Artificial intelligence (AI) has emerged as a game-changer in the world of business, offering enormous potential for improving efficiency, increasing productivity, and driving growth.
The explosion of companies investing in AI to enhance business operations also created the opportunity for investors to profit handsomely by investing in firms that are successful in adopting this new technology.
However, forming an AI investment strategy may be more complex than most realize, as not every publicly traded company will be a winner. Some firms will get left behind, entire industries could become obsolete, and others will find new legs to drive substantial growth. With this in mind, we’ve created the everything guide to investing in this revolutionary technology.
More specifically, in this article, we’ll explore the benefits of investing in AI, highlight some of the most promising investment opportunities that exist today, as well as talk about some of the pros and cons of choosing to focus on investing in AI.
What is AI & How is it Used?
In simple terms, artificial Intelligence refers to computer systems that can perform tasks that typically require human intelligence, such as problem-solving, decision-making, and language understanding. AI technology is designed to simulate human cognitive abilities, such as perception, learning, and reasoning, to analyze data and make predictions or recommendations based on that data.
Here are some of the most common applications of AI in 2023:
- Natural Language Processing (NLP): NLP enables computers to understand, interpret, and respond to human language. Applications of NLP include chatbots, virtual assistants like Siri and Alexa, and customer service systems.
- Computer Vision: Computer vision enables computers to interpret and understand visual information from the world around them. This technology is used in facial recognition, image recognition, and object detection applications.
- Machine Learning: This is a subset of AI that allows computers to learn and improve from experience without being explicitly programmed. These algorithms can be used to make predictions, identify patterns, and recognize anomalies in data.
- Robotics: Robotics involves the development of machines that can perform tasks autonomously or with minimal human intervention. Robotics technology is used in manufacturing, logistics, and healthcare applications, among many others.
- Predictive Analytics: Predictive analytics uses statistical algorithms to analyze data and make predictions about future events or outcomes. Predictive analytics can be used in a wide range of applications, including finance, marketing, and healthcare.
- Autonomous Systems: Autonomous systems are machines or software programs that can perform tasks without human intervention. Examples of autonomous systems include self-driving cars and drones used to deliver packages.
The applications of AI are diverse, and its potential uses are limitless. Businesses can leverage AI to automate routine tasks, enhance decision-making, and gain a competitive edge by improving efficiency and revamping outdated business models.
Top AI Stocks in 2023
Artificial intelligence is quickly taking the world by storm, with more and more companies throughout the global economy looking to implement this technology into business processes and operations.
Both private firms, as well as publicly traded companies, are offering unique investment opportunities for investors to consider. However, with so many firms promising to leverage AI algorithms to improve profitability, it can be overwhelming to tell the difference between true AI companies from those who use flashy buzzwords.
The good news is, we’ve identified the top AI investments in 2023. We’ve picked both ETF’s along with individual companies who are investing heavily in artificial intelligence and also have visible proof that their AI systems are providing real value to their customers:
Image Source: Nvidia
Nvidia is a leading manufacturer of the high-performance microchips that power artificial intelligence software and services.
The company is perhaps one of best AI investments in 2023, as Nvidia is providing companies across every industry the technology they’ll need to transform their operations to AI-focused ones.
This is is a great pick-and-shovel play on artificial intelligence as Nvidia is positioned perfectly to benefit from the rise of AI regardless of which industries or other companies succeed. Additionally, with new AI research and other emerging technologies coming to market quickly, Nvidia has a very long runway for further growth.
Image Source: Motley Fool
Much like Nvidia, Advanced Micro Devices is a semiconductor company that has been making significant strides in the development of AI technologies. AMD’s GPU technologies are particularly well-suited for AI workloads due to their parallel processing capabilities, which enable handling large datasets and complex algorithms with speed and efficiency.
AMD’s AI strategy focuses on delivering cutting-edge technology and partnering with leading tech companies, such as Google and Microsoft, to provide AI solutions for a range of industries, including healthcare, finance, and gaming. AMD’s emphasis on innovation, coupled with its partnerships with industry leaders, make it a strong contender in the AI market and a promising investment opportunity for those looking to capitalize on the ever-increasing reliance of next gen semiconductors used to power advanced AI tech.
Image Source: Adobe Blog
Adobe is a leading provider of content-creation software, and its recent move to expand its Firefly collection of generative artificial-intelligence tools further cements its position as an industry leader.
The company’s initial set of AI tools includes a text-to-image feature and a text-effects application, and has already been made available to hundreds of thousands of users. Now, with plans to add video tools to the mix, Adobe is set to revolutionize the content-creation landscape even further. With the ability to make color enhancements, add music and sound effects, and automatically create storyboards from script text, Adobe is bringing powerful new AI-based tools to content creators.
By investing in Adobe, investors can gain exposure to a company at the forefront of the AI revolution and an industry stalwart that is already profitable with strong free-cash flow and a solid balance sheet.
Image Source: Google Play
Alphabet, the parent company of Google, is renowned for pioneering in artificial intelligence. Google’s cutting-edge AI technology is ubiquitous across its platforms, from the incredible precision of its search engine algorithms to the AI-powered features of its Google Maps application, which offers live updates and autocorrection for traffic changes.
In addition to their regular operations, Alphabet also boasts a subsidiary named DeepMind, which specializes in using AI for drug discovery (among other things). Deep Mind has shown promising advancements in artificial intelligence and makes Google a mega-cap firm with the potential for small cap growth as they inevitably penetrate new markets with AI solutions.
Image Source: Kinaxis
Canadian company Kinaxis specializes in providing customers with cloud-based supply chain management and sales and operations planning software in various industries, including aerospace and defense, automotive, tech, and life sciences.
