How to invest in AI in 2024

When it comes to tech-sector investing, it can pay to have an eye on the cutting edge. And in today’s market, artificial intelligence, or AI, is just that. With its vast potential and applications just beginning to take shape, AI is revolutionizing industries far and wide, reshaping how we live our daily lives. This new territory of technology is drawing investors keen on being part of a sector that’s not just growing, but showing promise to continue evolving at a rapid pace in the future. AI investments could present a prime opportunity for anyone aiming to diversify their portfolios with the latest in tech.

Here’s what we’ll cover:

• Reasons to consider investing in AI 
• How to invest in AI with stocks and ETFs
• Why now might be a good time to invest in AI
• Considerations before you invest in AI

Investing in AI: why now?

The current landscape of AI technology is a brave new world. AI development has accelerated considerably in the last year, with new generative AI models in particular forging new pathways to create content, design products, and even write code. AI tools are emerging to tackle many tasks faster than humans can, as well as improve business operations and create new market opportunities.

Tech companies aren’t the only ones chasing AI innovations; industries like healthcare, media, and even real estate are leveraging AI tech to streamline operations, enhance decision-making, and offer groundbreaking new services. Big tech industry giants and AI startups alike are using machine learning advancements to push the boundaries of what’s possible. 

Many investors are attracted to these companies because they see a transformative potential in AI to redefine industries, increase efficiency, and drive profitability for the companies that seize on AI systems.

How to invest in AI 

If you want to start investing in AI, there are two main paths: selecting individual stocks or opting for AI ETFs (exchange-traded funds). Whether you’re starting fresh or looking to deepen your investment, exploring these avenues can align you with the future of technology.

Investing in AI stocks

Investing directly in top AI companies is one way to add AI stocks to your portfolio. This strategy allows investors to choose specific companies they believe have a strong potential for growth in the AI industry. With companies across industries investing in AI, there are lots of options, from well-established blue-chip stocks to higher-risk growth stocks in AI startups. The best AI stock to buy for you depends on your investing strategy and comfort with risk. 

As with any individual stock, there is a higher risk of volatility and potential for loss. Investors must also carefully consider the company’s financial health, management team, and competition within the AI industry before making an investment decision.

Successful AI investments in individual stocks have been seen in companies like NVIDIA, which has seen significant growth due to its dominance in providing AI chips to various industries. Other examples include Amazon’s success with its use of AI technology across its vast ecosystem and Alphabet’s breakthroughs in AI research through Google DeepMind. Bigger companies like Google or Microsoft may offer a solid foundation with their AI ventures, while new and emerging companies could provide more growth, though they could be riskier.

If you’re ready to add artificial intelligence stocks to your portfolio, you might want to consider the following AI companies:

• NVIDIA (NVDA): Though not an AI company itself, NVIDIA develops the AI chips, or Graphics Processing Units (GPUs), pivotal for the machine learning and deep learning that drive generative AI, making the company a key player in AI’s expansion across industries.
• Microsoft (MSFT): Leveraging its Azure AI, Microsoft is weaving AI systems into cloud computing, offering everything from analytics powered by AI to cognitive services, revolutionizing business applications of AI.
• C3.ai (AI): Specializing in AI applications for businesses, C3.ai offers solutions that enable the use of AI at scale for real-time decision-making at large corporations.
• Alphabet (GOOGL): Alphabet, Google’s parent company, is deeply embedded in AI, from its search algorithms to autonomous driving ventures and health tech innovations. Their AI development arm, Google DeepMind, is known for breakthroughs in AI technology that have applications in various sectors.
• Amazon (AMZN): Amazon leverages AI across its vast ecosystem, from enhancing retail operations with predictive analytics to developing more sophisticated voice recognition technology with its Alexa platform. Their cloud computing service, AWS, also offers AI and machine learning features for businesses.

Investing in AI funds 

As you’re determining how to invest in AI, you don’t have to rely on picking individual stocks. Investing in ETFs or mutual funds focused on AI allows for a more diversified approach to investing in the industry. This strategy offers exposure to a basket of AI companies, reducing the risk associated with investing in individual stocks. One of the main advantages of investing in AI funds is lower risk and potential for higher returns compared to direct stock investment. Additionally, these funds are managed by experienced professionals who specialize in selecting and managing a portfolio of AI stocks. However, investors must also be aware that fund fees can eat into their profits over time.

