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How To Invest In Artificial Intelligence

Purchase Artificial Intelligence Stocks and ETFs with Ally Invest

New Ally Invest customers can qualify for up to $3,500 in cash bonuses and $500 in free trades. Ally Invest also has some of the lowest trading costs and features dozens of commission-free ETFs.

The idea of a computer that thinks is terrifying to a lot of Americans, especially fans of movies like The Matrix and The Terminator. Yes, killer computers have wreaked havoc in our movies for decades now, but the real goal of artificial intelligence isn’t world domination. AI researchers want to use the technology to increase our efficiency in, well, everything! Sure, robots grab the headlines, but the real impact of AI is a little more mundane.

 

What is Artificial Intelligence?

Artificial intelligence is a series of programs and algorithms designed to imitate human thinking and remembering. Just like the human brain, AI systems learn, solve problems, and perform actions to advance certain predefined goals. Algorithms are built on top of algorithms, creating an increasingly complex operation of cognitive ability.

AI’s impact has been a mainstream discussion topic ever since HAL-9000 and Dave Bowman had their famous altercation in Stanley Kubrick’s masterpiece 2001: A Space Odyssey, but research actually goes back to the 1930s. Several researchers, including MIT’s Claude Shannon, posited that the electrical impulses passed on by neurons in the brain could be replicated in a machine. Alan Turing, who cracked the Nazi codes in World War II, wrote that machines could eventually be taught to think at a child level.

Today, AI research and development is one of the fastest growing industries in the world. Job growth for AI position has more than quadrupled since 2013 and venture capital funding has been copiously supplied.

More than 400 startups researching AI systems have been born in the last decade alone. For investors, these are all great signs of future growth. But AI investment will be inherent risky because so much is unknown. Here’s a few things to think about before investing.

Potential Hazards of AI

  • Job destruction due to automation: Computers that think will inevitably perform certain tasks better than humans, and won’t require compensation. If you’ve recently stepped foot into a Panera Bread, you know computers are already snatching up low-skill jobs.
  • Lack of common knowledge: AI skeptics claim that computers will struggle to think like humans because they don’t have common sense. The ability to process information from the surrounding environment and reason based on common knowledge base is still far below the capabilities of humans.
  • Exponential AI growth could limit human innovation: If we teach our computers to think and perform tasks for us, we might become dependent on them to do the work. Deceased British physicist Stephen Hawking warned that AI systems could grow exponentially and possibly supersede human beings if left unchecked.

For more on the dangers of AI research, watch this interview with Tesla founder Elon Musk:

How To Invest In AI

Despite the potential problems, AI could usher in a new age of technological revolution. With increased precision and accuracy, companies using AI can improve products and experiences without hiring a single employee. Routine tasks can be performed indefinitely and outcomes can be improved in healthcare, education, and safety.

The research isn’t there yet, but here are a few companies at the forefront working to get artificial intelligence more involved with our lives. If you want exposure to the industry, you’ll want shares of these stocks.

1. Google stock

AI research is incredibly important to Google and the company has put a lot of cash into multiple projects. Google AI is the new name of Google’s research branch, and the company has completely refocused from mobile technology to AI research as its core mission.

During a conference this year, Google showed off its new personal assistant, Google Duplex, a sophisticated AI capable of making appointments by telephone with perfectly mimicked human speech. Google is also in the driverless car race with Waymo, its subsidiary company that tests both automated ride-sharing vehicles and commercial trucks.

Google is one of the leaders in AI development and a strong bet for investors seeking AI exposure.

2. Nvidia stock

Few stocks have been hotter the last few years than Nvidia, the tiny chipmaker from Santa Clara. Nvidia produces some of the most powerful computer processors on the planet and was uniquely positioned to leverage its technology into AI research.

Its GRU-based deep learning branch has become a focus for analysts, and the company recently had an AI-based breakthrough in brain imaging through a partnership with the Mayo Clinic. Nvidia stock went down in the October correction, but the prospects for AI development are strong.

