Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
How to invest in Artificial Intelligence
Karl
28th Nov 2023
Now that we have chatbots that can provide human-like responses, it’s fair to say that Artificial Intelligence (AI) is now very much ‘out in the open’.
Some are worried about the impact of the upcoming AI revolution on our everyday lives, but many supporters of the technology are keen to understand how to get in on the action.
In this article we’re going to explore three different ways to invest in AI, and highlight some risks to keep in mind. Keep reading for all the details or click on a link below to jump straight to a specific section…
How is Artificial Intelligence evolving?
Following the release of ChatGPT a year ago, Artificial intelligence has taken the world by storm.
If you’re one of the few people that hasn’t used it, ChatGPT is an AI chatbot that has the ability to formulate human-like responses to pretty much any question you ask it. While the information it serves up isn’t always 100% accurate, many of its responses are terrifyingly impressive.
ChatGPT has become so popular over the past year that it officially became the fastest-growing app in history in January 2023, after its daily users doubled in the space of a month.
Scared of missing out on the AI bandwagon Google launched its own ‘Bard‘ chatbot in March, though many say it isn’t quite as sophisticated as the latest version of Chat GPT – GPT 4.
Meanwhile, eccentric billionaire and owner of X, Elon Musk, revealed his own AI tool in early November 2023. The ‘Grok AI’ chatbot is expected to launch officially this week, though only to those who have a Premium X subscription.
It isn’t just chatbots either…
It’s worth knowing that AI technology doesn’t just refer to chatbots. OpenAI, the creators of ChatGPT, have also released ‘DALL·E2‘, a free-to-try AI image generator that can draw artwork from simple text instructions. Other AI image generators include Midjourney, Jasper Art, NightCafe to name a few.
While many AI generators are far from perfect, they do a good job of showcasing just how far AI has come over the past year or so.
If you were wondering, we had DALL·E2 create the below image for us following a prompt to ‘create an image for an article about investing in AI’. (We’ll let you be the judge of its creation!)
Besides text and image generators, there are other impressive AI technologies out there, including AI tools that have the ability to edit videos, turn text to speech, create social media campaigns, draft presentations, and even take notes at your next meeting!
How can you invest in Artificial Intelligence?
While a few big-name tech giants are concerned about the incoming arrival of super advanced AI, the robotic revolution is coming whether we like it or not.
So, if you’re interested in investing in AI, there are essentially three ways that you can go about it. Let’s take a closer look…
1. Buy shares in firms involved in AI.
Arguably the most obvious way to gain exposure to AI technology is to buy shares in companies directly involved in AI.
Here are five firms that already have a big slice of the AI pie:
- Microsoft (MSFT). In early 2023 Microsoft poured a whopping $10 billion into OpenAI, owner of ChatGPT. Clearly the company believes in AI technology, and has even gone as far as incorporating GPT4 into its ‘Bing’ search engine.
- Alphabet (GOOG). Alphabet, owner of Google, released its own AI chatbot known as ‘Bard.’ While many say it isn’t quite as sophisticated as Chat GPT, Bard did have the ability to search the live internet on launch – a feature that wasn’t available with GPT. Given AI has come such a long way over a short period of time, it’s fair to say that Alphabet will be investing big in AI over the coming years.
- IBM (IBM). IBM is one of the world’s largest IT companies. It’s currently in the midst of developing, ‘WatsonX’, which the company describes as ‘an enterprise-ready AI and data platform’ designed to multiply the impact of AI across businesses.
- NVIDIA (NVDA). NVIDIA is a huge player in the gaming industry thanks to its Graphics Processing Units. The company has since diversified into AI by launching its own platform – NVIDIA AI. The firm says this platform will being ‘cutting-edge advancements to every organisation’ and will provide AI platform software, AI models and services.
- C3ai.Inc (AI) C3ai.Inc offers a range of bespoke and off-the-shelf AI software solutions to businesses and already has a number of big-name clients.
