The global market for artificial intelligence (AI) is forecast to grow massively, and could reach around $126 billion this year. It seems the AI revolution is here to stay. So it’s a good time for investors to get some exposure to this burgeoning market.
This article will detail how to invest in AI stocks, as well as ETFs and mutual funds.
Quick Answer
Some of the best AI companies you can invest in are Alphabet, AristaNetworks, IBM, Microsoft, Nvidia and Palantir Technologies.
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The AI landscape
How to invest in AI: Stocks, ETFs and Mutual Funds
How to invest in AI stocks in the UK
Some AI stocks to invest in
AI company Fundamentals
How to invest in AI ETFs in the UK
Examples of AI ETFs
Benefits and risks of investing in AI
FAQs
The AI Landscape
The rapid development of AI presents a very exciting opportunity for investors. This new technology has rapidly seen widespread adoption across various industries, and it has become an integral part of our daily lives. It impacts many sectors, including finance, healthcare and transportation.
AI has experienced significant advancements, with companies producing new versions of the software as improvements in machine learning, natural language processing and computer vision are introduced.
Governments are also recognizing the strategic importance of AI, and investments and grants are being made available to AI researchers. This increases competitiveness in the field worldwide.
The continuous innovation of AI products, and its versatility as new uses are found for the technology, make AI stocks a compelling investment. For those seeking high-growth opportunities, this ever-evolving technology offers substantial financial gains.
How To Invest In AI: Stocks, ETFs and Mutual Funds
There are several ways to approach an investment in AI, including stocks, ETFs (exchange-traded funds) and mutual funds. There are pros and cons for each method.
Stocks
You can invest directly in the stocks of individual companies that are involved in AI technology. By choosing your own stocks, you can focus on specific companies that you believe have strong growth potential.
However, you need to take the time to do your research to decide which stocks to invest in. In addition, investing in individual stocks carries higher risk than diversifying your investment options.
ETFs
An ETF (exchange-traded fund) is a basket of stocks that provides a more diversified approach to investing. The funds pool the money from investors to make the purchases of individual stocks. ETFs often focus on stocks in a particular sector – in this case, the AI sector. The funds are managed by a professional fund manager.
If you invest in an ETF you gain exposure to multiple companies involved in AI technology, which reduces the risk associated with buying individual stocks. You also don’t need to spend time doing research and selecting the stocks yourself.
ETFs are traded throughout the day, just like stocks.
Mutual Funds
Mutual funds are similar to ETFs, in that they offer a diversified approach to investing in a particular sector, and are managed by a professional fund manager. However, they are priced at the end of the trading day; no matter what time of day you place an order, you’ll get the same price as everyone else who bought and sold on that day, based on the closing prices of the stocks in the fund.
Mutual funds may have higher fees than ETFs, and there may be a higher minimum purchase.
How To Invest In AI Stocks In The UK
Here are the steps you should follow to invest in AI stocks in the UK.
- Choose an Online Broker: If you do not already have an account with a broker you will need to decide which company to use. Select a reputable online brokerage platform that has a user-friendly interface, competitive trading fees and reliable customer support.
- Open an Investment Account: You will need to provide your personal details, documents to verify your identity, and your bank account details.
- Fund Your Account: You can transfer money into your brokerage account by bank transfer, debit card or electronic payment services.
- Research AI Companies: Identify AI-focused companies – not just companies producing AI software but those in adjacent fields such as chip makers, robotics and data analytics. Consider the financial performance of the companies, their competitive advantages and growth prospects. Look at any relevant news or developments that affect the field.
- Purchase Your Stocks: Use your broker to buy stocks in the AI companies you wish to invest in.
- Monitor Your Investments: Once you have the AI stocks in your portfolio, you need to keep a close eye on their performance and keep informed about market trends and company news, so that you can make any necessary adjustments.
Some AI Stocks To Invest In
Several companies in the AI sector stand out as having growth potential. Here are some suggestions:
- Alphabet Inc. (NASDAQ:GOOGL): The parent company of Google, which has a strong presence in the AI sector. The company’s AI-driven technologies and platforms, such as Google Cloud AI and Google Assistant, as well as the introduction of AI to its search engine, make Google a leader in AI-powered innovation.
- AristaNetworks (NYSE:ANET): Provides switches and routers used by next generation data centres. With tech giants rolling out AI data centres on a global scale, demand for their products should continue to grow.
- IBM (NYSE:IBM): Has a long history of research and development in the AI field and is a significant player in the AI software market. Its AI platform, Watson, offers advanced AI capabilities to companies in many industries, such as finance, healthcare and cybersecurity.
- Microsoft (NASDAQ:MSFT): Is a major player in the AI market. It has acquired OpenAI and its natural language chatbot, ChatGPT, and is positioned as a frontrunner in generate AI.
- NVIDIA Corporation (NASDAQ:NVDA): Specialises in graphics processing units (GPUs) which are widely used in AI applications for training and inference. The company is a key player in the AI hardware market.
- Palantir Technologies (NASDAQ:PLTR): Software company specialising in data analytics and AI. Its products were initially used by the US government in counter terrorism, but now it provides its services to local governments and private corporations.
