Majority of Large Firms Using AI in Taking Investment Decisions

As many as 77% of large firms are using artificial intelligence (AI) to help guide their investment decisions, a recent survey of 516 global business leaders has found, a report by fDi, a bi-monthly news and foreign direct investment publication, said.

Kearney’s latest Foreign Direct Investment (FDI) Confidence index, which was released on April 3, revealed the growing adoption of AI among large firms to help inform their FDI decisions, the report said.

The respondents, which represent companies with more than $500 million in annual revenues and are headquartered in 30 different countries, cite the top benefits as time and cost savings, improved investment returns and more accurate analysis of target markets. The AI use cases include stress-testing potential investments, predictive analytics to inform market outlook, and creating overviews of market trends.

Over the next three years, 64% of respondents expect to increase their use of AI when making investment decisions.

Investors Cautious

“However, they are exercising caution. ‘Investors are … mindful of the potential AI risks. They specifically cite concerns around cybersecurity, misinformation, bias and bad or incomplete data when using AI in making investment decisions,” said Erik Peterson, Kearney partner and the report’s co-author.

More than four-fifths say that AI policies and regulations will influence their strategies. And while the headline figures suggest adoption rates are high, today only one-third of respondents are using the technology ‘all or most of the time’ in investment decisions, the report said.

Increased use of AI underlies another key takeaway from Kearney’s report: firms’ prioritisation of operational and regulatory efficiencies across their FDI activities.

Respondents say technological and innovation capabilities is the top factor they look for when choosing an investment destination, up from second place last year. Meanwhile the efficiency of legal processes and capital movement climb to second and third place, respectively. 

The report also noted that the focus on regulatory frameworks follows an uptick in government intervention in FDI, including via tariffs and national security screening.

“Indeed, 31% of respondents expect a more restrictive business regulatory environment in developed markets over the coming year. The rise of industrial policies and trade restrictions could lead to a more heavy-handed regulatory environment across markets that investors will need to address,” the report quoting Peterson added.