What AI should I invest in?

Artificial Intelligence (AI) has become incredibly popular over the past few years. We can find it in everything from our browsers to surveillance cameras, making it a good investment opportunity. Whether you're looking to invest in established tech giants like NVIDIA and Microsoft or explore niche sectors like robotics and semiconductors, AI presents numerous opportunities for growth in the coming years.

Investing in AI stocks

Investing in AI stocks offers a direct route to profit from the advancements in artificial intelligence technologies. Some great choices for investing in this category include NVIDIA, Microsoft, Amazon, and Google. NVIDIA leads the bunch and is a company that develops powerful graphics processing units (GPUs) essential for AI workloads. It originally made gaming chips but moved on to dominate in areas like machine learning, data centers, and autonomous vehicles, making it a top performer in AI.

Microsoft is partnered with OpeAI (another company soon to be public), which powers generative AI tools like the hugely popular ChatGPT. Amazon is using it to enhance its online retail experience, among other things. Google has DeepMind, which drives cutting-edge AI research, and Adobe, which leverages AI to improve its creative software suite​.

AI-focused ETFs

If you are an investor looking to invest in AI without the risk of picking a winner, AI-focused exchange-traded funds (ETFs), like Global X Robotics & Artificial Intelligence ETF (BOTZ), which invests in companies developing AI technologies and robotics across sectors, can be a good option.

The iShares Semiconductor ETF (SOXX) is also a strong pick. This ETF holds shares in companies that produce the semiconductor chips driving AI advancements, including NVIDIA and AMD.

Private AI companies and venture capital

Private AI companies can be another great and sometimes overlooked option for someone looking to invest in AI. However, it can be harder to get access to them, and investments can carry a higher risk. Examples in this category include startups like Scale AI and Anthropic.

Scale AI is a leader in providing training data for machine learning models, which is vital for AI algorithms to function effectively. Anthropic focuses on creating safer and more interpretable AI systems, making it a potential leader in ethical AI development​.

Other great options in this category include Cerebras Systems, which designs AI-specific hardware, and Databricks, a leader in AI-driven data analytics.

AI in other sectors

AI is also transforming industries outside the tech sector, opening up even more investment opportunities. For example, AeroVironment uses AI in its autopilot aircraft systems to provide critical surveillance and defense solutions for governments.

Intuitive Surgical uses AI to power its robotic-assisted surgical systems, which are revolutionizing healthcare by improving precision and reducing recovery times​. Other industries that are adopting AI at a rapid pace include finance and manufacturing.

Risks and considerations

While AI holds great potential, some risks include government policies that slow growth through stricter regulations. Furthermore, the AI sector is still in its early stages, and not all companies will succeed.

Another consideration is the competitive landscape. While companies like NVIDIA and Microsoft are leading the charge, new players may emerge, and predicting winners in such a fast-evolving market is difficult. Diversification through ETFs or investing in a range of AI-adjacent industries can mitigate some of these risks, but you will need to consider each investment extremely carefully.

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