How to Invest in AI

Key points

• Ways to invest in AI include stocks and exchange-traded funds.
• Investing in AI can provide big returns, but it also presents risks.
• Understand the market and research companies before investing in AI.

The tech world has been buzzing since applications like ChatGPT and DALL·E catapulted artificial intelligence from obscurity to inevitability. The recent surge of generative AI has investors scrambling to capitalize on the phenomenon.

There are bound to be winners and losers in the investing world. Companies that primarily focus on AI might represent high-risk, high-reward opportunities. Tech industry mainstays that effectively integrate AI into their product ecosystems may be less risky.

How to invest in AI

Investing directly in AI companies is the primary way to invest in AI. But finding publicly traded companies that focus solely on artificial intelligence is difficult. For example, OpenAI, which owns ChatGPT and DALL·E, isn’t publicly traded. So investing in AI mainly involves investing in larger companies leveraging AI to enhance their product lines.

How to research AI investments

Investing in AI starts with doing your homework. This is true whether you want to find the next big thing or some dependable investments for your portfolio. Buying individual stocks can be an enormous task. But focusing your efforts in the right areas can make it less daunting.

First, understand the market, including the dominant players and their product lines. Read news reports and press releases to stay ahead of upcoming developments.

Once you identify potential investments, examine each company closely. Is it just the latest source of hype? Or is the hype backed up by the financial results? 

Here are some places to look when considering a company to invest in:

• Annual reports. Annual reports give you a high-level look at a company’s financial performance over the past year. You’ll also find information like cash flow and income statements.
• Quarterly reports. Quarterly reports provide important financial details about a company. These include its revenue, net income and net profit margin.
• Earnings forecasts. Earnings are an essential part of a successful company. Forecasts can give you clues about the future. This is especially true for a relatively new AI company, whose future might be uncertain.
• Management team. The ship might be state-of-the-art. But who’s steering it? Look for a management team with relevant experience and qualifications.
• Analyst opinions. Analysts devote their careers to researching and assessing companies. While they aren’t always spot on, they can help reduce the time you spend researching AI companies.

AI investments

AI stocks and AI exchange-traded funds are two of the easiest ways to invest in artificial intelligence. Each approach has pros and cons. But both can help you gain AI exposure in your portfolio. 

Below are some investments to consider.

AI stocks

As mentioned, few publicly traded companies focus only on AI. AI stocks generally come from larger companies that use artificial intelligence to enhance their products and services. 

The following are prime examples, as most are tech companies that leverage AI capabilities:

• Nvidia (NVDA). Nvidia invented the graphics processing unit — hardware that powers graphics in personal computers and console games. The company began developing AI partly because GPUs excel at powering AI. Its dominant position in the GPU market and the demand for its chips make Nvidia worth considering. 
• Google (GOOG). Google is more than a search engine these days. It researches and advances technologies like generative AI and machine learning. The company is also working to advance generative AI tools like Gemini Pro. This aims to make chatbots more capable of synthesizing information.
• Amazon (AMZN). You might not think of Amazon as an AI company. But, like Google, Amazon does much more than sell products. For example, it now offers AWS AI services, which allows businesses to integrate AI into their products. The company is also rolling out an AI assistant to answer customers’ questions about products.
• IBM (IBM). IBM is one of the oldest names in the computing business. It’s known for its hardware and software, including computers, servers, storage systems and networking solutions. The company also offers AI solutions like IBM watsonx, a data and AI platform with AI assistants. It can help companies optimize their data for AI as well. 
• Microsoft (MSFT). It’s no secret Microsoft is investing heavily in AI. The company is integrating AI into its full suite of applications, from Bing to Paint. Copilot lets you generate page summaries, ask questions, take screenshots and more. Microsoft has invested billions in AI, including $10 billion in OpenAI.

AI ETFs

Do you want to invest in artificial intelligence without digging through financial reports? Then consider AI ETFs, which offer exposure to baskets of AI stocks.

• Global X Artificial Intelligence & Technology ETF (AIQ). AIQ aims to invest in companies that can benefit from AI developments. Its top holdings include familiar names like Meta Platforms, Nvidia, Netflix and Amazon.
• ROBO Global Robotics & Automation Index ETF (ROBO). Having launched in 2013, ROBO is one of the oldest AI ETFs. The fund invests in companies advancing robotics and automation, in addition to AI. Its top holdings include Intuitive Surgical (ISRG), which manufactures devices for robotics-assisted surgeries.
• Global X Robotics & Artificial Intelligence ETF (BOTZ). This robotics and AI ETF seeks to match the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index. It leans more heavily on robotics than AI, citing forecasts that the market could more than triple by 2032. 
• ARK Autonomous Technology & Robotics ETF (ARKQ). ARKQ is an actively managed ETF. It seeks long-term capital growth by investing in autonomous technology and robotics companies relevant to its theme of disruptive innovation. These companies develop or enable technologies like autonomous transportation, robotics and automation, energy storage, and space exploration. ARKQ’s top holdings include Tesla (TSLA), UiPath (PATH), Kratos Defense & Security Solutions (KTOS) and Trimble (TRMB).

Where can I buy AI stocks or ETFs?

There are many ways to buy AI stocks or ETFs. One of the easiest is through an online broker like Fidelity, Vanguard or Charles Schwab. These platforms typically have low fees and minimums. Some even offer fractional shares. This makes starting easy, even with a limited budget. 

Another option is investing with a robo-advisor. Popular choices include Betterment, Ally Invest and SoFi. Robo-advisors use algorithms to invest your money based on your risk tolerance, investment goals and time horizon. They might invest in AI.

You can also invest in AI through a human financial advisor. Like a robo-advisor, a financial advisor selects investments for you. But a financial advisor often makes personalized decisions based on your input. They can also help with ongoing portfolio management. Financial advisors usually charge a fee. This might be an hourly or flat rate or a percentage of assets under management.

Frequently asked questions (FAQs)