Artificial Intelligence: How to Invest in The Next Big Thing

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Buy a piece of the looming tsunami of growth in the AI market by investing today.

Artificial intelligence, or AI, is the fourth industrial revolution. The steam engine heralded the first industrial revolution, the second was mass manufacturing through electricity, and the third was computers. According to data from Fortune Business Insights, the size of the global AI market may grow to $202.6 billion by 2026, up from $20.7 billion in 2018. (USA Today)

In fact, artificial intelligence is already prevalent in most businesses across the globe, and if you have a well-diversified portfolio of stocks, chances are it already has exposure to AI.

But the question is, what more can you do to participate in the “next big thing”?

How to invest in the AI revolution

According to Nidhi Gupta, technology sector leader at Fidelity Investments, the key to artificial intelligence investing is a lot of diversification that would capture a wide range of outcomes.

That makes sense from a numbers perspective too – assuming that a fifth of your AI investments turns out to be multi-baggers – your portfolio could be profitable even if all the others turn out to be duds.

When investing in a company look for one or more of the following characteristics that could add a kicker to its artificial intelligence performance:

  • A rich database that could be farmed for machine learning and creating algorithms
  • Computer scalability for massive number crunching, e.g., big data centers
  • AI-competent workforce

Stock-picking for artificial intelligence

Examples of companies that have all three traits are Google parent Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT).

Furthermore, Nvidia (NASDAQ: NVDA) and Xilinx (NASDAQ: XLNX) are chipmakers whose products find applications in computers, machine learning, data centers, and cloud computing.

Again, some companies are leveraging artificial intelligence to improve their own business operations. For example, Tesla (TSLA) applies AI in its autonomous cars; Salesforce (NYSE: CRM) uses AI to crunch customer data for sales forecasting; Netflix (NFLX) analyzes viewership data to determine viewers’ preferences, and therefore to display suggestions; EquBot AI Powered International Equity ETF (AIIQ) is an actively managed ETF that uses AI to analyze and select investments.

The fourth group of investible candidates is companies that develop AI-capable software. For clients, this software uses AI-like inputs to generate business solutions. Examples include Guidewire Software (GWRE) for insurance; Adobe (ADBE) for cybersecurity; Datadog (DDOG) for monitoring web apps.

However, if individual stock-picking is not your cup of tea, try your hand at an AI-focused ETF.  The iShares Robotics & Artificial Intelligence ETF (IRBO), Global X Robotics & Artificial Intelligence ETF (BOTZ), and Robo Global Robotics & Automation Index (ROBO) could work for you instead.

Related Story:  Artificial Intelligence: AI Can Detect Brain Cancer In Minutes With Patient Lying on The Operating Table                                                  

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Alt Insights

January 29, 2020

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