Artificial Intelligence Stocks: Overview, And Why Should You Invest (2024)
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If you're a new investor or trader, the phrase “artificial intelligence stocks” probably conjures up images of Terminator-style robots taking over the world. But the truth is, artificial intelligence (AI) is already all around us and will only become more prevalent in the future.
Artificial intelligence is rapidly changing the landscape of many industries, from healthcare to transportation. And as AI continues to evolve, investing in AI stocks will likely become increasingly popular, and the opportunities in this area will continue to grow.
Artificial intelligence companies are drawing a lot of attention from investors, and it's no surprise to discover that they're quite popular. But exactly what are the businesses these represent doing, and should you invest in them? Continue reading to learn more about this fast-growing industry and how to invest in it.
What is Artificial Intelligence Stocks
AI stocks are businesses that focus on creating or utilizing AI technology. This can include companies that create hardware or software for AI applications, companies that use AI to provide services, or companies researching and developing new AI technology.
Artificial intelligence also presents companies that use deep learning and machine learning tools for their products' sales, manufacturing, and operations.
The concept of AI, machine learning, and deep learning is still new, but it has captured the public's imagination thanks to blockbuster movies like Ex Machina and The Terminator. And while there are still many concerns about the potential risks of artificial intelligence, there is no doubt that it has the potential to revolutionize many industries.
The stocks in this category take advantage of the trend. Although AI is relatively new, many AI-related items and services are on the market today, with most of them being provided by leading technology firms aiming to push the human imagination. Below are some of the most compelling types of AI companies that include:
#1. Health Care Companies
The healthcare industry is one of the most promising sectors for artificial intelligence. AI can help to speed up diagnosis, identify new treatments, and even provide personalized medicine. And with the rising cost of healthcare and an aging population, there is a growing need for AI in healthcare.
Several drug development companies are using AI to identify new drugs and treatments for diseases like cancer, Dravet Syndrome, etc. Biotechnology companies are also getting involved, with many offering their AI platforms in the fight against illness. IBM Watson Health is one of the most well-known examples of artificial intelligence in medicine; it assists clinics, processes data from clinical trials, and more.
#2. Data Management Companies
Data is one of the most valuable assets for any business, and it's only becoming more important as we move into the digital age. But managing data can be a challenge, especially for large organizations. This is where artificial intelligence comes in.
AI can help manage and organize data more effectively and can also be used to find patterns and insights that would be difficult to spot with the naked eye. Salesforce (NASDAQ: CRM) is a good example since it provides the best customer relationship management software for businesses and is a fantastic source of leads for sales staff. They are using AI to score and route leads so that the right salesperson can quickly contact them.
#3. Cloud Computing Companies
Cloud computing is one of artificial intelligence's most popular and fastest-growing areas. This is because AI requires a lot of computing power, and the cloud provides an easy and cost-effective way to access this power.
Major cloud computing services are now offering AI services, including Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Google (NASDAQ: GOOGL). These services make it easy for businesses to start with AI without investing in their infrastructure.
#4. Chip Makers
One of the key components of any artificial intelligence system is the processor, or “chip.” This is because AI requires a lot of processing power to work effectively. As a result, several leading chipmakers are developing AI-specific chips, including NVIDIA (NASDAQ: NVDA) and Qualcomm (NASDAQ: QCOM).
These chips are designed to provide the necessary processing power for AI solutions and are energy-efficient. This is important because AI systems can be very resource-intensive, and energy efficiency is a key concern for businesses.
#5. Augmented Reality Companies
Augmented reality (AR) is another area where artificial intelligence has a major impact. AR is a technology that allows digital information to be overlaid in the real world, and it has a wide range of potential applications.
These businesses have developed technology that can take what it sees and turn it into what the user wants to see, analyzing hundreds of data points in real-time. It is just the beginning for AR, and we'll likely see even more innovative applications of this technology in the future.
#6. Autonomous Vehicle Companies
We all heard about self-driving cars in 2014 for the first time when Google launched its first driverless car. Since then, the autonomous vehicle industry has exploded, with several leading companies working on this technology.
One of the most important applications of artificial intelligence in this industry is in the area of safety. AI, For example, is being used to develop systems that can detect and avoid potential road hazards. This is an important development, as it has the potential to reduce the number of accidents on our roads.
Several leading companies are working on autonomous vehicle technology, including Tesla (NASDAQ: TSLA), Alphabet (NASDAQ: GOOGL), and General Motors (NYSE: GM).
#7. Personal Assistant Companies
We're all familiar with personal assistants like Siri and Alexa, but these are just the tip of the iceberg regarding artificial intelligence in this space.
Several companies now offer AI-powered personal assistants that can book appointments, make restaurant reservations, and even order groceries. These assistants are becoming increasingly sophisticated and will likely become even more ubiquitous.
Personal digital assistants powered by speech recognition technologies from Apple, Google, Amazon.com, and other major tech firms have been working hard to perfect voice identification algorithms that power the devices.
What to look for in AI Stocks
Now that you know about some of the leading companies in artificial intelligence, you may wonder how to pick the right AI stock market. Here are a few things to look for:
#1. Companies that are leading this field
Many different companies are working on artificial intelligence, but not all of them are leaders in space. So it's important to invest in companies at the forefront of this technology.
