AI is an emerging sector that’s likely to experience plenty of volatility, so a risk-conscious approach may be smart. Before investing any of your hard-earned money, do your own research to ensure that you’re making thoughtful investment decisions. If choosing the stocks of individual companies isn’t appealing, then you can consider investing in a fund instead. Your typical options are exchange-traded funds (ETFs) and mutual funds (although as of 2024 a mutual fund dedicated exclusively to AI stocks doesn’t yet exist).
While we’ve never seen a technology like AI before, there’s an excellent chance it will be subject to a similar cycle. Artificial intelligence (AI) is changing the way we live — and the technology is still in its infancy.
Global X Robotics & Artificial Intelligence ETF
These funds might also make for more liquid investments, though I’d still recommend having a long-term investment outlook. Each fund has its own manager and team of analysts who evaluate startups full time. They’re likely to be more knowledgeable than you about the companies they’re investing in.
But the run-up has led many investors not yet holding Nvidia shares to ask whether they’ve missed out. Others worry about the firm facing increasing competition or stricter regulation here and abroad. Chip designer Broadcom (AVGO), a big player in cable set-top boxes and ethernet routers, has ramped up production of AI-related semiconductors. Chief executive Hock Tan told investors in June that AI revenue will likely hit $4 billion in fiscal 2023 (ending in October), making up about 11% of total annual revenue.
Is OpenAI Publicly Traded?
AI has strong long-term potential as it’s transforming industries and driving innovation across the economy. Leading companies in the space could see significant growth, but the sector is still evolving and comes with risks like rapid change and regulatory uncertainty. There are numerous factors to consider when picking AI stocks, from earnings forecasts to a company’s growth analysis. If you’re not a professional or skilled stock investor, conducting a full analysis of an AI-related company might be too time-consuming, not to mention risky. In these reports, professional researchers who understand the AI space share their thoughts on AI markets and stocks, helping you pick the right ones for your needs, risk tolerance, and investing goals. But in part because Broadcom’s profits are booming as well, the stock’s price-earnings ratio based on expected earnings was below the tech industry average of about 20.
Notable Companies Leading in AI Innovation
Investing in an ETF may be the most convenient way to gain AI exposure, but it can also be the most diluted. The group of companies held by a given ETF may focus only loosely on AI, so be sure to research the fund, paying special attention to its top holdings, before investing. And because fund holdings tend to shift over time, be sure to check in periodically to make sure your investments still fit your objectives and risk tolerance.
Always confirm important product information with the relevant provider and read the relevant disclosure documents and terms and conditions before making a decision. Depending on the price of the stock or ETF, investing in AI can be just a few dollars. Crowdfunding AI websites even allow you to invest in startups for as low as $5. With so many AI investing options, you’ll likely find one that fits your budget.
Once you’re ready to invest, make sure you fund your brokerage account. For example, you can easily link a bank account and transfer funds online. Remember to check your account balances for any uninvested cash, which you can use immediately for making new investments. Hiive is an investment platform that allows accredited investors to buy shares of private companies. While investing in individual stocks is riskier than buying an ETF (more on that in the next section), the potential return is also higher — if you can choose the right companies.
- Nvidia, a company long prized for its video game graphics cards, is at the heart of the AI revolution.
- To see more AI companies, check out our list of artificial intelligence stocks.
- Many AI-related stocks trade at more than 40 times next year’s expected earnings – about twice the level of the overall market.
- One way to get portfolio exposure to AI is by purchasing shares in large tech companies that are meaningfully engaged with the technology.
- As AI becomes more powerful and widespread, governments are beginning to explore regulations around its use.
For more investment options, see our list of artificial intelligence ETFs. The companies in this fund are responsible for creating the vast majority of chips being used for AI computing. ARKQ invests in companies focused on automation, robots, and related technologies. BOTZ invests in robotics and artificial intelligence companies across various sectors in the U.S. and international markets. To see more AI companies, check out our list of artificial intelligence stocks.
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AI start-ups have been proliferating, and many legacy enterprises are developing significant AI capabilities. Rowe Price’s Rizzo, who has made the company the fund’s third-largest holding. “Taiwan Semiconductor is the best-in-class semiconductor foundry,” he says, adding that AI will power significant growth for the company over the next 18 to 24 months. Morningstar analyst Phelix Lee agrees that the shares are attractively priced, trading about 30% below his estimate of their fair value. Synopsys (SNPS) is a Mountain View, Calif.–based company that provides software to help companies such as Nvidia design and produce AI chips. Synopsys gets a double benefit from AI, says Gary Mobley, an analyst at Wells Fargo Securities, because it makes money by selling software to AI designers and saves money by using AI to help write the software it sells.
Another, arguably more direct way (i.e., “pure play,” in industry lingo) to add AI exposure to your portfolio is by purchasing shares in publicly traded AI-focused companies. This investment strategy requires conducting research to identify stocks that interest you, but it may offer the most potential upside if you pick a winner. Since we’re likely still at the beginning of this AI revolution, investing in AI-related companies now can be a financially savvy play, especially with such high expected market growth in the coming decade. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products.
Investing in AI: A beginner’s guide
Countries around the world, such as the United States, China, United Kingdom, and India are investing significantly in AI, in a global race of technological adoption and optimization. Governments and large corporations are similarly investing heavily in AI research and infrastructure. This institutional support can accelerate development and adoption, creating a favorable environment for AI-focused businesses. AI is increasingly being integrated into various aspects of our daily lives, including smart assistants, self-driving cars, and personalized shopping. Before investing in AI, do plenty of research on the technology itself and thoroughly evaluate the risks of any investment you’re interested in. Businesses and investors poured billions of dollars into internet startups despite many of these companies not having any clear way to generate revenue.
By 2030, a new report from the consulting firm McKinsey predicts AI could increase global productivity by more than 3%, adding trillions to the world’s wealth. Whichever way you lean, never put all your eggs in one basket and consider consulting a financial advisor before making big investing decisions. These AI stocks soared last year, but a different bet could be on tech stocks with an AI focus. AI attempts to replicate human intelligence in a computer or machine with faster speed and greater accuracy. As systems become more intelligent, AI becomes more powerful, and its uses and applications may reach every stock sector and industry. Every new technology brings with it breathless excitement, scores of media coverage, and soaring stock prices.
While the idea of intelligent robots is still mostly science fiction, the financial risks tied to AI are very real. AI stocks can be grouped into a few main categories, depending on how the companies are involved with artificial intelligence. The initial revelation of generative AI occurred only two years ago, and that event marked the beginning of a long, gradual process of AI development and growth in the years to come. Straddling the line between established AI leaders and AI pure plays are software platforms such as Palantir (PLTR).
- If you qualify as an accredited investor and want to gain direct exposure to companies on the cutting edge of artificial intelligence, you should check out Hiive.
- Prices, returns and other data are as of June 30, unless otherwise noted.
- Investing in stock involves risks, including the loss of principal.
- “If you have a long-term investing time frame – five to 10 years – you shouldn’t worry about the run-up,” he says.
- Companies that leverage AI can potentially reduce overall operating costs, streamline operations, and drive innovation.
He expects AI-related sales to soar to as much as $7 billion in fiscal 2024. The firm is on pace to earn more than $42 a share in fiscal 2023, up 12% from the prior year and about 50% from fiscal 2021. The rapid pace of innovation in artificial intelligence (AI) has brought many experiences to reality that were previously only thought to be fiction. As this technology continues to reshape how we live and work, many investors want to know how to invest in AI. Similar to an ETF, investing in private companies via a fund also gives you broad diversification to a basket of companies, all in a single investment.