A shortfall in labour will drive the market for artificial intelligence technology to $US1 trillion by 2050, a Morgan Stanley analyst has calculated.

“By 2050, the US alone will likely face an 18-million worker shortfall,” says Scott Helfstein, senior market strategist at the investment bank.

“If the AI (or artificial intelligence) industry grows at a compound annual rate of 15.4 per cent — my current estimate — it could reach nearly $US1 trillion in revenues by 2050, based on automation replacing the projected shortfall of 18 million US workers.

“With Europe, Japan and China facing similar demographic deficits, that growth estimate is likely conservative.”

While the opportunity seems obvious, the emergence of intelligent machines (sometimes known as “the fourth industrial revolution”) is a confusing theme for investors.

There are no software makers with a general dominance in the technology and there is no “single dominant AI technology”, Morgan Stanley says.

That becomes clear for any Australian investors looking for AI stocks on the ASX.

(Scroll down for a table showing some of the ASX stocks offering exposure to AI).

A glance at our table below shows there is a wide variety of companies across many sectors that make claims on AI technology.

How to choose?

Morgan’s Scott Helfstein identifies three areas that potential AI investors should look for:

1. Upstream

Look for companies supplying “the raw material” for core AI technologies including hardware makers and cloud data centres. Also look for companies with big databases — and the know-how to cleverly slice and dice that data.

2. Core

These are software makers developing AI apps. There will be a wide variety of players across many industries.

Bigger companies with infrastructure such as cloud computing services may have an upperhand, but the potential uses for AI are so wide that “the market can likely accommodate a number of players”.

3. Downstream

These are the companies that make use of advances in AI to do business more efficiently.

“Companies that have high labour costs tied to simple repetitive tasks (think fast food) are probably the most obvious beneficiaries of AI,” Mr Helfstein says.

Industries with high customer-service demands could benefit from advances in natural language processing and machine learning improve. (Look to Google’s recent demonstration of an AI that can make phone calls.

Here is a selection of ASX small caps that offer exposure to AI:

ASX code Company Market Cap
4DS 4DS MEMORY 53.9M
ALC ALCIDION GROUP 32.2M
BID BIDENERGY 30.4M
BRC BRAIN RESOURCES 20.7M
BRN BRAINCHIP 145.4M
BTC BTC HEALTH 24.1M
CAJ CAPITOL HEALTH 233.7M
CGS COGSTATE 93.2M
CMP COMPUMEDICS 75.3M
CM8 CROWD MOBILE 16.1M
FGO FLAMINGO AI 55.6M
IPD IMPEDIMED 191.0M
LBT LBT INNOVATIONS 26.1M
LNU LINIUS TECHNOLOGY 73.0M
M7T MACH7 TECHNOLOGIES 31.0M
MDR MEDADVISOR 59.3M
MEB MEDIBIO 38.5M
ONE ONEVIEW HEAL 127.0M
OPN OPENDNA 6.2M
RAP RESAPP HEALTH 95.6M
RHT RESONANCE HEALTH 9.7M
SP3 SPECTUR 16.2M
UTR ULTRACHARGE 19.5M
VHT VOLPARA HEALTH 19.5M
WBT WEEBIT NANO 90.9M
WHK WHITEHAWK (floated Jan 22) 5.9M
YOJ YOJEE 111.3M