Artificial intelligence has been decades in the making, it is a technology that was deemed inconceivable for centuries, and today, it is real and transforming our everyday life.
The AI revolution is still in its early days, yet, it has created an over $200 billion market in 2023, a market that is expected to grow 10x by 2030 reaching over $2 trillion in market size.
Where there is growth there is opportunity and AI being the next big thing is primed for an explosive growth over the next couple of years.
Smart long-term investors are positioning their portfolio today to seize the opportunity of tomorrow.
There are many ways to capitalise on the rapid AI expansion and different things to consider before investing in artificial intelligence.
In this article, we will walk you through all you need to start investing in AI.
How to Invest in AI
You can invest in artificial intelligence today by buying AI-themed ETF, stocks with higher exposure, and shares of Pre-IPO AI companies.
According to a study by PWC, the use of AI will contribute over 15 trillion dollars to the global economy by 2030.
Its impact will be widespread, touching various sectors including healthcare, financial services, manufacturing, logistics, energy, automotive, consumer electronics, communication and entertainment.
Generally, companies that are well-positioned to grow rapidly on the back of the AI revolution are those that provide critical AI products and services, and those that are leveraging AI technology to gain a strategic or competitive advantage.
And as such, investors looking to invest in AI should ensure to get a broader exposure, not just to pure AI stocks but also to companies whose business will benefit significantly from AI related demands, like TSMC.
Taking a diversified approach to investing in AI will help minimise risks given that it is still early days and investors cannot know for sure which sector, industry or individual companies will produce the most return leveraging AI.
That notwithstanding, AI is sure to produce the next Amazon, Apple and Tesla.
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Here are the Best Approaches to Investing in AI:
Buy Artificial Intelligence Stocks
Investing in AI stocks is one of the best, easiest, and most direct ways to invest in artificial intelligence today.
There are a lot of promising AI companies with publicly-listed shares that are strategically positioned to take advantage of the AI boom.
And depending on your investment strategy there are a number of ways you can play AI stocks including; simply buying the overall best AI stocks (the big names with more chances for success in the short-term), AI penny stocks, pure AI stocks (stocks of companies whose primary business is AI), or Small cap AI stocks (with the potential for explosive returns).
Here are some of the best AI stocks to consider:
Best AI Stocks to Buy NOW
Here are the big names in AI with the most resources and strategic positioning to leverage AI, and accelerate their company’s growth as a result:
1. Microsoft (MSFT)
Microsoft stands out as one of the winners in AI in the near and medium-term. It has established itself as a leading player in AI particularly through its Azure Cloud Computing Service.
The company has also deployed AI in its major products including Microsoft 365, Windows, Xbox, Teams, Power Platform, Dynamics 365, and Microsoft Defender.
Given that we are in the early days of AI deployment, most companies are still developing (training) their AI systems. And to do so they require AI cloud computing infrastructures and Microsoft Azure is one of the top two cloud computing providers globally.
Some of the companies using Microsoft Azure AI platform to gain a competitive advantage includes eBay, CarMax, KPMG and AT&T to name but a few.
In January 2023, Microsoft extended its partnership with OpenAI, which enables Microsoft to commercialize the resulting advanced AI technologies being developed at OpenAI and in return it powers all OpenAI workload.
This partnership puts Microsoft in a leading position in AI, as OpenAI is regarded as one of the very top advanced AI research companies.
OpenAI ChatGPT breakthrough with Generative AI ignited a boom in the AI industry in 2023.
And as a result, Microsoft is already reaping the fruits of its strategic investment as it is experiencing sales growth in its cloud computing and PC business stimulated by artificial intelligence.
As more companies continue to run to artificial intelligence in the short and medium term to gain strategic and competitive advantage, Microsoft through its world-class AI cloud computing offerings will be a major AI winner.
When you also factor in its 49% ownership stake in “the OpenAI”, it’s not difficult to see that Microsoft is one of the best stock for investors looking to invest in AI today.
2. Nvidia (NVDA)
NVIDIA is clearly a major winner in AI in these early days of deployment. The company develops and sells AI processors which are critical components for the development and deployment of AI at scale.
By betting on AI early on, NVIDIA has managed to achieve a market dominance in the AI chip market.
The chipmaker and AI darling, currently has over 70% of the overall AI chip market and more than 85% market share in generative AI accelerated chip market.
