Why investors should follow AI and esports

Both the use of artificial intelligence (AI) in daily life and the growing popularity of formerly fringe activities like esports are areas for technology investors to watch, says Jonathan Mzengeza, global technology analyst at CIBC Asset Management.

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From Shopify to Tesla, many companies are making use of AI to serve customers. Meanwhile, esports have exploded into a mainstream event for spectators that now rivals traditional sports and entertainment behemoths.

Mzengeza is watching companies in the AI and esports space for the CIBC Global Technology Fund. In a July 20 interview, he said he likes chip design and manufacturing companies like Nvidia and Micron, and he’s also paying more attention to companies that apply AI and machine learning for their consumer products, such as Google, Microsoft and Amazon.

“We see growth from the application of AI and machine learning in the real world,” he said.

One example is Shopify, which uses Google’s cloud and machine learning capabilities to make their own product better by “improv[ing] merchant outcomes on their platform,” Mzengeza said. That company also uses AI and machine learning to supply working capital loans to merchants, he added.

“We think that this is a big area of focus for technology going forward,” he said.

Read: Finding value in the cloud

Esports have arrived

Esports, where professional video gamers compete in front of spectators and online, saw revenues of $1.5 billion last year, Mzengeza said, with an audience that’s grown from 204 million in 2014 to 335 million in 2017.

That compares to NBA and NFL audiences of around 400 million, which have been “roughly flat and could be declining in the NFL’s case,” he said. “We believe that, over time, more and more people will start to watch video games and esports competitively.”

The esports audience is largely in the 12-to-34 year old range, providing advertisers valuable access to the younger demographic. By 2020, Mzengeza expects revenues to be $2.3 billion.

The CIBC fund owns Activision Blizzard, which was the first to create a competitive league for its first-person shooter, multiplayer game Overwatch, he said. That league signed broadcasting deals with ESPN, Disney and Amazon-owned Twitch, and the first season had an average Twitch audience of 130,000. The sold-out final was held in Brooklyn’s Barclay Centre, Mzengeza said.

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This article is part of the AdvisorToGo program, powered by CIBC. It was written without input from the sponsor.