How to Invest in Artificial Intelligence

Methodology

How to Invest in Artificial Intelligence

At the moment, artificial intelligence is a hot topic, with ChatGPT rising to prominence with its capacity to speedily compose university-level essays on any topic, code apps, or even create content in multiple languages.

With that in mind, a commonly held assumption for the future of A.I. is that it will replace the jobs of millions of people, completely disrupting the job market as we know it today.

It is assumed that A.I. will completely replace customer service representatives, accountants, as well as programmers, to name but a few.

Consequently, the value that A.I. is predicted to deliver in the long term is potentially enormous, representing a substantial opportunity for early-stage investors.

With that said, few investors are aware of the investment opportunities available to them in the A.I. space. Therefore, this article intends to outline four investments that investors can make to gain exposure to A.I. technology.

Before proceeding, it is important to note that as much as A.I. could be the trigger for the next industrial revolution, significant risks remain that investors need to consider. For instance, there is nothing to say that governments won’t excessively regulate A.I. technology, sharply reducing its utility within society.

Microsoft Stock (NASDAQ: MSFT)

OpenAI, the creators of ChatGPT, has received an investment of $13 billion from Microsoft, resulting in the two companies forming a partnership.

Though Elon Musk claims that OpenAI is totally controlled by Microsoft, Satya Nadella claims otherwise. Originally starting as a non-profit organisation, OpenAI shifted towards a capped-profit model in 2019, within which Microsoft will receive a percentage of the profits generated by the organization, once their investment has been returned in full.

As part of the partnership, Microsoft is in the process of aggressively implementing the ChatGPT technology into the Bing search engine, Microsoft 365, Azure, and GitHub, among others. Analysts suggest that this integration could lead to a $30 billion increase in annual revenue for the firm.

From an investor’s perspective, gaining exposure to A.I. through an investment in Microsoft is arguably a safer bet than some of the other companies listed in this article, especially when you consider the other aspects of the business that drive revenue.

Microsoft stock currently stands at $318.52, delivering a 5-year return of 223.83% to shareholders.

Alphabet Inc. (NASDAQ: GOOGL)

Similar to Microsoft, Alphabet represents a safer bet for investors when it comes to gaining exposure to A.I. technology.

Alphabet, the parent company of Google, has been investing in A.I. technology for several years, most notably acquiring A.I. firm ‘DeepMind’ in 2014. At the time of the acquisition of ‘DeepMind’, Google had access to three-quarters of the world’s total A.I. talent.

Much like Microsoft, Alphabet is currently in the process of implementing A.I. technology across its whole business. Among other uses, the company has announced that it will use A.I. to enhance Google search, boost its advertising business, and support content creators on YouTube.

It is expected that the integration of A.I. tools will deliver a significant boost to Alphabet’s revenue across all aspects of its business.

Alphabet stock currently stands at $122.83, returning 126.62% to investors since 2018.

C3.ai (NYSE: AI)

Representing the first of three risky investments into A.I. technology, C3.ai is a company that is primarily focused on A.I. software for enterprises.

C3.ai currently offers two services for customers, which are access to the C3 AI Suite and C3 AI Applications. The C3 AI Suite is of particular interest because it allows customers to design, develop, deliver, and utilize enterprise AI apps.

The solutions provided by C3.ai are scaleable and can be utilized across multiple industries, including manufacturing, oil and gas, financial services, and retail.

C3.ai stock is currently priced $26.82, delivering a loss of -77.57% since its IPO in 2020. The firm is yet to make a profit, with the firm reporting a net income loss of -192.06m in 2022. A strong positive, however, is that firm revenue has grown from $91.61m in 2019, to $252.76 in 2022.

Palantir Technologies (NYSE: PLTR)

Palantir Technologies is a company that is primarily focused on building software that helps organizations minimize security threats.

In April 2023, Palantir launched its A.I. platform, which is designed to help organizations integrate large language models into privately operated networks.

The company’s platform is designed to help firms to incorporate A.I. into their operations at scale, in addition to effectively using A.I. to enhance decision-making.

Stock in Palantir Technologies is currently priced at $11.90, which is around 29.29% higher than the IPO price of $9.20 in 2020. The all-time high of the stock stands at $35.18, which means that the current price is on the lower end of the historic range.

Much like C3.ai, Palantir Technologies is yet to make a profit, though net losses have reduced from -$580.03m in 2018, to -$373.70m in 2022.

Revenue, on the other hand, has grown markedly since 2018, from $595.41m to $1.91bn in 2022. The important question though is whether a market capitalization of $24.86bn is justified or not, particularly when the future of AI is so uncertain.

Notice: The content provided does not constitute personal advice or a personal recommendation. No content should be relied upon as constituting a personal recommendation. If you require any personal advice or recommendations, please speak to an independent qualified financial adviser. No liability is accepted by the author, for any loss or detriment experienced by any individual.

Methodology

Methodology