Invest in Artificial Intelligence Before It Changes the World
Thousands of years ago, it was fire. In the 1800’s, it was electricity. And in the future, it will be artificial intelligence.
These discoveries have or (in the case of AI) will change the trajectory of mankind. While fire and the commercialization of electricity weren’t financial successes’ the world is vastly different now because of them.
AI not only has the potential to change the world, but to make investors rich along the way.
The number-one thing that we know is just the widespread potential applicability. That said, we’re quite early in terms of the adoption of these technologies, so there’s a lot of runway to go. One of the other things that we’ve discovered is that one way to think about where the potential for AI is, is just follow the money…We see the potential for trillions of dollars of value to be created annually across the entire economy.
In order to make substantial returns, investors need to be early or hold for a very long time — or both! This phenomenon is potentially playing out in front of us in many industries: electric cars, marijuana stocks, quantum computing. AI can have a bigger impact than any of those.
What is Artificial Intelligence
AI is a very common buzzword thrown around these days. No matter what industry you’re in, you are likely to hear someone mention it.
Artificial intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The term may also be applied to any machine that exhibits traits associated with a human mind such as learning and problem-solving.
The ideal characteristic of artificial intelligence is its ability to rationalize and take actions that have the best chance of achieving a specific goal.
Computers are great at crunching numbers. I trust an old calculator more than my college math professor. Computers are also great at running programs and models.
What we as humans are great at doing is using the capabilities and technologies of computers combined with our understanding of human emotion and behavior to come to a reasonable conclusion.
AI seeks to combine machine capabilities with human intelligence. Essentially to develop machines to think and act like humans.
50% scary, 50% exciting.
Industry Opportunity
Business leaders and investors universally agree that Artificial Intelligence (AI) and Machine Learning (ML) will transform their businesses by reducing costs, managing risks, streamlining operations, accelerating growth, and fueling innovation.
The potential for AI to drive revenue and profit growth is enormous.
The opportunities from AI are expected to be staggering. Any company could utilize AI to enhance its practices.
This could range from companies in healthcare, e-commerce, logistics, and more.
International Data Corporation (IDC), a global market research company, forecasts worldwide revenues for the AI market to be $327.5 billion in 2021. They expect a five-year compound annual growth rate (CAGR) of 17.5%
IDC breaks the AI market into three segments: software, services, and hardware. Software currently makes up the bulk of the revenue share, representing 88% of the total for 2020.
How to Invest in Artificial Intelligence
Like any other exciting, new technology, “big tech” already has prioritized understanding it.
There are plenty of companies to evaluate when deciding which stocks in the AI market to invest in.
Some of the biggest names in tech should be considered.
- Apple is building a new campus and engineering center in North Carolina creating 3,000 jobs in machine learning, artificial intelligence, and other related fields. Apple also recently hired former Google scientist Samy Bengio to lead a new AI research unit.
- Microsoft recently acquired a speech recognition software maker company, Nuance Communications, for its artificial intelligence tools that are widely used in the health care industry.
- IBM is using its AI technology to enhance solutions in both the healthcare and financial industries. They generated over $2.5 billion of revenue from AI in 2018, according to IDC.
- Amazon uses AI in almost everything from its product rankings, recommendations, logistics, cashier-less grocery stores, and much more.
- NVIDIA is considered a leader in the graphic chip industry. Any company in this chip industry can stand to benefit from a boom in AI technology.
There are also some smaller, less known companies one could invest in. AI may have a more direct impact on these companies, but these companies are not as large and steady as the previously mentioned companies.
Some of these companies, among many others, include:
- Coupa (COUP) — a global technology platform for Business Spend Management.
- Pegasystems Inc.(PEGA) — develops software for customer relationship management, digital process automation, and business process management.
- Teradata Corporation (TDC)— a provider of database and analytics-related software, products, and services.
- Upstart Holdings Inc (UPST) — an AI lending platform that partners with banks to provide personal loans using non-traditional variables.
There are also a variety of other AI companies that are still too early to be publicly traded. Some can be invested in for accredited investors, but unfortunately, most of us aren't accredited.
And as always, there are also ETFs to invest in for the AI industry.
Etf.com provides 27 options; some of the ETF names I’ve seen the most from my research are ROBO Global Robotics and Automation Index ETF (ROBO), First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT), and iShares Robotics and Artificial Intelligence Multisector ETF (IRBO).