Considerations Before Investing In AI Stocks

—TechRound does not recommend or endorse any financial, investment or trading practices. All articles are purely informational—

Artificial Intelligence (AI) is technology that lets machines perform tasks that usually require human intelligence. It’s becoming a big part of everyone’s daily life and the economy, sparking a lot of interest from investors. As AI continues to grow, it’s important to know how to invest in this area effectively.

Just like the rise of railroads in the 1800s or personal computers in the 1980s showed, new technologies can offer big opportunities for investors. But it’s also true that while some companies will succeed hugely, others might not make it.

The rise of computers, which helped automate simple tasks, is a good comparison to AI. AI is taking this a step further by automating complex tasks that usually need human thinking. This article will look at different ways you can invest in AI as it moves from just being an idea to being widely used in the real world.


Exploring the Leaders in Artificial Intelligence


There are many ways to invest in a sector like AI, which is quickly becoming a game-changer. By identifying trends that shake up industries, investors can grow their portfolios. However, there’s a lot of competition, and it’s not always easy to tell which companies will come out on top.

For those new to investing, understanding the basics is crucial. Learning how to start investing in stocks can provide a solid foundation, ensuring you make informed decisions as you explore thematic investing in AI.

You might choose to invest directly in companies making AI technology, or in companies that are set to benefit from using AI. Here you will explore some specific stocks that fit into these strategies for investing in AI, aiming to give a range of options for different types of investors;

Tesla (TSLA): Tesla is a standout name in the artificial intelligence sector, particularly known for its innovations in autonomous driving technology. The company’s vehicles use AI to make split-second decisions based on real-time data from the environment.

This includes recognising other vehicles, interpreting traffic signals, and detecting pedestrians, which are crucial for safe driving. Tesla’s approach to AI is a perfect blend of technology and practicality, making it easier for people to understand the powerful impact of AI in everyday life.

NVIDIA (NVDA): NVIDIA has positioned itself as a powerhouse in AI technology, particularly famous for its work in generative AI. This area of AI focuses on creating new content—whether it be images, texts, videos, or even computer code from existing data.

NVIDIA doesn’t just create the software for these tasks; it also builds the hardware, like GPUs, which are essential for running AI operations efficiently. These GPUs are a big reason why NVIDIA holds an impressive 88% of the market share in this industry.

Microsoft (MSFT): Microsoft has heavily invested in AI, with initiatives totaling around $13 billion. This includes a significant early investment in OpenAI, known for the popular AI programme, ChatGPT.

Microsoft incorporates AI into many of its products, from the Bing search engine to its Office 365 suite, enhancing tools like X-Box and GitHub with AI capabilities. The company also focuses on developing AI apps and expanding its range of AI plugins, aiming to make AI tools more accessible to users and developers.

Taiwan Semiconductor Manufacturing (TSM): Known as the world’s largest chip maker, TSM is integral to the AI industry. It manufactures the robust computing chips necessary for AI systems.

Besides AI, TSM also produces chips for traditional computing applications, which diversifies its risk and makes it a steadier investment compared to companies solely focused on AI.

Meta Platforms (META): Meta, formerly known as Facebook, has made significant strides in AI. It uses advanced AI models to enhance how users interact with content, making predictions about what they might like to see next.

Meta has also developed its own AI-specific chips and built state-of-the-art data centers to support its vast AI operations, demonstrating its commitment to leading in AI technology. (AMZN): Amazon integrates AI across various products, most notably in its Alexa virtual assistant. Through its subsidiary, Amazon Web Services (AWS), it offers a suite of AI tools that help businesses analyse data and improve customer service.

AWS supports a wide range of industries, demonstrating the versatility of AI applications from personalised shopping recommendations to enhanced data security.

Apple (AAPL): Apple uses AI to power Siri, its virtual assistant, and continues to integrate AI in its services. The recent launch of the ChatGPT app for iPhones is a testament to Apple’s strategy to earn from AI-based applications hosted on its platform.

With its large financial reserves, Apple is well-positioned to either develop new AI technologies or acquire emerging AI companies.


How to Invest in AI Technology


Investing in AI is more than just buying stocks; it involves understanding the entire sector and its different components. Here’s a simpler guide on how to approach AI investments:

Start with education: Learn about AI, its uses, and the different types of companies involved. Understanding both high-risk and more stable investment opportunities in AI will help you decide where you want to invest.

Analyse earnings and growth: Look at companies’ earnings reports to gauge their financial health. Consistent and growing earnings are a good sign, especially in a fast-evolving field like AI. Growth analysis, including looking at earnings trends and market share, will give you a picture of a company’s stability and future prospects.

Read annual reports and analyst projections: Annual reports provide a wealth of information about a company’s operations and financial status, which can help in making informed investment decisions. Additionally, analyst projections can offer insights into industry trends and how specific companies might perform in the future.

Compare performance: Comparing how different AI companies perform against each other and broader market indices can give you insights into which companies are leading and which might be lagging.

Navigating the artificial intelligence landscape as an investor requires a blend of knowledge, insight, and strategic foresight. By understanding the foundational elements of AI, the role of key players, and the dynamics of the AI market, investors can make informed decisions.

It’s crucial to continuously educate yourself about the latest developments and to evaluate investments with a critical eye towards both growth potential and stability.

—TechRound does not recommend or endorse any financial, investment or trading practices. All articles are purely informational—