Nvidia’s AI bet is paying off massively in 2023, the company is experiencing exponential growth in revenue and earnings all on the back of artificial intelligence.
In Q3 2023, Nvidia reported 206% total revenue growth year-over-year at $18.12 billion, 279% data center revenue growth year-over-year at $14.51 billion, 1260% net income growth year-over-year, and diluted EPS growth of 1270% year-over-year.
From the numbers, it’s obvious that data centre revenue is the major driver of Nvidia’s growth and that is because it supplies major cloud computing providers including Amazon AWS, Microsoft Azure, Google Cloud and Oracle with Advanced Processors required to build AI Data Centers.
Literally all the big-name cloud computing providers with over 70% cloud computing market share relies on Nvidia’s AI processors.
As more companies run to AI, cloud computing providers will need to build more data centres and hence more NVIDIA chips.
It is worth noting that NVIDIA has the most advanced AI chipset in the market, which gives it an unprecedented market dominance. Nvidia is already miles ahead of the competition, yet it continues to extend its lead with more innovation.
In Nov. 2023, the company announced a new top-of-the-line AI Chip, HGX 200, which has more memory bandwidth and capacity than its popular and in-demand H100 AI Chip. The H200 AI chip will hit the market by Q2 2024.
As companies race to build their AI systems at scale, Nvidia will continue to profit, making it one of the best stocks to buy now.
3. Amazon (AMZN)
Amazon over the years has established itself as a winner in online retailing, the leader of the cloud computing market, and has strategically positioned itself as a leading player in the AI race.
Like Microsoft Azure, Amazon AWS empowers companies to develop and deploy AI systems using its AI Cloud services.
OpenAI ChatGPT breakthrough came as a wake-up call to everybody in AI, Amazon’s AWS is answering the call, and asserting its dominance in the AI cloud computing market.
In April 2023, Amazon unveiled the Amazon Bedrock Service, a cloud computing service for building generative AI applications.
And in Sept. 2023, the company took a minority stake in Anthropic, a major OpenAI rival, and sealed a deal that allows it to incorporate Anthropic’s technology into its various businesses similar to the Microsoft and OpenAI deal.
Amazon is famous for amazon.com, but in recent times, 70% of its profit comes from its cloud computing business, AWS.
The major driver for its cloud-computing business over the short and medium term is artificial intelligence. Amazon AWS is well positioned to profit from the growing AI demand and this is already reflecting in the company’s bottom line.
Amazon is also building a custom AI chipset that will compete with NVIDIA and Intel. When its AI accelerator chips hit the market, it will result in billions of dollars in revenue for Amazon over the next several years.
There are many layers of opportunities in the AI boom and Amazon is a leading player in a number of them.
The retail giant also deploys AI in its major services and products beyond AWS, including its use of AI in amazon.com for product recommendation, optimisation of delivery route, AI-powered product search feature, inventory management, Amazon Go stores, and Amazon Alexa (an AI voice assistant).
Amazon also owns a self-driving unit, Zoox, developing autonomous driving technology and recently acquired iRobot, an autonomous robot vacuum and mop technology company.
Amazon is one of the companies to benefit from the broad impact of artificial intelligence, and is one of the best AI stocks for the near to medium-term.
4. Alphabet (GOOGL)
Alphabet, the parent company of Google, is one of the big tech companies that zeroed down on artificial intelligence early on.
As far back as 2016, Alphabet CEO declared that the company was to be an “AI-first” company.
The Silicon Valley behemoth has invested heavily in everything AI, from AI-powered generative search engines to self-driving technology.
Alphabet is now relying on its early bet in AI to gain an edge in the rapidly evolving AI market.
It merged AI research units DeepMind and Google Brain in April 2023 to accelerate and improve execution, and infuse AI into more of its products and services.
The company released Bard, an AI chatbot, in response to OpenAI ChatGPT and went on to release a host of AI products across various business segments to reassert its lead in artificial intelligence development.
Google Cloud AI and ML empowers Google Cloud Platform users to build AI application, just like Microsoft Azure and Amazon’s AWS, and as a result its cloud-computing business is experiencing accelerated growth.
The company’s self-driving subsidiary, Waymo, is the leading autonomous driving technology company. It currently offers robo-taxi services in Phoenix and San Francisco, and will also roll out the service in Austin and Los Angeles.
