Artificial intelligence expands our possibilities by increasing efficiency, providing better product recommendations, and making information more accessible. This technology is still in its early stages, but it became a mainstream investment opportunity in 2023. Many companies give investors exposure to this compelling technology. Corporations are spending billions of dollars on AI tools and solutions. This guide will explore how investors can benefit from the surging demand for artificial intelligence.
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. 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. AI investment will be inherently risky because so much is unknown. Here are a few things to think about before investing.
How To Invest In AI
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. Alphabet Stock
AI research is incredibly important to Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and the company has put a lot of cash into multiple projects. The company has several AI resources such as Google Duplex, a sophisticated AI capable of making appointments by telephone with perfectly mimicked human speech. Alphabet is also in the driverless car race with Waymo, its subsidiary company that tests both automated ride-sharing vehicles and commercial trucks. Alphabet 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 in the last few years than Nvidia (NASDAQ:NVDA), the trillion-dollar chipmaker from Santa Clara. Nvidia produces some of the most powerful computer processors on the planet and is uniquely positioned to leverage its technology into AI research. Its GPU-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
Since Microsoft (NASDAQ:MSFT) 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. 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. These are two of the options:
- Global X Robotics and Artificial Intelligence ETF (NASDAQ:BOTZ)
- Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ: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 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 out some of Benzinga's favorites below. Some feature free trading with new accounts and commission-free ETFs.
5. Chip Producers
Nvidia is one of the largest chip producers in the industry. However, investors can also gain exposure to artificial intelligence through other chip makers. The rising demand for AI solutions will keep chip makers busy.
6. Data Centers
Artificial intelligence tools rely on data centers to operate. Data center companies like Supermicro (NASDAQ:SMCI) have critical servers that are required for AI tools to run smoothly. Rising demand for artificial intelligence will translate into more demand for data centers.
7. Startups
Potential Hazards of AI
Artificial intelligence presents many opportunities, but it is important to assess the risks. These are some details to keep in mind as the world ventures deeper into artificial intelligence.
- 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 a 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.
Getting into the AI Boom
Artificial intelligence will have a great impact on our future, and investors can profit from the industry through various assets. Artificial intelligence is here to stay. The technology is increasing efficiency and effectiveness. Companies are using the technology to break revenue records and reward shareholders in the process. Getting into the AI boom now can help long-term investors achieve their financial goals. It is important to assess your risk tolerance and objectives before investing in artificial intelligence stocks.
Want to learn more about trading and investing? Check out Benzinga's guides to the best artificial intelligence stocks, the best online brokerages and free stock trading.
Frequently Asked Questions
Can you make money investing in AI?
Investors can generate significant long-term returns through AI investments. However, these assets carry risk.
Is it worth investing in AI?
Artificial intelligence is changing how companies operate. Many consumers use AI-powered websites and services. It can be a promising opportunity for many investors but requires a higher risk tolerance than other sectors.
Can I buy OpenAI stock?
OpenAI is currently a private company. You cannot buy shares of the company, but you can invest in corporations that have exposure to OpenAI. For instance, Microsoft has invested over $13 billion into OpenAI.
About Dan Schmidt
Dan Schmidt is a finance writer passionate about helping readers understand how assets and markets work. He has over six years of writing experience, focused on stocks. His work has been published by Vanguard, Capital One, PenFed Credit Union, MarketBeat, and Fora Financial. Dan lives in Bucks County, PA with his wife and enjoys summers at Citizens Bank Park cheering on the Phillies.