Alger On the Money

The New Moore’s Law

Moore’s Law states that the speed and ability of computers doubles every two years as the number of transistors on a microchip increases. It has been the driving force of the global digital revolution. Now a different version of Moore’s Law is set to usher in even larger, more powerful changes in technology and living standards.

Exponential Growth in the Training of Artificial Intelligence Programs

PetaFLOP/s-Day (Training) RETURN 10,000 High Dividend Yield 6% Underperforms AlphaGo Zero 1,000 AlphaZero 5% 100 Neural Machine Translation Neural Architecture Search 4% 10 T17 Dota 1v1 Xception Russell 1 3% 3000 Growth VGG High Dividend Yield DeepSpeech2 Outperforms .1 Seq2Seq ResNets 2% GoogleNet .01 AlexNet Visualizing and Understanding Conv Nets Dropout 1% .001 0% .0001 DQN .00001 -1% 2013 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 Year Source: https://openai.com/blog/ai-and-compute/ Source: FactSet and Northfield Information Systems. Data is based on the 3000 stock universe of Alger’s U.S. risk model. Note: A petaFLOPS is a unit of computing speed equal to one quadrillion FLOPS, floating operations per second, a measure of computer performance. The dividend factor expresses the portion of stock price movement attributed to dividend exposure.

• The amount of “training” a computer program undergoes drives advances in artificial intelli- gence (AI). This training can be thought of as computing usage (compute for short) needed to practice and improve a program’s skill. AI is the ability of computer systems to perform tasks that normally require human intelligence and perception. • The chart above shows how much “training” various AI programs required over time. More available compute led to added training and better programs. Incredibly the speed of training is doubling every three to five months, faster than Moore’s Law. If sustained this greater speed is likely to lead to incredible breakthroughs in the field of AI. For example, AI recently tackled the field of radiology and proved it could analyze images better than 80% of the experts, according to Google Director of Engineering Ray Kurzweil. • Companies that are at the forefront of AI services, such as the major cloud platforms or leaders in the hardware that drives the cloud technology forward, may enjoy a very bright future.

Inspired by Change, Driven by Growth. The views expressed are the views of Fred Alger Management, Inc. as of June 2019. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares. Risk Disclosure: Investing in the stock market involves gains and losses and may not be suitable for all investors. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Many technology companies have limited operating histories and prices of these companies’ securities have historically been more volatile than other securities, especially over the short term. Technology companies may also face increased competition, government regulation, and risk of obsolescence due to progress in technological developments.

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