What not long ago seemed like crazy science fiction movie scenarios are slowly but surely becoming reality. Artificial intelligence is increasingly penetrating our lives without us being too aware of it. The aim of this text is not to judge whether this is a good thing or a bad thing, or whether the future depicted in the Matrix tetralogy awaits us, but to show that the business of artificial intelligence is a remarkable investment opportunity.
Artificial Intelligence: article content
Self-driving cars, surgical robots, programs for autonomous text creation based on only a few user-supplied requirements, as well as home assistants like Alexa or Siri. All this and many other similar devices that can function without permanent human interaction can be included in one large set under the term “artificial intelligence” or AI – Artificial Intelligence.
Artificial intelligence can be understood as the ability of machines to mimic human abilities and skills such as reasoning, learning, planning or creativity. Artificial intelligence enables technical systems to respond to inputs from their environment, solve problems and achieve certain goals. An embedded computer receives data that has already been prepared or is collected by its own sensors and cameras, which it then evaluates and responds to. AI systems are able to work independently and also change and adapt their actions based on evaluating the effects of previous actions.
Why invest in AI-focused companies?
Although all this may sound scary, in reality it is nothing more than a kind of next level of technology that ultimately makes life much easier for humans. This is not a technology that has been developed by accident, but by companies whose aim is to monetise their new product.
This is the main reason why it makes sense to be interested in AI from an investor’s point of view. There are companies on the market that have developed a desirable product that has huge potential. In fact, it can replace human labour in a number of fields, moving the economy as a whole even further towards an economy based on knowledge and innovation, and ultimately significantly increasing the productivity of the factors of production. In business terms, this means opportunities for increasing profits. Today, we could hardly look for a more promising sector than one that focuses on the development of artificial intelligence.
Moreover, the current boom in artificial intelligence cannot be identified with the technology bubble that emerged in the markets around the turn of the millennium. In contrast, the use of artificial intelligence is conceivable for virtually everyone. And in many everyday situations. With a little exaggeration, one could say that the demand for artificial intelligence is guaranteed, and in almost unlimited ways.
Furthermore, it can be successfully assumed that companies from every sector of the national economy will be (if they are not already) interested in AI. There will be no sector where AI will not find a use. Be it industry, commerce, tourism, but also pharmaceuticals, healthcare or social services. Companies that shy away from AI are likely to meet a fate similar to that of the fiacre manufacturer at a time when Henry Ford was already introducing crawler production in his car factory.
TOP 5 stock companies specializing in artificial intelligence
But that doesn’t mean it doesn’t matter which AI company’s stock you invest in. As in any industry, it is necessary to carefully monitor which companies are just playing at developing AI and which can be considered serious and, moreover, promising. And, perhaps surprisingly, among them we find the “old standbys” despite the possible notion that a quality AI stock must mean a technology start-up that is just finding its place in the sun. Forbes magazine, as well as some other expert sites, considers the following as the top 5 AI-focused stocks:
Advanced Micro Devices (AMD)
Until recently, the relatively underrated semiconductor and chip maker finds itself on the list of companies to watch if you’re considering investing in AI stocks. AMD is building AI technology into its next-generation chips, which gives it particular appeal. In addition, AMD has posted great financial results over the past five years, which has also contributed to the rise in the market value of its stock. They are currently trading on the New York Stock Exchange at around $95, up about 800 percent from five years ago. Since the start of this year, AMD shares have firmed by nearly half, and many experts estimate that they haven’t said the last word this year.
The parent company of the tech giant Google is also not on the list of recommended AI stocks by chance. In addition to being an internet search engine, operator of a number of social networks, provider of cloud services, Google, or rather Alphabet, is one of the leaders in the field of artificial intelligence. And it has been since 2014 at the latest, when it took the British start-up DeepMind under its wing. Alphabet has literally transformed a number of AI fields, including computer vision, deep learning or image and speech recognition. There is also talk of supplying technology for autonomous vehicles. Alphabet’s stock has firmed more than 100 percent in the past five years. They have then appreciated about 17 percent since the beginning of this year and are trading around $105 apiece. Alphabet is one of the world’s most valuable companies.
Micron Technology is not exactly one of the best known companies. Still, investing in its stock is worth considering. Micron Technology is one of the leading suppliers of memory devices for computers and other similar devices, providing services related to the storage of large amounts of data, but also producing chips for computers, smartphones and the like. It creates data storage devices for companies in a variety of industries, including automotive and healthcare. Its perspective lies precisely in its ability to store and process huge amounts of data. It is on data that the capabilities of artificial intelligence depend. Micron Technology’s shares have only firmed about eight per cent in the past five years and trade at around $60. As recently as a year ago, it was nearly $100, and Micron Technology has become part of the overall sell-off in technology stocks. But that doesn’t diminish its potential.
Microsoft needs little introduction. It is one of the most successful companies ever created in the field of information and communication technologies. However, we have included it in our list mainly because of its recent multi-billion dollar investment in OpenAI.
Among other things, OpenAI is responsible for a well-known tool for generating texts on virtually any topic. This is ChatGPT, a software that, based on a few keyword inputs, can produce text that in many cases appears authentic. Sometimes too much so, and so the ability of readers to distinguish between text that is real – created by humans – and text that is instead backed by an extremely intelligent, but also artificial, text generator is slowly disappearing. Microsoft shares are currently trading slightly above $270. Over the past five years, their value has increased by almost 215 percent. Since the beginning of this year, Microsoft shares have gained just over 14 percent.
NVIDIA is a company that many of you will have associated with the development and production of computer graphics cards. That’s right. But that’s not all. NVIDIA also focuses specifically on the development of artificial intelligence, for example by supplying graphics chips and other software for self-driving vehicles. NVIDIA stock has appreciated about 350 percent over the past five years. Since the beginning of this year, the company’s stock has risen more than 80 percent in market price, trading at around $260.
How to invest in artificial intelligence
Probably the easiest way to invest in AI is to buy shares in specific AI-focused companies. If you choose this option, keep in mind that these are stocks. And stocks, as we know, are one of the riskiest assets ever. That’s why you need to keep up-to-date with what’s going on in the markets so that if the worst happens, you can get out of the stocks you’re invested in in time.
If you don’t want to follow the stock market, or the shares of specific companies, on a daily basis, there is the option of investing through funds that deal with the shares of companies focused on artificial intelligence. Such funds may have the advantage of some diversification of the stock portfolio, where the funds invest in a larger number of types of stocks. This does mitigate risk to some extent.
Last but not least, you can try investing in AI start-ups. However, this is a very risky investment because the start-up is a start-up and therefore an unestablished and unproven company. However, you can try your luck, but be extremely careful not to invest too much of your savings or leftover money from your salary in such companies.
Read also: How to invest in real estate
Investing in AI stocks – what to watch out for
As has been said several times, artificial intelligence represents a huge potential. And not just from an investor’s point of view, but from the economy as a whole. It is therefore to be expected that the shares of AI companies will probably tend to rise.
But beware, the principle of extreme caution applies here too, because not all gold glitters. Invest in stocks of companies that have at least some history behind them. It’s definitely not a mistake to buy shares in tech giants like Microsoft, Alphabet or AMD. After all, a cutting-edge technology company doesn’t always have to mean a new and small company.
When investing in stocks of AI-focused companies, one can follow the rules that are recognised for investing in stocks in general. That is, buying in gradually in several packages is always better than trying to estimate the share price at its low. Equally, you should think about what you expect from such an investment. Whether it is primarily to pay an interesting dividend or to increase the value of the share and then sell it at a profit. In any case, diversify, diversify and diversify again.