Investing in AI: What you should know

Artificial intelligence, or Al, is one of the most exciting developments in information technology today. While the technology offers key benefits for consumers and businesses, companies producing the hardware needed for AI could also see potential growth, presenting a range of opportunities for interested investors as well.

What is AI?

A pure definition of Al is the ability to simulate human intelligence in machines through a set of instructional rules, known as algorithms. Al is a way to automate tasks by making machines “smart.”

For example, think about how a fruit stand may operate, with workers sorting fruit from a conveyor belt into labeled bins for apples, bananas and oranges. An AI program could automate this task by sorting prelabeled fruit into the correct bins instead of the workers, helping to create time and cost savings while streamlining resources.

How is AI useful today?

Many tasks can be automated and made simpler with AI. As the technology continues to grow and become more precise, use cases have expanded from simple tasks, like turning off lights in a house, to the very complex, such as autonomous driving at scale.

The most widely used AI functions today include conversational (chatbots), recommendation engines (recommended items from past purchases), fraud detection (automated credit card alerts), image recognition (face scanning) and robotic-process automation (factory robots).

What is the opportunity for investing in AI?

AI continues to innovate the ability to bring efficiencies to various markets, saving time and reducing costs along the way. Given Al’s wide reach and potential impact, it could become not only one of the largest markets in technology, but also one of the fastest growing.

Two primary opportunities for AI investors include:

1. Infrastructure — This refers to the nuts and bolts of Al — the chips needed to power complex algorithms, such as the most advanced central and graphics processing units. Demand could grow as companies that serve as data centers continue to expand and upgrade their hardware.
2. Large cloud service providers — These give customers access to data centers with the most advanced hardware so they can run Al algorithms. Renting computing power tends to be cheaper and more efficient than building it from scratch, especially with the need for frequent upgrades and maintenance. Providers of cloud services could benefit as Al adoption accelerates.

How to invest in AI

Because AI requires so many components, there are many ways to invest in the technology. You could invest in a fund comprised of AI industry–involved companies or a company that creates, trains and operates AI models.

AI stocks

Many AI stocks have seen incredible growth over the past few years, but valuations can still be attractive for investors interested in AI. Stocks offer the opportunity to focus on a specific sector of AI, such as microchip production, cloud services or AI model training.

AI ETFs

ETFs or other managed funds provide the opportunity to hold shares in various AI companies rather than just one.

Ready to learn more about investing in AI? Your financial advisor can help

Are you looking to invest in AI but don’t know where to start? Consider contacting an Edward Jones financial advisor. Your financial advisor can help you understand the benefits and risks of AI investing and develop an investment strategy designed to help meet your needs and goals.