How to invest in the artificial intelligence boom

Artificial intelligence (AI) is changing the way people live and work. But while there may be fears the technology could spark job losses, there are also investment opportunities.

AI is the “hottest area of technology”, said Fidelity, and many investors are keen to gain exposure to it.

Fortunately, there are numerous avenues for those looking to invest in this way. But there are also numerous risks.

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How to invest in AI

A substantial number of options are available for those who want to invest in AI, with many companies developing and producing AI technology across various sectors. Some may be listed on stock markets such as the Nasdaq and the S&P 500.

One of the biggest is semi-conductor chip maker Nvidia, which controls the majority of chip sales with its hardware and software ecosystem.

There are hundreds of AI stocks, said IG, but the market is dominated by a “handful of US blue chips” such as Microsoft, Google, Meta and Tesla.

Investors don’t need to be a “tech expert or spend hours digging through company reports to join this trend”, said Barclays Smart Investor.

Options include investing through a professionally managed fund or exchange-traded fund focused on AI and technology, “which can spread your money across a range of companies from major players in global tech to smaller, fast-growing innovators.”

Is AI a good investment?

AI could “impact every sector”, said Hargreaves Lansdown, such as helping with diagnosing diseases or offering bespoke retail advertising tailored to each consumer, which has “investors excited about their prospects”.

The “scale of the opportunity” has become a “major driver” for investing in AI, said Saxo.

The AI market is expected to be worth more than $826 billion (£621 billion) by 2030, the multi-asset platform added, “reflecting robust adoption across various industries”.

The risks of AI

The “market impact” of AI has been massive, said Trustnet, with major players such as Google, Meta, Amazon, Microsoft and Nvidia helping double the value of the Nasdaq since the launch of ChatGPT in November 2022.

But investors are “growing increasingly concerned” about AI stocks being a bubble that could be about to burst.

Jamie Dimon, the CEO of JP Morgan, along with the Bank of England, are among the latest to warn that the stock market is “saturated with AI megacaps”, said MoneyWeek.

This would be poor timing in the UK, said Politico, with chancellor Rachel Reeves rumoured to be planning cuts to the cash ISA allowance to “push Britain’s savers into the stock market”.

Investors need to see a return from AI stocks, added Hargreaves Lansdown, and there is “evidence of herd mentality” where consumers put money into shares in fear of missing out, “rather than because of company prospects”.

It is important to “understand the specific risks of a fund or trust” and check that its objectives align with yours.

Investment is often risky, and there is a lot of uncertainty as the technology is still developing. As such it is important to do your research, and only invest in companies with a “proven track record of success in the AI space”, said Unbiased.