Palace Street, London, SW1E 5JD, United Kingdom.

Polar Capital (Europe) SAS is authorised and regulated by the Autorité des marchés financiers (AMF) in France. Polar Capital (Europe) SAS’s registered address is 18 Rue de Londres, Paris 75009, France.

Polar Capital LLP is a registered Investment Advisor with the SEC. Polar Capital LLP is the investment manager and promoter of Polar Capital Funds plc – an open-ended investment company with variable capital and with segregated liability between its sub-funds – incorporated in Ireland, authorised by the Central Bank of Ireland and recognised by the FCA. Bridge Fund Management Limited acts as management company and is regulated by the Central Bank of Ireland. Registered Address: Percy Exchange, 8/34 Percy Place, Dublin 4, Ireland

Benchmark: The Fund is actively managed and uses the MSCI ACWI Net TR Index as a performance target and to calculate the performance fee. The benchmark has been chosen as it is generally considered to be representative of the investment universe in which the Fund invests. The performance of the Fund is likely to differ from the performance of the benchmark as the holdings, weightings and asset allocation will be different. Investors should carefully consider these differences when making comparisons. Further information about the benchmark can be found https://www.msci. com/acwi. The benchmark is provided by an administrator on the European Securities and Markets Authority (ESMA) register of benchmarks which includes details of all authorised, registered, recognised and endorsed EU and third country benchmark administrators together with their national competent authorities.

Third-party Data: Some information contained herein has been obtained from third party sources and has not been independently verified by Polar Capital. Neither Polar Capital nor any other party involved in or related to compiling, computing or creating the data makes any express or implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any data contained herein.

Country Specific Disclaimers: When considering an investment into the Fund, you should make yourself aware of the relevant financial, legal and tax implications. Neither Polar Capital LLP nor Polar Capital Funds plc shall be liable for, and accept no liability for, the use or misuse of this document.