Note: All of the above companies, aside from London-listed IBM, are listed on American stock exchanges. To learn more about buying shares stateside, take a look at our article that explains how to buy US shares in the UK.
2. Buy shares in firms involved in specific industries
The AI revolution has the potential to impact a huge number of sectors. While we can’t list them all here, some of the most obvious sectors set to benefit from the advent of AI include healthcare, science and research, and education.
When it comes to healthcare, for example, AI tools will be able to analyse vast amounts of medical data, which may be hugely beneficial in terms of offering diagnoses or personal treatment plans. For science and research, AI might help to accelerate discoveries thanks to an ability to analyse large datasets and make considered conclusions at speed. For education, it’s pretty easy to see how AI chatbots will be used to provide personalised instructions and support for students.
If you aren’t keen on investing in companies directly involved in AI, however, then you may be tempted to buy shares in companies involved in sectors that are likely to be the big winners from the incoming introduction of super robots. For example, buy shares in a firm operating in the healthcare sector and you might be quids in if AI tools help make massive improvements to the industry.
To learn more about investing in individual companies, take a look at our step-by-step guide on how to buy shares.
3. Buy an exchange-traded fund.
Exchange-traded funds, commonly known as ETFs, allow you to buy funds that trade on exchanges.
When you invest in an ETF, you can gain exposure to a wide range of firms without having to go ‘all in’ by backing a single company or two. This is one of the reasons why buying an ETF can be a good way to diversify your portfolio.
Some popular ETFs that focus on AI include:
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- Global X Robotics & Artificial Intelligence ETF
- AI Powered Equity ETF
- ARK Autonomous Technology & Robotics ETF
- ROBO Global Robotics and Automation Index ETF
- First Trust Nasdaq AI and Robotics ETF
To learn more, take a look at our article that highlights all you need to know about exchange-traded funds.
What are the risks of investing in new technologies?
Putting your wealth in new and evolving technologies, such as AI, can be an exciting way to invest – especially if you have a particular interest in the technology.
At this point, we should say that there’s actually nothing wrong with investing in something that you’re interested in. In fact, investing in an area of interest may give you a bit of added motivation to keep on top of your portfolio!
However, investing in new technologies, including AI, isn’t without risk. While you may feel that AI will almost certainty play a bigger part of our lives in future, don’t forget that ‘the market’ has already priced this in. This means that buying shares in firms that are heavily involved in AI may not necessarily leave you with a massive profit.
There’s also the risk of new entrants entering the AI space in the coming years which could leave you essentially backing the wrong horse.
For example, when social media was gaining traction from 2005, ‘MySpace’ may have seemed like a sure fire bet for investors at the time. It was the biggest social media platform around and seemingly everybody had an account. Fast-forward to the late 2000s, however, and the company was very quickly overshadowed by an unknown entrant called Facebook! This is a great example of how some companies simply don’t fulfil their potential, especially when it comes to new technologies.
Don’t forget about regulation…
Another big risk associated with investing in new technologies is regulation. For example, we’ve all seen how the price of various cryptocurrencies can be harmed when a country takes steps to ban, or announces tighter regulations on digital coins. These risks may also apply to AI.
Not long after its launch Chat GPT was banned in Italy. While Open AI has since resolved this issue, it’s possible other jurisdictions may wish to hamper the growth of AI technologies in future – especially when we consider the negative impact AI could have on employment.
That being said, if you want to invest in AI, then you aren’t necessarily making a bad decision. Just ensure you understand the risks, and don’t invest more than you can afford to lose. If you’re particularly risk averse, then it may be a wise idea to invest in AI as part of a diversified portfolio in order to minimise risk.
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Disclaimer: When it comes to any type of investing, be mindful that your capital is at risk. Remember, the value of any investment can both rise and fall. The companies listed above are not necessarily endorsed by Money Magpie. Always do your own research.
MoneyMagpie is not a licensed financial advisor. Information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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