Best AI Investments for Your Portfolio

Artificial intelligence (AI) investments offer significant growth opportunities as AI and robotics emerge as revolutionary technologies to change how people live and work in the next decade. Even the government is dedicated to developing AI. Investors have a great opportunity to get in on some of the best companies emerging as market leaders. 

To find the best AI investments, you can use exchange-traded funds (ETFs) and individual stocks as a part of a diversified investment portfolio. Read on to find simple ways to invest in AI.  

5 Best AI Investments

Here's a look at some of the best AI investments you can add to your portfolio this year.

• Best Overall AI: Microsoft stock
• Best for Growth Potential: Broadcom stock
• Best AI ETF: Global X Robotics and Artificial Intelligence ETF
• Best Sustainable AI ETF: iShares Robotics and Artificial Intelligence ETF
• Best for International Investments: Axis Growth Opportunities Fund

1. Best Overall AI: Microsoft Stock

With its partnership with OpenAI, Microsoft Corp. (NASDAQ: MSFT) is already an AI leader. Its portfolio includes a new version of the Bing search engine powered by ChatGPT. It is working on harnessing AI, from automated clinical documentation in healthcare to offering customers the option to build custom AI tools. Microsoft’s main AI offerings include memory chips for data centers and self-driving cars, which have the potential for significant growth.

2. Best for Growth Potential: Broadcom Stock

Broadcom Inc. (NASDAQ: AVGO) has huge AI growth potential; for example, it advertises that its system-on-chip completes AI workloads 10% faster than InfiniBand-based network systems. Broadcom is currently outperforming the rest of the AI industry on the strength of its custom chips. Products include digital and mixed signal complementary metal oxide semiconductor-based devices that could grow to include 25% of semiconductor revenue next year, up from 15% this year.

3. Best AI ETF: Global X Robotics and Artificial Intelligence ETF

The Global X Robotics and Artificial Intelligence ETF (NASDAQ: BOTZ) aims to invest in companies that could benefit from adopting and using robotics and AI, including industrial robotics and automation, non-industrial robots and autonomous vehicles. As an ETF, this choice benefits from a diverse portfolio and a strong performance with a 9.42% annualized return since inception. Major positions include NVIDIA, Intuitive Surgical and ABB LTD-REG.

4. Best Sustainable AI ETF: iShares Robotics and Artificial Intelligence

A second strong ETF contender, the iShares Robotics and Artificial Intelligence Multisector ETF (NYSEARCA: IRBO), is looking to take advantage of significant projected growth in robotics and AI in the next seven years. iShare’s offering blends companies with sustainability objectives with strong robotic or AI developments. Major positions include iRobot Corp, Intel, Kawasaki Heavy Industries and Netflix. 

5. Best for International Investments: Axis Growth Opportunities Fund

Axis Growth Opportunities Fund is a large and mid-cap growth fund that has shown a 28.4% annualized return over the last three years. The goal of the fund is long-term returns for investors from equity and equity-related securities of companies with a long-term perspective. While Axis Growth Opportunities Fund doesn’t specifically focus on AI, major holdings include 11.21% of investments in IT software. Holdings include major Indian companies like Tata and Bajaj Finance. 

What is an AI Investment? 

AI investments are investments in companies developing the technologies and language models that can revolutionize the way people live, work and interact with computers. Most AI investments include robotics and large-scale applications of robotics, from industrial production to healthcare.

Despite growing concerns and warnings from professionals developing AI technology, there's no doubt that AI will play a key role in future developments. Investors can get in on these emerging technologies to maximize returns. You can invest in individual companies' stocks that are developing AI or in funds that include a diverse portfolio of AI investments. AI investments should be in the context of a diversified investment portfolio. 

Things to Consider With an AI Investment

When looking at AI investments, you'll want to evaluate market potential, emerging ethical concerns and regulations. Here's what to take into consideration. 

Technology and Competitive Advantage

Assess the technology and AI capabilities of the companies you are considering investing in. Look for companies that have a clear competitive advantage, unique algorithms, proprietary data sets or innovative approaches that differentiate them from their competitors. It is crucial to understand the company's technology and its potential for scalability and commercialization.

Market Potential

Evaluate the size and growth potential of the market the AI investment is targeting. Consider the industry or industries in which the AI technology is applied and assess the market demand and adoption rate. Look for industries that can benefit significantly from AI advancements, such as healthcare, finance, retail, manufacturing or transportation.

Intellectual Property and Data

Assess the company's intellectual property (IP) portfolio and data assets. Determine if the company has patented technologies or proprietary algorithms that provide a competitive edge. Understand the ownership and usage rights of the data the company relies on for its AI applications. Strong IP protection and access to high-quality data can be significant assets in the AI field.

