“The Best Ways to Invest in Artificial Intelligence: From Big Companies to ETFs”

How will AI investments change the future of the global economy?

 Artificial intelligence (AI) is no longer a futuristic concept, but a transformative force that is reshaping industry and everyday life. Before investing in AI, it helps to understand what AI is. AI technology is about giving computers and high-tech products intelligence and problem-solving capabilities similar to those of humans. From virtual assistants in homes to self-driving cars on the road, AI is rapidly being added to many products and applications, leading to investment discussions and questions about the future.

The AI ​​landscape is complex, and news of talent additions to one company reshapes the pace of change across all companies. Even with the best brokers and online trading platforms, choosing the best AI companies to invest in is a daunting task. Just as investors half a generation ago had to sort the wheat from the chaff among web browser, smartphone, and app-based startups, now niche companies and established tech giants are competing for AI market share and research capital.

This article explores how to invest in AI and looks at the best AI stocks and funds.

Key points.

1. Investing in AI technology is not uniform; There are investment opportunities in a wide range of sectors and global AI companies. From startups to established companies, AI has become an important function in a wide range of organizations; while there is great potential for investment opportunities in AI, there are also significant risks if promising companies falter.
2. Laws and regulations, including those related to copyright, are evolving and vary from region to region, which may impact investment.
3. As with other issues, investing in this area requires ongoing education and engagement to understand the potential and limitations of AI-based products.

How to Invest in Artificial Intelligence?
As with other technologies that have emerged in the past, such as the railroad in the late 1800s and the personal computer in the 1980s, there are many ways to invest in artificial intelligence. Some companies have been huge successes, while others have failed in their infancy.

The computer revolution is an apt metaphor for how to invest in artificial intelligence and how to invest in it. Computers paved the way for the automation of mundane, repetitive tasks, and now artificial intelligence is augmenting that concept by automating tasks that once required human intelligence.

Investors can find great AI stocks with double-digit returns in a single year, such as NVIDIA’s announcement of 176% growth in the 12 months to July 23, 2024.

Some may want to invest directly in companies that are developing artificial intelligence, while others may want to invest in companies that are likely to benefit most from the widespread adoption of artificial intelligence. Taking the introduction and growth of the personal computer industry as an example, some investors have successfully invested in computer manufacturers and hardware companies that produce routers and switches. Others have invested in software companies that produce computer programs, while still others have sought to identify companies that would benefit most from the automation that computers provide.

Some of these investments were direct bets on actual computers and technology, while others were more conservative, buying shares in already strong companies that were expected to benefit from increased use of computers. More importantly, there are different ways to invest in new technologies.

One company can acquire the technology and maintain its market leadership position, while a copycat company can better leverage the first company’s technology and achieve long-term success. Since it is difficult to pre-select winning AI stocks, holding multiple AI stocks or choosing an AI ETF will help minimize missteps.

Investing in AI-Related Stocks and ETFs:

Big AI Companies

These are some of the best AI stocks, but you should consider business cycles and valuations before making serious investments. You may want to include dollar-cost averaging in your AI stock selection as a hedge against market declines.

NVIDIA (NVDA):

NVIDIA is at the forefront of the AI ​​revolution by designing and developing graphics processing units (GPUs), related software, and data center networking solutions. It’s also caught the attention of investors: As of July 23, 2024, the company’s stock price had risen 176% in the past 12 months, and it’s up more than 2,885% in the past five months.

Originally developed for the computer graphics and video gaming industries, GPUs have become the backbone of artificial intelligence, machine learning, self-driving vehicles, robotics, augmented and virtual reality applications, and even cryptocurrency mining systems.

Microsoft (MSFT): Microsoft is an example of a legacy tech company committed to investing in AI. Microsoft has a partnership with OpenAI, the developer of ChatGPT. Microsoft is using that partnership to embed AI into its Azure cloud service, and Microsoft 365 has an additional subscription for generative AI called Copilot. In its April 2024 earnings call, Microsoft said 65% of Fortune 500 companies use Azure OpenAI services, roughly the same percentage that said they use Copilot.

AeroVironment Inc. (AVAV): Government contracts with the U.S. Department of Defense and U.S. allies provide some support for this AI-focused brand. AeroVironment Inc. provides unmanned aerial vehicles, tactical mission systems, and high-altitude simulation satellites. The AVAV system provides security and surveillance without the need for a human or driver in the air.