When it comes to AI research, Alphabet is undoubtedly the leading company in the world but the game is changing. AI is now being commercialized and Alphabet is rallying to bring AI products to the market; effectively transitioning from development to deployment.
Thanks to its advanced AI research capabilities, Alphabet is positioned to take advantage of AI, making it one of the best AI stocks for the long-term.
Best Small Cap AI Stocks
A diversified approach to investing in artificial intelligence is the most practical approach to investing in the revolutionary technology.
Small cap stocks can be particularly rewarding because of their huge upside potentials. They’re typically stocks of companies with valuations between $300 million to $2 billion.
Many large-cap stocks today started as small caps. Amazon was valued around 300 million dollars at IPO, NVIDIA had a market cap around $625 million at IPO and Tesla went public at a $1.7 billion dollars valuation.
Today all these three companies combined are valued over $3 trillion US Dollars.
Although not all small cap stocks eventually become mid to large-cap companies, the ones that do generates exponential returns for investors.
Here are 3 top small-cap AI stocks:
1. Lemonade (LMND)
Lemonade is a digital insurance company that uses artificial intelligence powered rating methods to provide low-cost insurance coverage.
It offers renters, homeowners, car, pet and term life insurance in the United States.
Lemonade built proprietary AI chatbots, AI Jim that is capable of processing claims and Maya that helps customers sign up for policies.
In many cases AI Jim can handle claims from start to finish, in about 40% of claims it handles, there is no need for any human intervention at all.
The company established itself as an AI disruptor in the multi-trillion-dollar insurance market and could very well be to the insurance industry what Amazon was to retail.
Lemonade has over 1.9 million customers, and has operations in Germany, Netherlands, and France.
2. Upstart (UPST)
Upstart is an AI powered lending platform that connects consumers with lenders (banks and credit unions) to enable them access quick personal and auto loans at competitive rates.
Where traditional lenders relies exclusively on credit report, debt, income and asset to qualify borrowers, Upstart uses artificial intelligence and non-traditional data (like education and employment history) to qualify borrowers.
This makes it easy for borrowers with no or thin credit history and bad credit score to get personal loans.
Its AI technology enables it automate its loan application and approval process given it an edge over traditional lenders.
Over 80% of loans on Upstart are fully automated and 99% of funds are sent to consumers within 1 business day after signing.
The AI disruptor is expanding its product lines, after initially starting with personal loans, and now offers wedding, moving, home improvement and medical loans, and credit card and debt consolidation.
3. SoundHound AI (SOUN)
SoundHound AI is a voice AI platform with a proprietary voice technology that delivers better speed, accuracy and a more natural conversational experience.
The company enable brands connect to customers/consumers with customised AI conversational experiences.
SoundHound is an old player in the voice technology industry, in its early days in 2005 it was known for its music recognition app.
Over the years the company has rebranded itself, building on its experience with voice technology to launch a voice AI platform in 2015 that runs its proprietary speech-to-meaning and deep-meaning-understanding technologies.
Today, it operates as a B2B company offering services to customers in the automotive, IoT and smart devices, and restaurants market. Its clientele includes Netflix, Square, Vizio, Hyundai, Qualcomm White Castle, Toast and Snap among other big-name clients.
SoundHound AI supports over 25 languages and has over 1 billion annual queries on its platform.
With the rise to AI, revenue for SoundHound has been growing rapidly and will potentially continue as AI’s rise expands.
In Q3 2023, the company reported a revenue of $13.3 million, representing a 47% growth quarter-over-quarter, after growing at a similar rate (over 50%) the previous quarter.
According to Statista, the global voice technology market is projected to reach almost $50 billion in 2029, growing at a CAGR of 23.7%.
The voice technology company is standing out for enabling a brandless integration of its technology, making it more appealing to customers looking for more brand control.
SoundHound’s clientele speaks a lot about the capabilities of its voice AI technology.
Today, text-based AI like ChatGPT are in high demand, and over the next couple of years demand for voice AI will also be explosive, and with this explosion in demand, SoundHound AI is posed to benefit greatly.
Best Artificial Intelligence ETFs to Buy NOW
Exchange-traded Funds (ETFs) that track companies with exposure to artificial intelligence is one of the best ways to invest in AI.
Why look for the needle in the haystack when you can just buy the whole basket?