Management Team and Expertise

Evaluate the management team's experience, qualifications and expertise in AI. Look for leaders who deeply understand AI technology and its potential impact on their business. Assess their ability to execute strategies, adapt to technological advancements and navigate the complex AI landscape.

Financial Performance and Viability

Analyze the financial health and stability of the company. Review its revenue growth, profitability and cash flow. Assess its ability to generate sustainable returns on investment and its financial capacity to fund research and development efforts. Consider the business model, cost structure and ability to generate revenue from AI offerings.

Partnerships and Collaborations

Assess the company's partnerships and collaborations with other organizations. Partnerships with industry leaders, research institutions or government entities can enhance the company's credibility, access to resources and market reach. Consider how these collaborations contribute to the company's competitive advantage and potential growth prospects.

Regulatory and Ethical Considerations

AI technologies are subject to regulations and ethical considerations. Assess whether the company adheres to regulatory requirements and ethical standards in its AI practices. Consider the company's approach to privacy, data security, fairness, transparency and bias mitigation. Compliance with regulations and responsible AI practices can mitigate risks and enhance long-term sustainability.

Risk Management

Understand the risks associated with AI investments, including technological risks, market competition, changing regulations and potential ethical implications. Evaluate the company's risk management strategies and its ability to identify and address potential risks. Consider diversifying your AI investments across multiple companies or sectors to reduce concentration risk.

Long-Term Outlook

Assess the long-term outlook for AI technology and its potential impact on the industry or industries in which the company operates. Consider future trends, emerging applications and the potential for disruptive innovations. A long-term perspective is crucial when evaluating the growth potential of AI investments.

Advantages of AI Investments

AI investments come with significant advantages. Here are the biggest reasons to consider investing in AI.

Potential for Innovation and Disruption

AI investments offer the potential for significant innovation and disruption across various industries. AI technologies have the capability to automate processes, optimize operations and generate insights from large volumes of data. By investing in companies at the forefront of AI development, investors can benefit from groundbreaking advancements that have the potential to reshape industries and create new business opportunities.

Improved Efficiency and Productivity

AI can enhance business efficiency and productivity by automating repetitive tasks, streamlining workflows and providing real-time data analysis. AI-powered systems can improve decision-making processes, optimize resource allocation and reduce operational costs. Investments in companies leveraging AI technologies can lead to increased efficiency, improved performance and higher profitability.

Enhanced Competitive Advantage

AI investments can provide companies with a competitive edge in the market. By leveraging AI algorithms and machine learning models, businesses can gain insights into customer behavior, personalize offerings and deliver targeted marketing campaigns. AI can also enable predictive analytics, allowing companies to make data-driven decisions and anticipate market trends. Investing in companies that successfully integrate AI into their operations can lead to enhanced customer engagement, improved customer satisfaction and a stronger market position.

Disadvantages of AI Investments

AI isn't without a few major disadvantages, including technological limitations and ethical concerns. Before investing in AI, consider the disadvantages and weigh them with the overall benefits. Disadvantages include:

Technological Limitations and Uncertainty

AI technologies are rapidly evolving, and investing in AI carries inherent risks associated with technological limitations and uncertainties. While AI has made significant advancements, there are still challenges to overcome, such as limitations in data quality, algorithm accuracy and the interpretability of AI models. Investing in AI companies or technologies that fail to address these limitations or encounter unexpected technical hurdles could result in underperformance or loss of investment.

Regulatory and Ethical Considerations

AI investments are subject to regulatory frameworks and ethical considerations. As AI technologies become more prevalent, governments and regulatory bodies are increasingly focused on ensuring responsible AI practices. Regulatory changes and compliance requirements can impact the operations and profitability of AI companies. Additionally, ethical concerns related to privacy, bias, transparency and the impact of AI on jobs and society can affect the public perception and market acceptance of AI investments.

Dependence on Data and Algorithm Quality

AI technologies heavily rely on high-quality data and accurate algorithms. Investing in AI companies or technologies lacking access to relevant and reliable data or struggling to develop robust and accurate algorithms can lead to poor performance or unreliable outcomes. Data biases, data breaches or algorithmic errors can have negative consequences on the effectiveness and trustworthiness of AI systems, potentially impacting the value of AI investments.

Choosing AI Companies to Invest In

When choosing companies, look at their technology, future potential, management, financial portfolio and past performance. Whether you choose a broad-based fund or individual AI stocks, investing in AI companies with strong growth potential can potentially offer higher long-term returns. 

AI is the way of the future, but as an emerging technology, any investment carries greater risk than, for example, an indexed fund for the S&P 500. That's why choosing to invest in AI should be balanced with other lower-risk alternatives. Balance risk and enjoy potential long-term rewards. Want to get started? Find some of the best AI stocks and keep up with the latest AI news here.

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