The company’s RapidResponse platform integrates AI and machine learning capabilities to help businesses optimize their supply chain operations and make more informed decisions in real-time. Kinaxis’ software can identify potential disruptions, simulate different scenarios, and provide recommendations on how to improve supply chain efficiency.
The company has a strong track record of customer retention and growth, with a customer base that includes some of the largest companies in the world. As supply chain management continues to be a critical component of many businesses, Kinaxis is well-positioned to leverage its AI technology to help its customers stay ahead of the curve and drive value.
Open Text (OTEX)
Image Source: Newswire
Open Text is a leading global software company that provides intelligent information management solutions to businesses. With a focus on innovation, Open Text is heavily investing in AI and machine learning to enhance its existing offerings and create new ones. Its AI-powered platform, Open Text Magellan, leverages natural language processing and machine learning to extract valuable insights from structured and unstructured data, enabling businesses to make data-driven decisions faster and more accurately.
Additionally, Open Text has developed specialized AI-powered solutions for various industries, including financial services, legal, and healthcare. With a strong commitment to research and development, a robust portfolio of products, and a growing customer base, Open Text is well-positioned to benefit from the increasing demand for AI solutions, making it a promising small cap investment for investors to consider.
Image Source: Microsoft Blog
Microsoft is one of the most talked-about AI firms today, thanks in large part to the success of its ChatGPT software. However, the tech giant has been investing in and utilizing machine learning techniques and artificial intelligence applications for several years now. Since 2019, Microsoft has invested $1 billion in OpenAI, the company responsible for ChatGPT, and secured exclusive rights to provide cloud computing services to the AI lab for the foreseeable future.
Microsoft is committed to making AI technology universally accessible through its Azure cloud computing platform, and with serving over 90% of Fortune 500 companies, this software giant has a mammoth-sized AI opportunity ahead of them as they find new ways to help their customers lower costs, drive value, and improve efficiency with AI solutions.
The company has also launched various initiatives to develop further AI technology, such as acquiring conversational AI technology provider Nuance Communications in 2022 and developing AI-powered tools for programming and healthcare solutions.
Palantir Technologies (PLTR)
Image Source: Business Wire
Palantir provides AI data mining platforms for both government agencies and enterprise businesses. Gotham’s government platform leverages AI to identify patterns in disconnected data, allowing intelligence teams to quickly identify and respond to potential terrorism threats in real time.
On the other hand, Palantir’s Foundry platform helps businesses manage their organizational data, by offering a centralized platform to transform, store and manipulate data to streamline processes and support better decision-making.
Palantir has a strong business model with great free cash flow generation and a long pipeline of catalysts for further growth. Investing in the company is a pure play for how important AI development will be in helping companies and governments make sense of large data sets.
Image Source: C3.ai
C3.ai is a top player in the enterprise AI industry, providing tailored and off-the-shelf AI solutions to companies looking to transform and migrate to the cloud digitally. These AI applications are highly effective in enhancing business operations, identifying fraud, cutting costs, and even improving employee safety.
Investing in C3.ai is a smart move for anyone seeking to enter the AI market as the company’s exceptional expertise and focus on innovation make it a leading contender in the industry. Although the company has yet to report a profit, it is actively expanding, investing in cutting-edge technologies, and maintaining a strong client base, indicating promising future growth potential.
Horizons Robotics And Automation Index ETF (RBOT)
Image Source: Linkedin
For retail investors looking to gain exposure into AI, but who also want to practice sound risk management strategies, investing in this automation and AI index ETF is a great option.
RBOT tracks the Global Robotics & Artificial Intelligence Thematic Index, which offers exposure to robotics and/or artificial intelligence companies. This ETF offers a well-diversified portfolio, which can help manage risk and reduce the reality of individual stock price volatility while still allowing investors the potential to benefit from the return’s artificial intelligence promises.
Pros and Cons of Investing in AI Stocks
Investing in AI can be a great opportunity for those looking to gain exposure to cutting-edge technology that promises to reinvent entire industries and economies. However, like any investment, there are both pros and cons to consider.
On the positive side, investing in AI can offer the potential for significant returns as the technology continues to advance and becomes more widely adopted. Additionally, AI has the potential to revolutionize a variety of industries, from healthcare to finance, and can lead to more efficient and cost-effective solutions.
Though, investing in AI also comes with risks. For example, the technology is still relatively new and untested (in various industries), which can lead to uncertainty and volatility in the stock market. Additionally, as with any emerging technology, regulatory and ethical concerns could impact its growth and adoption.
Case in point, the recent letter signed by technology CEOs (including Elon Musk) stating companies should slow the development of AI-related technologies to allow governments and other institutions time to implement controls and policies to protect citizens from potential risks.
It’s important for investors to carefully consider their risk tolerance and investment goals when considering investing in AI. While the potential rewards can be significant, it’s also important to be aware of the potential risks and manage them accordingly. By doing so, investors can make more informed decisions and benefit from the growth of this exciting new technology while keeping within their risk comfort level.
Is Artificial Intelligence Worth the Hype?
So far, various artificial intelligence developments have shown how incredible and life-changing the technology can be.
The potential for growth and innovation in this field is enormous, with numerous opportunities for investors to capitalize on. In all honesty, AI’s potential to improve a company’s bottom line and society as a whole has only just begun.
But it’s important to keep in mind that investing in any emerging technology comes with inherent risks, including market volatility and uncertainty around regulatory developments.
Looking ahead, the field of AI will undoubtedly continue to progress forward, with other industries like cybersecurity, transportation, and even finance leading to further innovation and technological advancements.
Considering this, artificial intelligence is already showing its worth the hype, and investors who hone in on this trend today, are likely to be handsomely rewarded in the years ahead.