Successful investments in AI ETFs and mutual funds have been seen in BOTZ, an ETF focused on companies at the forefront of AI and robotics. This fund has seen significant growth as demand for AI and robotics technology continues to rise. Other successful funds include IRBO and AIQ, both focused on companies that may benefit from the long-term growth of AI.

If you’re looking to invest in an artificial intelligence ETF, you have options: there are already 17 U.S. ETFs focusing primarily on AI or machine learning. These three funds are garnering investor interest: 

• Global X Robotics & Artificial Intelligence ETF (BOTZ): This ETF gives investors exposure to companies at the forefront of the AI and robotics transformation, covering sectors from manufacturing to healthcare.
• iShares Robotics and Artificial Intelligence ETF (IRBO): IRBO aims to track an index composed of global companies and industries that could indirectly benefit from the long-term growth and innovation in AI.
• AIQ Artificial Intelligence & Technology ETF (AIQ): AIQ offers exposure to companies that may potentially benefit from the advancement and increased utilization of AI and machine learning technologies.

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Is it a good time to invest in AI?

While it’s hard to know the perfect time to make an investment decision, many investors see the ongoing growth and innovation of generative AI as a signal that AI investing might be a strategic move at this time. Whether it’s the right time for you largely hinges on your personal risk tolerance and investment strategy. 

Industries across the board, from healthcare and finance to automotive and entertainment, are being transformed by AI, and the AI market is expected to continue growing. In 2021, global AI funding doubled to $66.8 billion, and a record number of AI companies were valued at over $1 billion. Even Warren Buffett, known for his cautious approach, notably allocated a significant portion of his portfolio to tech companies utilizing AI, signaling a recognition of AI’s role in today’s stock market landscape. 

Is investing in AI a good idea?

As with any investment decision, you’ll want to weigh a number of factors before investing in AI. Chatting with a financial advisor could also help you weigh your options, making sure your investment choices are in line with your financial goals.

As you explore how to invest in AI, keep these considerations in mind:

• Volatility: Volatility is a natural part of how the stock market functions. That said, new technologies and market disruptions can increase volatility, both within a specific industry and across the market as a whole. When investing in AI companies, you might want to take a long-term approach so you have time to ride out short-term dips.
•  Risk: All investing comes with risk, and investing in AI is no different. Understanding your risk tolerance can help you determine the best strategy for adding AI stocks to your portfolio. And if your risk profile is on the conservative side, you may be more comfortable with ETFs instead of individual AI stocks. 
• Diversification: Maintaining a diversified portfolio is one way to reduce investing risk. By owning a variety of different types of securities, you avoid putting all your eggs in one basket. Before you decide how to invest in AI, consider your current asset allocation and ensure any new investments in artificial intelligence won’t leave you overly concentrated in one type of asset or industry. 
• Research: Before you invest, it’s wise to get to know the companies you’re interested in, taking a closer look at details like expense ratios that can impact your returns. Take time to research individual stocks, and keep up with AI tech news and stock market trends related to your investments.  

How to invest in AI: getting started 

If the emerging innovations in generative AI and machine learning sound exciting, investing in AI might be an appealing option. Even if you’ve never invested in the stock market before, you can learn how to start investing, decide how much to invest, and open a brokerage account. Then you’ll be set to find the AI stocks and ETFs that align with your goals.  

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FAQ about investing in AI

Still have questions on how to invest in artificial intelligence? Find answers below.

Is there a way to invest in AI?

Yes, there are several ways to invest in AI. One option is to invest in companies that specialize in developing and utilizing AI technology. Another option is to invest in AI-focused exchange-traded funds (ETFs) or mutual funds that provide exposure to a diversified portfolio of AI-related companies. It’s important to carefully research and consider the potential risks and rewards before making any investment decisions related to AI. 

Is AI a good investment?

AI can be a good investment opportunity, as it has the potential to revolutionize many industries and improve efficiency and productivity. However, like any other investment, there are risks involved and it’s important to carefully evaluate each opportunity. Keeping up with the ever-changing landscape of AI technology is crucial in making informed investment decisions.