3. Microsoft stock

Like Hawking, Bill Gates has similar fears about AI, but that hasn’t prevented Microsoft from diving deep into artificial intelligence. Since Microsoft has been around for nearly 40 years, the company has a head start in most research areas. Microsoft Azure is its strongest AI platform, and it incorporates a wide variety of tools so data can be better collected and analyzed.

Microsoft’s focus is on machine learning and works to incorporate AI systems democratically so all people have equal access to the technology. New CEO Satya Nadella has reinvigorated the company and Microsoft investors have been rewarded over the last couple of years.

4. Artificial Intelligence ETFs

More AI-based ETFs are in the works, but right now the way to get diversified exposure to the technology is through these two:

  • Global X Robotics and Artificial Intelligence ETF (Stock ticker: BOTZ)
  • Nasdaq Artificial Intelligence and Robotics ETF (Stock ticker: ROBT)

Both of these ETFs attempt to invest in medium-sized firms working with AI technology. Expense ratios for both are about the same (a high 0.65%), but if you’re looking for diversified exposure to AI outside of the giants like Google and Microsoft, these ETFs are your best bet.

You can invest in AI ETFs and stocks with ease, but only if you have a great brokerage account. Check our some of Benzinga’s favorites below . Some feature free trading with new accounts and commission-free ETFs.

Broker Best For Commissions Account Minimum Choose your platform
Ally Investment
  • Active traders
  • Beginners looking to start trading
  • Low fees
  • Penny stocks
$4.95 volume discount available $0
Get started securely through Ally Investment's website
1 Minute Review

If investors are on the hunt for a bargain broker, Ally Invest could be the one. With low commissions across the board, Ally Invest (formerly TradeKing) stops potential investors in their tracks with its especially low mutual fund commissions. Commissions on stocks and ETFs are notoriously inexpensive as well, and for more active traders or those with larger account balances, commissions can dip as low as $3.95 per trade.

Pros
  • Volume discounts available
  • Among the lowest fees in industry
  • Good for every experience level
  • Excellent customer service
Cons
  • No commission free ETFs
  • Lacks physical locations
Current Promotion

$3.95 per stock trade for Active Traders at Ally Invest

eTrade
  • Mobile traders
  • Traders looking for research and data
  • Investors looking for retirement planning guidance
$6.95 for fewer than 30 trades/quarter. $0
Get started securely through eTrade's website
1 Minute Review

E-Trade is best known for its user-friendly browser, desktop and mobile trading platforms and its extensive research and educational information. E-Trade may not have the lowest commissions compared to discount online brokers, but customers certainly get their money’s worth from E-Trade’s comprehensive offerings.

Pros
  • Extensive resources
  • Full banking services
  • Easy-to-use platforms
Cons
  • Limited access to ETrade Pro
  • Higher commissions than discount brokers
Current Promotion

60 days of commission-free trades with deposit of $10,000 or more

TD Ameritrade
  • Beginner investors
  • Advanced traders
  • Investors who want portfolio-building advice.
$6.95 $0
Get started securely through TD Ameritrade's website
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Pros
  • Superior technology
  • No account minimum balance
  • Excellent customer support
  • Premier data and news partnerships
Cons
  • Slightly higher commissions
  • Can be for more advanced users
Current Promotion

Trade commission–free for 90 days & get up to $2500

6. Startups

Hundreds of new startups focusing on AI research have sprung up in the last few years. While shares of these companies aren’t publicly traded, you can still get exposure to them by using startup investment firms like SeedInvest, WeFunder, and 1000 Angels.

Companies like SapientX are doing tremendous research but can’t be purchased on stock exchanges. Learn more about investing in startups with Benzinga’s startup investment guide.

Final thoughts

Artificial intelligence will have a great impact on our future, but how it plays out remains to be seen. Imitating the human brain remains an exceedingly difficult task, and our governments will have a say in how quickly AI systems can be implemented. The future might be uncertain, but an investment in AI could be worth the risk.