AI Company Fundamentals
| Company | Market cap (USD) | Share price (USD) |
| Alphabet (NASDAQ:GOOGL)  | 2.01 trillion | 164.51 |
| AristaNetworks (NYSE:ANET)  | 104.04 billion | 82.50 |
| IBM (NYSE:IBM)  | 223.89 billion | 241.45 |
| Microsoft Corp (NASDAQ:MSFT)  | 2.87 trillion | 385.45 |
| Nvidia (NASDAQ:NVDA)  | 2.9 trillion | 117.40 |
| Palantir Technologies (NASDAQ:PLTR)  | 202.76 billion | 86.45 |
How To Invest In AI ETFs In The UK
Here are the steps you should follow to invest in AI ETFs in the UK.
- Choose an Online Broker: If you do not already have an account with a broker you will need to decide which company to use. Select a reputable online brokerage platform that offers access to UK ETFs, and that has a user-friendly interface, competitive trading fees and reliable customer support.
- Open an Investment Account: You will need to provide your personal details, documents to verify your identity, and your bank account details.
- Fund Your Account: You can transfer money into your brokerage account by bank transfer, debit card or electronic payment services.
- Research AI ETFs: Identify AI-focused ETFs available in the UK market, that specifically target the AI or technology sector. Consider factors such as the ETF’s investment strategy, underlying holdings, expense ratio and performance history.
- Purchase Your ETFs: Use your broker to buy the AI ETFs you wish to invest in.
- Monitor Your Investments: Once you have the AI ETFs in your portfolio, you need to keep a close eye on their performance and keep informed about market trends and company news, so that you can make any adjustments needed.
Examples of AI ETFs
Here are some of the AI ETFs that you could add to your portfolio:
- Robo Global Healthcare Technology and Innovation ETF (AMEX:HTEC): Focuses on the use of technology and AI in the healthcare field. It invests in companies that leverage advanced technologies, such as AI, robotics and cloud computing, to drive innovation in the healthcare sector. HTEC offers a targeted approach to investing in AI within the healthcare industry.
- Global X Robotics and Artificial Intelligence ETF (BIT:BOTZ): Targets companies involved in the development and utilisation of robotics and AI technologies. It invests in companies worldwide across various sectors, including industrial and artificial intelligence, automation and healthcare, providing broad exposure to the AI and robotics theme.
- ARK Innovation ETF (AMEX:ARKK): An actively managed ETF that invests in disruptive innovation across various sectors, including AI, genomics and robotics. It has an emphasis on innovation, and seeks exposure to companies at the forefront of technological advancements, including AI-related firms.
- Global X Artificial Intelligence and Technology ETF (NASDAQ:AIQ): Invests in companies with a potential to benefit from the development and utilisation of AI technology in their products and services, and companies that provide hardware used in AI.
Benefits And Risks Of Investing In AI
Like all investments, there are both pros and cons to investing in companies that deal in AI. Here are some of the things to consider:
Benefits of Investing in AI Technology
- Growth Potential: AI technology has the potential for significant growth across various industries. Advancements in AI algorithms, machine learning and data analytics create opportunities for efficiency gains, cost reduction, and innovation.
- Disruptive Innovation: AI technology has the power to disrupt traditional industries, unlocking new business models and revenue streams. Investing in AI allows investors to participate in transformative advancements and potentially benefit from the disruption caused by AI adoption.
- Enhanced Productivity & Efficiency: AI applications can streamline operations, automate tasks and improve decision-making processes. Companies leveraging AI effectively can gain a competitive edge, leading to increased productivity and profitability.
- Expanded Market Reach: AI technology enables companies to personalise offerings, improve customer experiences and target new markets. Investing in AI companies that successfully leverage these capabilities can drive revenue growth and market expansion.
- Sector Diversification: Adding AI technology to an investment portfolio can provide diversification, as the sector operates independently of traditional industries. This diversification can help mitigate risk and potentially enhance overall portfolio performance.
Risks of Investing in AI Technology
- Volatility & Uncertainty: The AI industry is rapidly evolving, leading to potential volatility and uncertainty. New technologies and market disruptions can impact the performance of AI companies, making it essential to carefully assess risk tolerance and investment horizon.
- Regulatory & Ethical Challenges: AI technologies often raise concerns about data security, privacy and ethical considerations. Regulatory changes or public backlash against certain AI applications can impact the performance and reputation of AI companies.
- Competitive Landscape: The AI sector is highly competitive, with numerous companies vying for market share. Investing in the wrong company or failing to keep up with technological advancements can result in underperformance or loss of market relevance.
- Technological Limitations: AI technologies are subject to technical limitations and potential failures. Investing in companies heavily dependent on unproven or immature technologies may carry higher risks.
FAQs
1. Is investing in AI stocks risky?
AI stocks can carry risks due to factors such as technological advancements, market volatility and regulatory challengers. You will need to research the field thoroughly before investing in AI stocks, and consider your risk tolerance.
2. Are AI stocks a good investment?
AI stocks can be a promising investment, because they have potential for growth. AI promises to have an impact across various industries. However, you need to assess the risks associated with specific investments – do your research.
3. How many organisations use AI in the UK?
Approximately one in six organisations in the UK have adopted AI in some form or another, and the number is increasing all the time. According to government research, large companies are leading the way, with 67% implementing AI, 34% of medium companies and 15% of small companies.
The information provided in this article is for informational purposes only and should not be construed as financial, investment, or professional advice. The views expressed are those of the author and do not necessarily reflect the opinions or recommendations of any organizations or individuals mentioned. Always consult with a qualified financial advisor or other professionals before making any financial decisions. The author and publisher are not responsible for any actions taken based on the content provided.