Ways to Invest in Artificial Intelligence Without Getting Burned
What is Artificial Intelligence (AI)?
Artificial Intelligence (AI) refers to the simulation of human intelligence in machines that are programmed to think like humans and imitate their actions. This term can also be applied to any machine that has a function related to the human mind, such as Learning and problem-solving.
The ideal feature of artificial intelligence is its ability to optimize and take actions that have the greatest chance of achieving certain goals.
Understand artificial intelligence
When most people hear the term artificial intelligence, they usually think of robots first. This is because big-budget films and novels weave stories about humanoid machines destroying the earth. But nothing could be further from the truth.
Artificial intelligence is based on the principle that human intelligence can be defined in such a way that machines can easily imitate and perform tasks, from the simplest to the most complex. The goals of artificial intelligence include learning, thinking, and perception.
With advances in technology, the previous indicators that define artificial intelligence are no longer valid.
For example, machines that compute basic functions or recognize text through optical character recognition no longer embody artificial intelligence, as these functions are now viewed as inherent computer functions.
AI is evolving for the benefit of many different industries. Machines are linked through an interdisciplinary approach based on mathematics, computer science, linguistics, psychology, and others.
The AI market is growing rapidly and could cost $ 46 billion over the next three years, based on an expected annual growth rate of around 54%, according to International Data Corporation.
The artificial intelligence market promises to have a major impact on the global economy, and PwC estimates artificial intelligence could add about $ 15.7 trillion. Dollar to global GDP by 2030
Today, most investors are in this trend, and so are you. Here’s what you need to know about the industry and how to invest in it.
Benefits of investing in artificial intelligence
This is a growing industry with great prospects
As calculated, the artificial intelligence industry is booming and is likely to continue this trend for many years.
The revenue generated by AI is estimated to be a compound annual growth rate (CAGR) of 54.4% over the next 5 years, more than double the growth rate of other advanced technology subsectors. This industry has very good prospects for an investor.
It has many uses and high return potential
Artificial intelligence is a technology with applications in almost every industry. This is part of what makes AI so attractive and requires a lot of investment.
This has the potential to disrupt a large number of existing businesses. There will be improvements in various areas over the next ten years. Just a few of the many major applications that can become relevant are transportation, health care, security, entertainment, education, personal robots, and many more.
There are many established companies
Many of the major players in AI have started companies with other problems. Take IBM as an example, apart from AI, there are other products such as data and analysis, IoT, IT security, IT infrastructure, and others. Large companies like IBM help reduce investment risk because these companies are already diversified.
Even if the AI department doesn’t live up to expectations, you should have lots of other profitable products managed by the company that can help you keep your investment going.
On the other hand, this can reduce profits compared to smaller companies that focus solely on AI.
Risks you may face when investing
This industry is very unstable
One thing about artificial intelligence is that it can decline a lot, quickly and then increase a lot.
Investing in the technology sector can be very volatile and it is very difficult to predict how a company will perform in it. The recent Facebook data scandal and the decline in the company’s market value are examples of risks in the industry.
It’s very competitive
The AI field is very competitive. This is because many large companies are investing in this industry and all of them are competing for who will bring out the latest technology products or services.
As of August 2017, CBInsights identified 33 different companies working on developing driverless cars. Other areas are equally competitive and the company is unlikely to be commercially successful. If you don’t (and even then) invest in a diverse portfolio, your risk is high.
How to invest in artificial intelligence without getting burned
Invest in Exchange Traded Funds for AI
Equity funds are securities that track an index, commodity, or basket of assets. In the case of an AI investing ETF, the ETF will have stakes in several companies that focus on AI.
When you invest in an ETF, you are indirectly owning some of these companies (even though you have no direct claims from them). You can diversify your portfolio with ETFs.
However, with a dedicated AI ETF, you rely heavily on the industry. So if the overall AI goes down, your investment will almost certainly depreciate.
If you don’t have the cash to avoid the risk of a stock split, you need to consider ETFs (exchange-traded funds) that invest in companies that push technology behind AI.
ARKQ owns many of the above shares as well as many others. Diversifying your holdings with an ETF like ARKQ or others (with 40 to 100 shares) is a much better choice.
Unless you have a fairly diversified portfolio and you don’t plan to “harm the stock” by observing generate the greatest profit prospects over time
Buy AI shares
Another way to invest in artificial intelligence is to buy shares in affiliates. When you invest, aim to buy shares of companies with a long-term competitive advantage in outer space.
Competitive advantage can be described as a company that has access to a large amount of its data. Facebook, Google, Amazon are some of these companies.
The biggest investors in AI include Alphabet, Facebook, Amazon, and Microsoft. However, investing in individual stocks is a risky approach because you will only depend on the results of that particular company.
Another way to gain exposure is through a broad technology collective fund that spreads investments across dozens of different companies.
Invest in individual companies
Investing in a specific company is a higher risk strategy because you only rely on a few companies to be successful. Specific business investments should be part of a more diversified strategy. That way you can reduce the risk.
Many websites offer a “selection” of stocks for you to invest in. However, you must always make the right decisions. Before taking steps on this issue, do your research about the company and its value and potential values. If you can’t do it yourself, hire a professional.
Note: The Artificial Intelligence market is projected to cost $ 46 billion by 2020, but many investors may need to be patient as their particular investment segment starts to take shape.
For example, if you’re investing in NVIDIA because GPUs will likely power many driverless cars, keep in mind that it will likely take another two decades for fully self-driving cars to become available everywhere.
PricewaterhouseCooper predicts that AI will add $ 15.7 trillion to global GDP by 2030. If so, some AI investors could make big profits. But before that time comes, artificial intelligence investors need to be patient with their investments and give them time to contribute.