Instead of trying to pick individual stocks, AI ETFs allows you to spread your risks through more exposure (diversification), and increases your chances of profiting from the AI revolution.
Here are 3 top AI ETFs to invest in today:
1. Global X Artificial Intelligence & Big Data ETF (AIQ)
Issuer: Mirae Asset Global Investment Co. Ltd.
Expense Ratio: 0.68%
Fund Family: Global X
AIQ track the Indxx Artificial Intelligence and Big Data Index with the aim of matching its return.
It is a themed-ETF with focus on companies that potentially stands to benefit from the future development and utilisation of artificial intelligence technology in their products and services.
AIQ also seeks to invest in companies that provide hardware used in AI development and deployment.
It is a market-cap-weighted and passively managed ETF, whose top holdings includes Intel, Adobe, ServiceNow, Meta, Alphabet, Amazon, Netflix, IBM, Microsoft and NVIDIA.
2. WisdomTree Artificial Intelligence and Innovation Fund (WTAI)
Expense Ratio: 0.45%
Fund Family: WisdomTree
WTAI tracks the WisdomTree Artificial Intelligence and Innovation Index with the aim of matching its performance.
The fund seeks to gain exposure to companies involved in the development and deployment of AI innovation, and those contributing to the advancement of AI.
WTAI is an equally-weighted index, its top holdings includes NAVER, Alphabet, Meta Microsoft, Arm Holdings, Synaptics, Globalfoundries Qualcomm, ASML and Mobileye.
Although most of the companies it invests in are US-listed, it also invest in foreign listed AI companies in developed and emerging markets.
3. iShares Robotics and Artificial Intelligence Multisector ETF (IRBO)
Issuer: BlackRock Financial Management
Expense Ratio: 0.47%
Fund Family: iShares
IRBO is aimed at tracking global equities at the forefront of artificial intelligence and robotics development and deployment.
It is an equally-weighted index whose top holdings include Faraday Technology, Via Technologies, FuboTV, Alchip Technologies, Microstrategy, Meitu, Splunk, Joyz ADR, Adobe and Intel.
IRBO is a global fund and tracks companies from both developed and emerging market that has significant exposure to robotics and artificial intelligence.
Best AI Investment Tools
Smart investors are leveraging artificial intelligence in many ways to gain an edge investing/trading.
There are a growing number of artificial intelligence investment platforms that carries out portfolio management, risk management, algorithmic trading, and delivers personalized investment advice.
One of the ways investors can take advantage of AI is to leverage the advanced analytics capabilities of AI to aid investment decisions.
Here are 3 best AI investments apps and what they are best for:
WealthFront is one of the leading robo advisors that uses advanced AI algorithms to create and manage personalized portfolios for its users.
It oversees over $50 billion dollars in assets and has more than 700,000 clients across the United States.
According to WealthFront, “investors in The world classic automated university in account with the risk of 9 saw an average of 7.55% every year since inception”.
WealthFront was founded in 2008 and is focused on democratizing investing by providing financial services that traditionally requires an expensive personal investment advisor to access.
With robo advisors like WealthFront, all you need to get started is complete a questionnaire designed to determine your risk tolerance and build a diversified portfolio to help you reach your financial goals.
Among the robo advisors available today, WealthFront is the overall best, and is particularly good at tax-loss harvesting, portfolio management, and goal planning.
Magnifi is an AI-powered investment marketplace that enables investors leverage AI to research Investment, manage portfolios and make better investment decisions.
Magnifi offers three main services; an AI investment research tool that allows users search for investment by themes, categories, or type using natural language, brokerage accounts that enables users to trade stocks, and managed portfolios where users can access actively managed portfolios at a 0.23% annual fee.
Magnifi also has a built-in ChatGPT-like AI Assistant where investors can ask custom questions about investing such as “what is a growth stock?”.
The AI assistant also delivers investment insights, analyse your portfolio, and keep track of your investments.
Magnifi is best for long-term individual investors who are new to the market and needs help working the ropes.
3. Trade Ideas
Trade Ideas is an AI Stock Scanner that uses proprietary AI algorithm to analyse stock charts, generate trading ideas, and alert users about trading opportunities.
It is a platform specifically designed to help traders improve their trading skills and performance through better and faster execution.
Trade Ideas also has an AI robo-advisor, Holy Grail, that is able to analyse millions of probabilities to uncover profitable trading opportunities.
