Artificial Intelligence (AI) is no longer just a futuristic concept; it’s a driving force behind significant advancements across industries. From healthcare to finance, automotive to retail, AI is transforming businesses’ operations, making it an attractive investment opportunity. If you want to capitalize on this revolutionary technology, here’s a beginner’s guide to investing in AI.
Why Invest in AI?
Before diving into investment strategies, it’s essential to understand why AI is such a compelling investment opportunity:
- Massive Growth Potential: The global AI market is expected to soar, projected to reach $2.74 trillion by 2032, up from just $515.31 billion in 20231. This rapid growth indicates a strong trajectory for the industry, with ample opportunities for investors to profit.
- Diverse Applications: AI’s influence spans a wide array of sectors, from pharmaceuticals and education to logistics and entertainment. As AI technology evolves, its ability to innovate across these varied industries will create numerous investment opportunities, allowing for growth in unexpected areas.
- Efficiency Gains: Companies that effectively leverage AI can significantly improve their efficiency, which often translates into higher profits. By automating routine tasks, enhancing decision-making processes, and enabling new product innovations, AI has the potential to boost the bottom line for businesses.
How to Invest in AI
Investing in AI can be approached in several ways, depending on your risk tolerance and investment goals. Here are some popular strategies:
AI-Focused Stocks – One of the most straightforward ways to invest in AI is by purchasing stocks of companies that are heavily involved in AI development and implementation. Some of the top players in this space include:
Nvidia: Known for its leadership in AI chips and graphics processing units (GPUs), Nvidia is at the forefront of AI technology. Its powerful parallel processing chips form the foundation of AI as they’ve revolutionized computing.
Microsoft, Amazon, & Google: These providers of cloud-based computing are the largest purchasers of Nvidia’s chips. Most of the world will access AI applications via the cloud, and these companies not only enable global reach, but they’re also integrating AI-based tools and functionality into the platforms.
Snowflake, Elastic, and Teradata: These companies sit downstream from the hardware and cloud providers. They are building powerful AI-based applications that help manage, manipulate, and analyze data. We believe that these solutions will be the next wave to benefit from the AI trade.
UnitedHealthcare, Meta, CrowdStrike: Companies with vast data sets and a strong commitment to AI-driven innovation should reap some of the largest benefits overtime. These organizations are already seeing efficiency gains, but the real value of AI will likely manifest in new business opportunities and revenue streams overtime. As AI technology continues to advance, companies like these, with a robust data foundation and strategic AI investments, are set to unlock even greater potential. And they are not alone – many other companies are also positioned to capitalize on this transformative technology.
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AI-Focused ETFs & Strategies
For those looking for a more diversified approach, AI-themed ETFs offer exposure to a portfolio of AI-related companies. Here are some of the more popular ETFs based on Assets Under Management (AUM):
- Global X Robotics & Artificial Intelligence ETF (BOTZ)
- Global Robotics & Automation Index ETF (ROBO)
- iShares Robotics & Artificial Intelligence ETF (IRBO)
- First Trust Nasdaq AI & Robotics ETF (ROBT)
Partners and clients of Carson Group enjoy exclusive access to our proprietary AI Leaders solution. This SMA invests in US-based companies because our research suggests the US enjoys structural technology advantages over the rest of the world. It is also an equally weighted fund, rather than market cap weighted, so investors can capture the value that we think will accrue to the companies downstream of the hardware and cloud providers.
Risks and Considerations
While AI investing presents exciting opportunities, it’s crucial to be mindful of potential risks, including high volatility, as AI stocks can experience significant price fluctuations compared to other sectors. The industry also faces regulatory challenges due to scrutiny over data privacy, security, and ethical concerns, which could lead to potential hurdles. Additionally, the rapid pace of technological advancements introduces uncertainty, as not all AI investments may succeed in the ever-evolving landscape.
Final Thoughts
Investing in AI can be a rewarding venture, but it requires careful consideration and thorough research. Whether you choose to invest in established tech giants, diversified ETFs, or emerging startups, it’s crucial to align your investment strategy with your financial goals and risk tolerance. As with any investment, consulting with a financial advisor is a wise step before making significant decisions. With the right approach, you can position yourself to benefit from the ongoing AI revolution and be part of this transformative journey.
1 https://www.wallstreetzen.com/blog/how-to-invest-in-ai/
For more content by Jake Bleicher, Portfolio Manager click here.
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The opinions stated in this article should not be construed as direct or indirect advice, or as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