Some of the leading companies in the AI space include Alphabet, Amazon, Facebook, IBM, and Microsoft. These companies are all leaders in the development of AI technology, and they're well-positioned to benefit from the growth of this industry.
#2. Companies with a strong competitive advantage
Investing in companies with a strong competitive advantage is always a good idea, and it's especially important in the AI space. This is because the AI software market is still in its early stages, and the landscape is constantly changing.
Companies with strong competitive advantages are more likely to survive and thrive in this rapidly-changing environment. Some of the leading companies in the AI space, such as Alphabet and Amazon, have a strong competitive advantage.
#3. Innovation
When it comes to artificial intelligence, innovation is key. This is because the AI industry is constantly evolving, and companies that can innovate and keep up with the latest trends are more likely to succeed.
Alphabet and Amazon are two companies that have a track record of innovation. They're both leaders in the AI space, and they're always working on new and innovative ways to use this technology.
#4. Strong Financials
Investing in companies with strong financials is always a good idea, and it's especially important in the AI space. This is because the AI industry is still in its early stages, and there's a lot of uncertainty about the future.
Companies with strong financials are more likely to survive and thrive in this uncertain environment. Some of the leading companies in the AI space, such as Alphabet and Amazon, have strong financials.
#5. Institutional Interest
Institutional investors, such as hedge and mutual funds, are taking notice of the AI tools. This is a good sign because it means there's growing interest in this space from big investors.
If you're looking for AI stocks to invest in, it's a good idea to look for companies that have seen increasing institutional interest. Some of the leading companies in the AI tech stocks, such as Alphabet and Amazon, have seen growing institutional interest.
Pros and Cons of Investing in Artificial Intelligence Stocks
Pros
- The AI industry is growing rapidly, and it's expected to continue growing in the future.
- Many different companies are working on artificial intelligence, so there are plenty of opportunities to invest.
- Companies that are leaders in the AI space are well-positioned to benefit from the growth of this industry.
- Investing in companies with a strong competitive advantage is always a good idea, and it's especially important in the AI space.
- Innovation is key in the AI industry, and companies that can innovate and keep up with the latest trends are more likely to succeed.
Cons
- The AI industry is still in its early stages, and there's a lot of uncertainty about the future.
- Companies that invest heavily in artificial intelligence may be riskier than other companies.
- Some people believe that the AI industry will eventually reach a point of saturation, so there may not be as much room for growth in the future.
How much of the Portfolio should you allocate to AI Stocks?
Diversification, as most successful investors would tell you, is one of the most important forms of protection for any portfolio. You may safeguard your portfolio from significant losses by spreading it across several asset classes and industries.
That said, you may still want to consider investing a significant portion of your portfolio in AI stocks. This is because the AI industry is growing rapidly and is expected to continue growing in the future.
If you're comfortable with risky investments, you may want to allocate a larger portion of your portfolio to AI stocks. However, if you're risk-averse, you may want to allocate a smaller portion of your portfolio to AI stocks.
However, as always, you must keep your investment in any single stock to a bare minimum. The 5% rule is a good rule of thumb. According to the rule, you should never put more than 5 percent of your entire portfolio value into one stock or a group of high-risk stocks.
For example, if your portfolio is worth $10,000, you should restrict yourself to $500 in any single stock, and only those you are most confident in should receive the full 5% of your portfolio value.
Remember that the 5% rule states that you must invest more than 5% of your portfolio. So there's no need to be embarrassed if you want exposure to stock but aren't sure about it, and invest $50 or $100 to acquire some.
Are AI ETFs a Great choice for Beginners
ETFs are a great choice if you are a beginner and don't know the market. It is a safe investment because you are buying a group of stocks, so even if one stock underperforms, the others may make up for it.
The only thing you need to be careful about with ETFs is that they track a specific index, so if the index drops, your ETF will also decrease. Another thing to remember is that ETFs have fees, so you must be aware before investing.
To sum it up, ETFs are a great choice if you are a beginner investor and want exposure to the AI industry. But if you are more experienced, you may want to choose individual stocks instead.
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Conclusion: Artificial Intelligence Stocks
Investing in the best artificial intelligence stocks can be a good way to benefit from the growth of this industry. However, it's important to remember that AI companies are generally high-risk investments. Therefore, you should only invest a small portion of your portfolio in these stocks.
ETFs can be a good choice for beginners who want exposure to the AI industry without taking on too much risk. However, more experienced investors may prefer to choose individual stocks. Whichever route you choose, be sure to do your research and only invest in companies you are confident in.
Artificial Intelligence Stocks FAQs
What company is leading in AI?
No one company is leading the artificial intelligence industry. Instead, several companies are working on different aspects of AI. Some of the most well-known companies include Google, IBM, Microsoft, and Amazon. You can consider buying C3.ai stocks as some of their company's customers include the US air force, Shell PLC, etc.
What are some good AI stocks to buy?
Some good AI companies to consider buying stocks include:
- Amazon Inc. (AMZN)
- Nvidia Corp. (NVDA)
- Meta Platforms Inc. (META)
- Microsoft Corp. (MSFT)
- Palantir Technologies Inc. (PLTR)
- Alphabet Inc. (GOOG, GOOGL)
- Micron Technology Inc. (MU)
