You have almost certainly never heard of RC365 (RCGH). The payments business joined London’s Main Market in March 2022, raising £2 million at 6.2p per share for a £6.7 million market cap. Fifteen months on, the share price has surged more than 2,000% to 154p. The stock is up more than 600% since the start of June this year.

Why? Because last month it jumped into the AI (artificial intelligence) space, unveiling plans to develop AI-based wealth management tools alongside partner Hatcher Group.

That is the power of AI to sell a story these days, a powerful growth theme on which investors appear happy to back the promise of profits down the line. In the six months to 30 September 2022 RC365 ran up net losses of nearly HK$3 million (£300,000) on HK$7.9 million revenue (£790,000).

BIG TECH STEALING THE HEADLINES

Many of the world’s largest technology companies have grabbed investors’ attention with AI in recent months; chip designer Nvidia (NVDA:NASDAQ), Meta Platforms (META:NASDAQ) and Tesla (TSLA:NASDAQ) – all seen as key AI plays – have posted triple-digit gains in 2023, while Advanced Micro Devices (AMD:NASDAQ), Salesforce (CRM:NYSE) and Amazon (AMZN:NASDAQ) are up more than 50%.

Steven Tredget, partner at Oakley Capital Investments (OCI), believes the hype is justified, telling Shares that AI will be ‘as big as the internet, smartphones and cloud computing’.

The UK and European markets have missed the AI surge; the FTSE 100 performance league is led by a tourism play – Carnival (CCL) – while a conglomerate tops the Euro Stoxx 50 – Philips (PHIA:AMS).

Investors may be missing a trick. There is nothing hotter right now than generative AI ‘chatbots’ capable of producing content, including text, images and audio, but Tredget sees a far wider range of applications coming that will mean almost no part of the global economy stays untouched by AI.

The global market for artificial intelligence is expected to experience compound annual growth of 52% by 2025. In the UK alone, AI is predicted to provide up to £630 billion in gross value added to the economy, a UK Research & Innovation study predicted.

‘There are many flavours of AI, both bespoke and off the shelf applications,’ says Tredget, but his areas of interest revolve around technology, consumers and education.

‘Education is super interesting,’ he says, explaining his view that the way we teach people today is flawed, sticking students in a room and dolling out information with an evaluation later to see how much they have remembered. He has seen first-hand through private equity investee company IU Group how AI teaching aids can inspire more curiosity in students, creating a ‘Socratean’ debating culture built around an individual’s ‘best way of learning’.

UK’S OWN AI OPPORTUNITIES

Tredget admits that, as an investor in privately-owned businesses today, he has fallen out of the loop when it comes listed opportunities. Shares’ own research drew our attention to three companies that we believe are high-quality, profitable business with a clear AI story of their own; FTSE 250 technical skills supplier FDM (FDM), big data analytics platform FD Technologies (FDP:AIM) and RWS (RWS:AIM), which operates a localisation and cultural reference platform, making content fit different markets and national regulations, a company that Tredget remembers well from his time spent in listed equity markets. ‘RWS was one of my favourite companies back in the day,’ he says.

‘Linguistic Validation and eLearning have continued to build well and our data services proposition, TrainAI, was well received when launched in February, with some encouraging client wins in the early part of the second half,’ said Ian El-Mokadem, chief executive of RWS in June.

The company believes that AI will revolutionise the way we create, manage, translate and make sense of content, in any language, from linguistic AI technologies that are customisable, scalable and secure, to reliable data labelling and real-time data insights.

AI solutions will give adopters a competitive edge in the digital world, the company says, and it claims longstanding AI capability and expertise in relation to localisation, language and technology and development, with a pioneering machine translation solution (Language Weaver), a full data services proposition (TrainAI) and deployment of AI-functionality in its Tridion and Trados products, all of which make RWS a significant beneficiary of developments in AI.

FD Technologies, or First Derivatives as it was once called, operates in the world of digital transformation, and owns the powerful KX platform that provides software to accelerate AI-driven innovation.

IT contracting firm FDM’s Mounties model is all about filling the technical skills gaps as companies adapt to the digital age. Its technical IT consultants are drawn from university graduates, people returning to work and, importantly, ex-forces personnel, where officers with great people and technical skills are looking for a new career. All are trained for free by FDM in return for at least two years of full-time service.

Technical expertise has typically centred on business analysis, IT testing, project management, data and business analysis, and product support. Yet recent years have seen its consultants pushed through steep training curves in new technologies, cloud applications, IT security, robotic process automation and… artificial intelligence.

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