Artificial intelligence (AI) Stocks
Artificial Intelligence Stocks
The past several months the technology industry has been positively buzzing about the new AI chatbot ChatGPT and how its set to disrupt many industries and change how people do work. Why spend hours writing code, articles, cover letters, or doing mundane tasks when a simple AI chatbot can do your work for you? The benefits to work, productivity, and automation are massive, but on a personal level, most people could probably find some benefit to streamlining certain tasks they do on a normal basis, like organizing trips, vacations, schedules, writing speeches or presentations, and organizing information for hobbies or events. AI technology goes beyond language-based chat bots, as AI generated art, faces, digital images, and autonomous vehicle software has already been adopted in various applications.
For a moment, let’s put aside the horrifying consequences of living in a world where AI can construct images of fake people, converse like a human, and distort reality in a way to blur the boundaries of what is real. Is there money to be made when investing in artificial intelligence?
Artificial intelligence (AI) Companies
I considering artificial intelligence to be a piece of the “investing in innovation” category, where new technology in robotics, automation, AI, fintech, telehealth and other areas are poised to create entire new sectors of financial growth in the coming years. The good news is that many of the largest core companies of the S&P 500 (Microsoft, Google, and Amazon) are the best positioned to benefit from the expansion of artificial intelligence. So just by owning large U.S. indexes your portfolio is exposed to this technology sector. Microsoft has invested billions in ChatGPT creator OpenAI, and Google recently announced its plans to integrate its AI called Bard into its search algorithm. Amazon uses AI in many applications including product recommendations, consumer demand predictions, optimizing delivery routes, and tracking supply chains. So, the first level of AI investing is to maintain the status quo and have exposure to major U.S. indexes.
The next level of AI investing is to more specifically target the artificial intelligence sector using ETF’s. For example, the Global X Robotics and Artificial Intelligence ETF (BOTZ) invests in companies expected to benefit from increased adoption and use of robotics and AI, including those involved with industrial automation, non-industrial robots and autonomous vehicles. Similar funds include ROBO, IRBO, and ARKW. These funds don’t just invest in companies involved with software development, but also focus on companies using AI in robotics, automation in processes and manufacturing, machine learning, or semiconductors. These funds are very broad within the innovation sector, but still focus more on AI and automation than just owning the S&P 500 or a NASDAQ index.
Within public equities, the final level of investing in artificial intelligence is owning smaller companies that are extremely focused on the AI space. This has a much higher degree of risk because picking the “winners” from the “losers’ in an area of emerging technology is extremely difficult. My preference would generally be to invest in the sector. It’s often the case that private contracts with major tech companies or governments are what propels or destroys smaller companies, and much of that information is hidden from public investors until its too late. However, if you scrutinize the financial situation of these companies, it might be possible to pick a winner. As a starting point, here is the top 20 holdings of the BOTZ ETF:
NVDA: NVIDIA CORP
6861 JP: KEYENCE CORP
ABBN SW: ABB LTD-REG
ISRG: INTUITIVE SURGICAL INC
6954 JP: FANUC CORP
6273 JP: SMC CORP
6645 JP: OMRON CORP
6506 JP: YASKAWA ELECTRIC CORP
DT: DYNATRACE INC
CGNX: COGNEX CORP
AUTO NO: AUTOSTORE HOLDINGS LTD
PATH: UIPATH INC - CLASS A
6383 JP: DAIFUKU CO LTD
TECN SW: TECAN GROUP AG-REG
MAXR CN: MAXAR TECHNOLOGIES INC
ATS CN: ATS CORP
RSW LN: RENISHAW PLC
JBT: JOHN BEAN TECH
PEGA: PEGASYSTEMS INC
CGCBV FH: CARGOTEC OYJ-B SHARE
AI: C3.AI INC-A
The final option for investing in companies using artificial intelligence is through venture capital or private equity. These are early stage private companies whose investment opportunities are only available to accredited investors (high net worth). This is the highest level of risk as none of these companies are large enough to be publicly traded, but the potential reward is high if you’re willing to lose money along the way. According to Pitchbook, investment in generative AI has shown a 425% increase from 2020 to 2022, even with the market difficulties caused by rising interest rates. Generative AI in particular has been a popular investment because it allows software to generate new content from previous text, images, and video. This has had widespread adoption in a variety of social networking apps.
ChatGPT’s Version of this Article
Finally, I would like to leave you with ChatGPT’s version of this article. I asked it to write an article using the prompt below, and this is what it generated. As you can see, it’s technically well-written and organized, though it’s lacking in both “voice” and personality and is extremely vague on details. But it’s obvious to see the future potential when a simple language model can generate this in 10 seconds.
Prompt:
Please write a short article on investment opportunities in artificial intelligence including stocks, ETF’s, private equity and automation. Be sure to discuss the risks and rewards of investing in AI.
Investing in Artificial Intelligence (AI) can be a lucrative opportunity, but it's important to understand the risks and rewards associated with it. In this article, we'll take a look at the different investment opportunities in AI and the potential benefits and drawbacks of each.
Stocks: Investing in publicly traded companies that are involved in AI research, development, and implementation is one of the most popular options. Some of the big names in the industry include Alphabet Inc (Google), Amazon, Facebook, and Microsoft. These companies are at the forefront of AI development and are likely to continue investing in the technology, making them a solid choice for investors.
ETFs: Another option for investors is to invest in exchange-traded funds (ETFs) that focus on AI and related technologies. These ETFs give investors exposure to a broad range of companies involved in AI, including both large tech giants and smaller startups. Some popular AI ETFs include the Global X Robotics & Artificial Intelligence ETF (BOTZ) and the ARK Next Generation Internet ETF (ARKW).
Private Equity: For those looking for a more hands-on approach, investing in private equity funds focused on AI can be a good option. Private equity funds invest in startups and early-stage companies that are working on AI technology. This type of investment often requires a significant upfront investment, but it can also offer the potential for high returns if the companies are successful.
Automation: Finally, investing in automation companies is another way to benefit from the growth of AI. Automation companies are developing technologies that enable businesses to automate many of their processes, increasing efficiency and reducing costs. Examples of such companies include ABB, Siemens, and Rockwell Automation.
Investing in AI can be a great opportunity, but it's important to understand that it also comes with risks. One of the main risks is the volatility of the stock market, which can lead to significant fluctuations in the value of an investment. Additionally, there's also the risk of investing in companies or technologies that may not be successful, leading to losses.
In conclusion, investing in AI has the potential to generate high returns, but it's important to carefully consider the risks and rewards before making any investment decisions. As with any investment, it's important to do your research, seek professional advice, and diversify your portfolio to minimize your risk.