In today’s rapidly evolving technological landscape, the rise of automated intelligence (AI) stocks has captured the attention of investors worldwide. The potential for AI to revolutionize industries and contribute significantly to the global economy cannot be overstated. According to a 2022 report by PwC, AI is projected to contribute a staggering $15.7 trillion to the global economy by 2030[^1]. With such promising growth prospects, it’s no wonder that investors are closely monitoring the performance of AI stocks.
The Best-performing AI Stocks
When considering AI investments, it is essential to identify the best-performing stocks in the field. The Indxx Global Robotics & Artificial Intelligence Thematic Index provides valuable insights into the top-performing AI stocks. This index ranks stocks based on their one-year returns, offering investors a comprehensive view of the market[^1].
Here are the seven best-performing AI stocks in the Indxx Global Robotics & Artificial Intelligence Thematic Index, as of November 8, 2023[^1]:
Ticker Company Performance (Year) NVDA NVIDIA Corp 224.84% SYM Symbotic Inc 223.17% AIC 3.ai Inc 118.30% PATH UiPath Inc 56.04% PRO Pros Holdings Inc 51.12% AVA AeroVironment Inc. 45.84% DT Dynatrace Inc 45.45% It’s important to note that these rankings are subject to change as the market fluctuates. Therefore, staying updated with the latest market trends and performance is crucial for making informed investment decisions.
Understanding AI Stocks
AI stocks can be broadly categorized into two groups: blue-chip technology companies that have invested in or partnered with AI developers, and small, experimental companies focused solely on AI development[^1]. While investing in small AI developers may seem like a direct opportunity, it’s important to consider the complexities associated with developing and scaling AI models.
Large language models, for instance, require substantial amounts of data and capital to develop effectively. As Michael Brenner, a research analyst at FBB Capital Partners, explains, small companies may develop innovative models independently but often need to partner with larger companies to achieve commercial scalability[^1]. This is why many investors opt for established mega-cap tech companies with significant AI interests.
Investing in AI Stocks
For those new to stock trading, the first step is to open a brokerage account to gain access to the stock market. Once you have a brokerage account, you can choose the level of AI stock exposure that aligns with your investment goals. Investing in individual AI stocks can potentially yield high returns but comes with higher risks, upfront expenses, and extensive research requirements. Alternatively, investing in AI stocks through exchange-traded funds (ETFs) that focus on AI can provide a more diversified approach[^1].
Exploring AI ETFs
Investors can gain exposure to AI stocks through ETFs that invest in a basket of companies involved in AI development and implementation[^1]. Several AI stock indexes, such as the Indxx Global Robotics & Artificial Intelligence Thematic Index and the Nasdaq CTA Artificial Intelligence & Robotics Index, are tracked by ETFs. When searching for AI ETFs, it’s essential to thoroughly research each option to ensure alignment with your investment strategy.
While some ETFs with “AI” in their name invest directly in AI-linked companies, others utilize AI-powered trading strategies but may not invest exclusively in AI stocks. Therefore, it’s crucial to understand the composition and underlying assets of each AI ETF before making investment decisions.
Evaluating the AI Bubble
With the rapid rise of AI-related news and developments, there has been speculation about the existence of an AI bubble. In early 2023, certain small companies experienced significant stock price increases after being associated with AI-related news. However, industry experts caution that these price surges may not always reflect substantial changes in business fundamentals[^1].
Haydar Haba, founder of Andra Capital, highlights that some investors may be overly enthusiastic about AI’s potential without considering the practical implementation and monetization of cutting-edge techniques[^1]. While valuations of individual AI-linked companies have seen notable increases, it is important to consider the broader market context. Many technology stock indexes are still below their 2021 highs, suggesting that we may not be in a bubble in the macro sense[^1].
Making Informed Investment Decisions
Investing in AI stocks requires careful consideration and informed decision-making. It is crucial to diversify your portfolio and avoid concentrating too heavily on individual stocks or narrowly focused ETFs. A widely accepted guideline is to allocate no more than 10% of your overall portfolio to individual stocks[^1]. By adhering to this principle, you can mitigate the risks associated with targeted investments and maintain a balanced portfolio.
While individual investors should evaluate their risk tolerance and ability to weather stock market volatility, investing in AI-related companies as part of a diversified portfolio can yield favorable results[^1]. Machine learning and AI technologies are poised to have a transformative impact on various industries, making AI stocks an attractive investment opportunity.
In conclusion, the rise of automated intelligence stocks presents a lucrative investment opportunity for those willing to navigate the complexities of the market. By staying informed, diversifying their portfolios, and making sound investment decisions, investors can position themselves to benefit from the growth and advancements in AI technology.
Remember, investing always carries inherent risks, and it’s advisable to consult with a financial advisor before making any investment decisions.
Disclaimer: The author owned shares of Alphabet at the time of publication. This article is for informational purposes only and should not be considered as financial advice.