Overview
Analyst Survey 2025: New regimes (full report).
Will 2025 be the year AI takes over the world? The word from our analysts is: don’t get too excited. At least, not yet.
Our annual survey shows a small drop in the proportion of Fidelity International analysts who expect AI will have a positive impact on their companies’ profitability in the year ahead compared to this time 12 months ago. A large majority (72 per cent) expect AI to have no impact this year.
Chart 1: A stagnant buzz
What impact, if any, do you expect AI will have on your companies’ profitability over the next 12 months?
Chart shows percentage of analysts responding to the question. Source: Fidelity International, January 2025.
“AI remains more of a buzz word than a profit driver at the moment,” says Evan Delaney, a telecoms, media, and technology fixed income analyst focusing on North America. Yet he does expect AI will have a moderately positive impact on his companies’ profitability this year, thanks largely to an automation of call centres and other customer service activity using the technology.
Back-office activities and customer service functions dominate the examples Fidelity’s analysts give of how the companies they talk to are currently using AI.
Chart 2: How are companies using AI?
Which parts of your companies are seeing material benefits from the use of AI?
Chart shows percentage of responses to the question. NB Analysts could choose more than one option. Source: Fidelity International, January 2025.
“My payroll companies are all talking about adding AI chat bots and replacing HR employees with it,” says Nathan Ha, a commercial and professional services equity analyst. “This won’t be a gamechanger though as I think any edge will be competed away.”
While most analysts say at least some of their companies are seeing productivity benefits from AI, by far the most common response is that this applies to only a minority of the companies they cover.
Chart 3: AI is beginning to make an impact, but it’s small
What share of your companies are seeing productivity benefits from AI?
Chart shows percentage of analysts responding to the question. Source: Fidelity International, January 2025.
“Automation is already widely used on assembly lines but there’s little application of AI,” says Alan Zhou, a fixed income analyst covering the Asian automotive sector. “AI may be useful at the R&D stage to speed up product development but so far that does not seem to be the case.”
This focus on automation hints at the pivot to robotics some tech companies are making as AI starts to mature. Reggie Pan, a China-focused analyst who covers the industrial sector, cites automation as the main use case for AI among his companies.
Andrew Hall, an equity analyst who covers North American grocers and convenience stores, says his companies are using AI mostly to optimise promotions and price setting. But, he adds, there’s little evidence of a material change in effectiveness.
Another consumer staples analyst, Louis Lee, says that the Asean companies he covers have little use for AI because of the region’s low labour costs. Sam Heithersay, who covers Australian metals and mining firms, says some of them are using AI to improve mine productivity and electricity grid use, but it’s still in its infancy.
Interestingly, more analysts expect their companies will spend more on AI this year than expect them to materially increase their use of the technology. One interpretation is that software vendors are bundling unloved AI features into existing products and then using the extra features to justify a price hike. The cliché about picks and shovels comes to mind, when many gold rush prospectors came away empty handed no matter how impressive their newly bought tools might have been. Perhaps the most successful AI use case so far is channelling money into the coffers of tech companies.
Chart 4: AI costs expected to outpace usage
Do you expect your companies to materially increase their use of/spend on AI over the next 12 months?
Chart shows percentage of analysts responding to the questions “Do you expect your companies to materially increase their use of AI over the next 12 months?” and “Do you expect your companies to increase their spend on AI over the next 12 months?” Source: Fidelity International, January 2025.
Another interpretation for expected spending outstripping use in 2025 is research and development. Unsurprisingly, it’s IT, financials, and communication services companies that are making the biggest AI bets as things stand.
Indeed, we manage a team here at Fidelity that is working on several AI solutions to improve the speed and quality of insight generation, such as using the technology to build simpler models, to generate assessments of companies ahead of doing fundamental research, and to help analyse company results. The aim is both to complement our own work with ideas from the public arena, and more importantly to make the most of our time with companies, their customers, and their competitors.
Chart 5: Tech, financials, and others making big bets on AI
Do you expect your companies to materially increase their use of/spend on AI over the next 12 months?
Chart shows percentage of analysts responding to the questions “Do you expect your companies to materially increase their use of AI over the next 12 months?” and “Do you expect your companies to increase their spend on AI over the next 12 months?” Source: Fidelity International, January 2025.
Investors will need to be patient for AI’s impact
A lot more analysts expect AI will have a positive impact on companies’ profitability over a five- year horizon compared to their more neutral expectations for the next 12 months.
As for how the technology will be used, the biggest potential over the next five years appears to be in the healthcare and financial sectors, via use cases like medical imaging, streamlining drug development and sales processes, originating loans, credit scoring, software improvements, and those ubiquitous back office and call centre applications.
Chart 6: Give it time
What impact, if any, do you expect AI will have on your companies’ profitability over the next five years?
Chart shows percentage of analysts responding to the question. Source: Fidelity International, January 2025.
In the meantime, investors waiting to see big breakthroughs in AI adoption and killer use cases will need to wait. The question is, will they have the patience?
Tech tailwinds
The AI hype has been one of the big drivers of the surge in technology shares over the past 12 months and a failure of the sector’s next big thing to live up to its vaunted promises would weaken the case for further gains. For now, however, there seems to be juice left in the tech orange.
“Tech has had a strong year and at this stage I don’t see a strong valuation de-rating catalyst,” says Clare Coleman, an equity analyst who covers software and internet companies across Asia Pacific outside of China and Japan. “However, maintaining current earnings momentum and delivering on consensus expectations will be pivotal. The sector is expensive as a whole but there are still companies with such strong structural growth that they will outpace more modest market growth and the risk-reward is still fair.”
Investors will need to be especially selective when deploying money into those sectors showing most promise for AI longer term given the divergence in valuations.
Chart 7: Divergent valuations
Looking at valuations as we head into 2025, would you say the disparity in valuations among your companies is high, medium, or low?
Chart shows percentage of analysts responding “High” to the question. Source: Fidelity International, January 2025.
Overall, more than a quarter of analysts (28 per cent) say there is a high disparity in valuations among their companies right now. Healthcare and tech have the highest proportion of analysts who see a wide divergence in valuations.
“There’s very high disparity between high and low-quality names,” says Matthew Bowles, an information technology sector equity analyst with a focus on the EU. “It’s still difficult for small caps, as most end markets are weak or still correcting after Covid.”
Keep in mind too our analysts’ view that there are many factors that will impact firms’ profitability this year, and that AI does not look set to be the dominant one yet.