Its platform can also be used to carry out automated trading.
Trade Ideas is owned by Interactive Brokers one of the top brokers in the United States. Its AI trading technology is best for day traders and swing traders.
Potentials of Investing in AI
Much like the internet in the late 20th century, and railroads and electricity in the late 19th century, artificial intelligence is creating a new economic era: The Era of AI.
AI is fuelling a global economic boom, exciting investors, and the revolutionary technology is just getting started.
Artificial intelligence companies are going to be the fastest-growing companies over the next couple of years.
In 2023, Nvidia, a company that develops and sells AI processors added over 800 billion US dollars (over 200%) to its market cap on the back of rapidly growing AI processor demand.
OpenAI’s ChatGPT, a generative AI app, reached an estimated 100 million monthly active users, two months after launch, setting a record for the fastest growing user base.
The potential benefits for AI Investors are massive and here are some of the potentials of AI:
1. Explosive ROI
Chief of every investor’s goal is to make money and a $10,000 investment in AI winners will potentially generate life-changing returns that rivals winning the lottery, literally speaking.
A $5,000 investment in an AI stock that generates similar return to TSLA within its first 11 years in the public market will yield a return that’s over $4.5 Million US Dollars.
And this is why I created the AI Disruptors program to help people escape the 9-5 and retire early.
After the internet, AI is the next big thing. And top companies of the dot-com era like Amazon, NVIDIA, eBay, and Netflix generated returns that are over 160,000%, 60,000%, 12,000%, and 40,000% respectively since they IPO’d.
The winners in the era of AI will see an explosion in their valuation over the next decade that will generate explosive returns for early investors.
2. Generational Wealth Creation
AI is set to change the world for a very long time. This revolutionary technology will be around potentially for generations, it will get better and more sophisticated with time.
As such investment in AI stocks will produce returns for decades. It is not the type of technology that peaks in a few years and becomes insignificant there after.
In 1973, Apple was worth $3 million, and today, it is valued over $3 trillion, 50 years later. The company is known for the development and sale of personal computers, and till date, Apple’s bread and butter is still personal computers; the iPhone, iMac, and iPad.
Like Apple, AI winners will continue to grow for decades, generating generational wealth for early investors.
3. Invest in Future Innovations
Investors who invest in AI as the next big thing are also taping into the next big thing that AI will power.
The winners in the internet boom are today the front-runners in the AI revolution.
Alphabet, the parent company of Google, owns one of the top three self-driving car companies, Waymo.
And Meta, the parent company of Facebook and Instagram, is leading the charge into communication in the Metaverse.
Moreover, the type of AI being developed today are narrow AIs, and most likely the winners of this type of AI will lead the charge to AGIs.
Risks of Investing in AI
AI is an emerging technology, the risks associated with investing in it, is as high as the rewards.
Before choosing to invest in the “AI opportunity of a lifetime”, it is imperative you strongly consider the risk associated with investing in AI.
Here are some of the risks to consider:
1. High Volatility
Given that AI is an emerging technology, there are a lot of uncertainties surrounding AI investments, these uncertainties create a highly volatile investment play in AI.
And when you combine that with the fact that the hype around AI makes it highly sensitive to changes in investor’s sentiment, it becomes apparent that investing in AI today is a high risk endeavor, and may not be a suitable investment option for investors with low risk tolerance.
There are (and there will be more) deceptive companies who are seeking to take advantage of investors interest in artificial intelligence by carrying out misleading PR campaigns claiming exposure to AI through propped up AI product and services offerings that only exist and papers.
Be on the watch out for these pretenders and carry out your due diligence before investing in any. AI company.
Ultimately in the world of capitalism, forprofit companies exist primarily to make profit and profit comes from sales/revenue.
So ignore the hype and follow the money 💰, a company should be able to show clearly in it financial reports how it is profiting from AI, otherwise ignore.
3. Regulatory Hurdles
AI capabilities is still unfolding and it is quite unclear how major governments in various regions across the globe are going to regulate AI.
As a disruptive technology with a wide scale impact, potential AI regulations could be limiting and pose a major risk to AI investments’ potential return.
In an essay by Yafit Lev-Aretz & Katherine J. Strandburg, they affirm that “regulation inhibit innovation by limiting potentially innovative paths and/or increasing innovation costs”