Is It Worth to Give Exposure to Artificial Intelligence by investing in AI Companies or Funds?
Right now AI is dramatically transforming our lives up to a great extent, by learning to perform tasks that till now required human intelligence and done mostly by human efforts. It is spreading fast into all areas of work and life and therefore it is emerging as one of the mega trends of the coming decades. Whether AI will end up destroying humanity as Stephan Hawking and Elon Musk have suggested or whether it will be a gift to mankind that will make life easier for both businesses and individuals remains to be seen. Although everyone is agreed on one thing and that is that AI will play a major role in the future.
There is no doubt that applications of artificial intelligence or AI are immense. For example, AI has a great future in number of fields like Chatbots, Personal Assistants, Speech Recognition, Facial Recognition, IoT, E-Commerce, Machine Learning, Autonomous Vehicles, Self-Driving Cars, Search engine technologies, Data Analytics, Pattern Recognition, Collision Avoidance Technology, Artificial Neural Networks, Cybersecurity, Gaming, Vision, Healthcare, Image Processing and lots more.
But how do investors get involved and catch this train of AI? For this they have to invest directly into the companies which are doing research in AI or they have to invest in actively managed or cheaper passive funds available that invest in AI technology.
But one thing to note here is that these kinds of opportunities come with a high level of uncertainty. There is a possibility of strong gains in these kind of hot investments but you could lose money also. Hence, AI should only be a small proportion of your investment portfolio and should not be the money that you can’t afford to lose. But as the trends suggest, AI is worth taking the risk if you want to gain handsomely.
What is Artificial Intelligence (AI)?
First let’s talk about and understand artificial intelligence first. Although artificial intelligence has become one of the most popular technology topic today but the concept is not new. The first definition and mention of artificial intelligence took place in 1950s when a college professor named John McCarthy launched a research project focused on the idea that “every aspect of learning or any other feature of intelligence can in principle be so precisely described that a machine can be made to simulate it.” There have been lots of technological advancements happened since that time and AI can now do much more than just beating a human player at chess game. By using the combination of big data and immense computing power, the AI of today can possess near-human and in some cases even better than human intelligence when it comes to completing and performing some specific tasks. In simple words, AI is a field of engineering and science that aims to build intelligent computing systems. You can see the use of AI in your iPhone’s speech recognition feature, or on Facebook in the way it creates newsfeed and even in Uber’s self-driving cars. Soon you will have robots helping you in the house or in the workplace that possess adequate AI to complete their tasks just like humans do. Also in near future majority of the customer support will be serviced by AI which can give accurate advice and also AI enabled computers will help doctors in providing better diagnoses and while performing surgery through robots.
How to Give Exposure to AI Technology through Your Investments?
As we have just said there is a bright future for AI technology hence so many investors are also looking at opportunities to invest in AI related companies or funds. Right now there are three main ways by which you can get exposure to AI i.e. by investing in leading large blue chips technology companies, by purchasing AI-Centric ETFs or by investing in startups or any companies which are doing research in AI. Let’s discuss about these options in detail now.
Investing in Large Blue Chips Technology Companies
The larger blue chip technology companies have started work in AI many years ago. Hence it is still a good idea to invest in these leading tech giants like Apple, Facebook, Alphabet (Google’s parent) and Microsoft. Hence, if you add these leading tech stocks in your portfolio then you will definitely get benefits of advancements in AI technology in future.
Google’s parent Alphabet is one such company which has invested and done a lots of research in AI. Google has been using AI for its search engine ranking algorithms for decades and it has many AI-focused business products like Google Home which is giving good competition to Amazon Echo, its driverless car technology, and its machine AlphaGo which recently beat the world’s best human at the Chinese strategy board game Go to tell you about some of these areas.
Apple, the famous company which launched iPhone smartphones uses lots of AI in these smartphones. For example, Apple uses AI in its voice recognition technology ‘Siri’ which can be used to navigate through the phone without touching a button and also in facial recognition technology to unlock the smartphones. Apple is also developing its own electronic autonomous vehicles.
Facebook is working on to develop best AI lab in the world and right now it uses AI technology in number of features like creating news feeds, in its facial recognition features that can find individual’s faces on images, in friend-suggestions and lots more.
There are many more such tech giants like Amazon, Microsoft and IBM which are doing good work in AI technology. Hence you can invest in any of these blue chip companies to get AI exposure.
Investing in AI Focused ETFs (Exchange Traded Funds)
To get good exposure in AI you can invest in AI focused ETFs. The most AI-focused ETF on the market is the Global X Robotics and Artificial Intelligence ETF, which invests in “companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots and autonomous vehicles.” This ETF is an open-ended equities fund which charges a 0.68 % annual fee and invests in global equity markets with focus on robotics and AI technology. Its biggest holdings include Surgical Inc, FANUC Corp, Keyence Corp, and Yaskawa Electric Corp. Else you can also invest in Ark Invest’s ARK Innovation ETF which has stocks like Amazon, Tesla, Twitter, Nvidia in its top holdings which provide the fund exposure to AI technology. This ETF has a 0.75 % expense ratio and is an actively managed fund.
Investing in Companies with a Strong AI Focus
There are several companies small and big which have a strong AI focus. For example, take the case of Nvidia which produces AI processors which it sells to leading tech companies which are engaged in cloud computing, such as Microsoft and Amazon. Nvidia stands to gain a lot from its this AI focused strategy. Nvidia also provides technology for early-stage self-driving car trials. Although Nvidia is more famous for its gaming CPUs but it is also an excellent bet for AI exposure. You can also invest in a company named Verint Systems which is listed on Nasdaq. It sells hardware and software for many AI related technologies. This company has over 10,000 customers in 180 countries with many Fortune 100 companies as its clients. If you will look at the stock exchange indices, then you can find many more such AI focused stocks which offer good opportunity to invest into AI.
As we have just discussed AI carries tremendous future and presently too it has started giving signs of maturity where so many AI related technologies are in use in many software applications around the world. There are many companies and ETFs where you can invest to gain equity exposure to benefit from the boom in AI technology. We have seen how this technology has evolved in the past 20 years and how much it affects our day-to-day lives even today. Hence it is expected to do well in future too. Therefore, the companies which are in the development of artificial intelligence based technologies and applications are stand to gain and by investing in them through the ways we have suggested you too can earn handsome returns in future.