Amazon.com (AMZN): 

Amazon’s AI productivity capabilities improve customer experiences, increase employee productivity, scale creativity and content creation, and maximize operations. Amazon uses AI in its Alexa system and sells machine learning and AI services to commercial customers. Amazon’s cloud computing subsidiary Amazon Web Services provides AI infrastructure that enables customers to analyze data and integrate AI into their existing systems. Amazon also makes its AI assistant Amazon Q available to the public for software development and data analysis.

Taiwan Semiconductor Manufacturing Company (TSM): Taiwan Semiconductor Manufacturing Company is the world’s largest chipmaker and a global player in AI chip manufacturing. As AI grows, the need for powerful computing chips grows. TSM is a mature company that is not involved in AI and continues to produce chips for computing applications, so it may be less risky than other AI companies.

Arista Networks (ANET): Founded in 2008, Arista is a company bridging the gap between technology startups and traditional companies.

Arista is a networking equipment company that sells Ethernet switches and software for data centers. Ethernet is one of the best options for AI workloads, and Arista is well positioned to use its power to improve the way we work, reinvent, and learn.

Adobe (ADBE): Workers around the world have been using Adobe products for years for content creation, document management, digital marketing, advertising, and services. Adobe is among the top companies on our list of the best AI companies to invest in, as AI capabilities are built into many of its products and services, adding to its already impressive competitive advantage.

It has recently underperformed other top AI companies, but it could be a bargain right now.

The company is significantly undervalued and has a four-star rating, according to Morningstar.

Best ETFs for AI:
Investing in professionally managed ETFs and ETFs that own AI stocks lets you leave the identification and selection of AI companies to professional fund managers; ETFs let you own shares in a portfolio of multiple AI companies with a single investment.
iShares Exponential Technologies ETF (XT): 
 XT is a large-cap fund with 186 US and global stocks that are revolutionizing the field.
XT, with $3.4 billion in assets, focuses on harnessing the power of AI to automate, analyze, and innovate new ideas. The fund covers technology, medical, industrial, and financial sectors.

Defiance Machine Learning & Quantum Computing ETF (QTUM): 
This fund provides exposure to AI and machine learning across a range of sectors. The fund mimics the BlueStar Quantum Computing & Machine Learning Index (BQTUM), which tracks 71 global stocks by multiple market capitalization. The Defiance Machine Learning & Quantum Computing ETF tracks the returns of leading next-generation companies specializing in innovative technology and machine learning.

ROBO Global Robotics & Automation ETF (ROBO):
This exchange-traded fund invests in companies specializing in robotics, automation, and artificial intelligence, including growth and hybrid stocks from all market caps.

How to Find AI Investments?

Buying individual AI stocks requires more effort on the part of the investor. Since there are multiple ways to invest in AI, the first step is to familiarize yourself with the sector. To understand the different aspects of AI, there are both pure and conservative sectors in the AI ​​world, and you need to decide which market sector you want to invest in. Once you have decided which sector of the AI ​​market you want to invest in, you can conduct traditional investment analysis (fundamental and technical analysis).

Earnings Forecast: Earnings performance is an excellent way to evaluate a company’s performance, and AI companies with stable and growing revenues should be viewed favorably. Many AI companies are considered growth stocks, so earnings growth will be an important metric for many investors. Earnings announcements tend to move AI stocks up or down significantly.
Annual Reports: These reports provide important details about a company’s operations and future growth plans. Financial statements provide information about a company’s debt ratios and other accounting ratios used in making financial decisions about stocks.
Relative Performance Compared to the Market:
 Relative performance is the performance of an individual stock compared to an index or other stocks. For new AI companies, it is best to compare their relative performance to similar companies.
Growth Analysis: This analysis looks at a company’s long-term growth. It examines revenue, market share, and other metrics to determine a company’s strengths and potential. 
Analyst Forecasts: Analytics and reports are especially useful if you’re new to AI. In this volatile market, new technological developments are constantly occurring and company forecasts change much faster than in more mature sectors. So it’s a good idea to get the perspective of a professional researcher who understands the AI ​​sector in general and the future potential of individual stocks compared to their competitors.

Conclusion:

Investing in AI in 2025 presents attractive opportunities for portfolios. The technology continues to permeate the media, healthcare, automotive, finance, and other sectors.

However, challenges will need to be addressed, including potential legal and regulatory changes, supply shortages, and broader political and ethical considerations related to the environmental impacts of deploying AI systems and operations.

As with investments in new internet and computing industries for decades, winners and losers can change in an instant. For companies looking to capitalize on the AI ​​boom while mitigating risks, it will be important to stay informed and invest selectively in companies that prioritize strong business models.