Like it or not, we are entering the dawn of thinking machines. Developing such tech is no easy task, as it requires not only tons of data, but cream-of-the-crop technologists and scientists. The competition to establish early footing, however, may be far greater than the estimated $383.5 billion market (according to Gartner)–the entity who defines AI in a sense defines the future (or a good chunk of it).
As an investor, you might be wondering which companies might be right for AI investment. Considering the costs, AI might probably fall within the territory of larger tech companies. To a considerable extent, this is true. Here are a few stocks to consider.
Unless you’ve been living under a rock, you should know that Google has its hands all over AI development, from Gmail, YouTube, Maps, Photos, Google Cloud, and Google Assistant, Google’s reach extends to well over 5,000 customer devices.
Google has also been developing TensorFlow, its own language, through which Google is defining its own AI standards. Who uses it? To name a few, Uber and eBay among others. Google is also trying to establish a foothold in the autonomous vehicle market; it’s dedicated Waymo unit valued, according to Morgan Stanley, at around $175 billion.
Most of us know Nvidia as the pioneer of GPUs (Graphics Processing Units). GPs process loads of data efficiently and in a cost-effective manner. But Nvidia also realized that such a technology can also be critical to AI processes.
Not a cheap stock by any means, and with a P/E of around 31, some analyst expect growth by as much as 87% (Evercore ISI Research has a price target of $400), anticipating that NVDA’s tech becomes an AI standard.
IBM has been developing AI tech for years. Remember Deep Blue back in 1985–the computer that beat world champion chess player Garry Kasparov? If not, you’ve certainly heard of Watson, IBM’s most recent iteration of a thinking computer. In addition to AI development, IBM has also got its hands on cloud computing, Big Data, mobile tech and more. Another thing that investors might find attractive s IBM’s dividend of 5.1% along with its price-to-earnings valuation of 19.93.
Global X Robotics & AI ETF (BOTZ)
A wider and more potentially diversified solution–albeit within a concentrated industry–is to consider an AI-concentrated ETF. Global X Robotics & AI ETF is one such solution, though you should note that it is highly specialized with a holding of around 29 stocks. Its top three holdings consisting of Intuitive Surgical Inc (ISRG), Mitsubishi Corp (6503), and ABB Ltd (ABBN), a large proportion of its stocks are based out of Asia, reflecting the intense AI focus of companies from that region. BOTZ has also suffered tremendous losses as compared with other ETFs with AI exposure.
The risk of loss in the trading of stocks, options, futures, forex, foreign equities, and bonds can be substantial and is not suitable for all investors. Trading on margin or the use of leverage is not suitable for all investors and losses exceeding your initial deposit is possible. Supporting documentation is available upon request. Trading futures, options on futures, and FX involves substantial risk of loss and is not suitable for all investors. Carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources and only risk capital should be used. Opinions, market data, and recommendations are subject to change at any time. The lower the margin used the higher the leverage and therefore increases your risk. Past performance is not necessarily indicative of future results.