How to Invest In Artificial Intelligence

Artificial intelligence expands our possibilities by increasing efficiency, providing better product recommendations, and making information more accessible. This technology is still in its early stages, but it became a mainstream investment opportunity in 2023. Many companies give investors exposure to this compelling technology. Corporations are spending billions of dollars on AI tools and solutions. This guide will explore how investors can benefit from the surging demand for artificial intelligence.

What is Artificial Intelligence?

Artificial intelligence is a series of programs and algorithms designed to imitate human thinking and remembering. Just like the human brain, AI systems learn, solve problems, and perform actions to advance certain predefined goals. Algorithms are built on top of algorithms, creating an increasingly complex operation of cognitive ability. AI's impact has been a mainstream discussion topic ever since HAL-9000 and Dave Bowman had their famous altercation in Stanley Kubrick's masterpiece 2001: A Space Odyssey, but research actually goes back to the 1930s. Several researchers, including MIT's Claude Shannon, posited that the electrical impulses passed on by neurons in the brain could be replicated in a machine.

Alan Turing, who cracked the Nazi codes in World War II, wrote that machines could eventually be taught to think at a child level. Today, AI research and development is one of the fastest-growing industries in the world. More than 400 startups researching AI systems have been born in the last decade alone. For investors, these are all great signs of future growth. AI investment will be inherently risky because so much is unknown. Here are a few things to think about before investing.

How To Invest In AI

With increased precision and accuracy, companies using AI can improve products and experiences without hiring a single employee. Routine tasks can be performed indefinitely and outcomes can be improved in healthcare, education, and safety. The research isn't there yet, but here are a few companies at the forefront working to get artificial intelligence more involved with our lives. If you want exposure to the industry, you'll want shares of these stocks.

1. Alphabet Stock

AI research is incredibly important to Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and the company has put a lot of cash into multiple projects. The company has several AI resources such as Google Duplex, a sophisticated AI capable of making appointments by telephone with perfectly mimicked human speech. Alphabet is also in the driverless car race with Waymo, its subsidiary company that tests both automated ride-sharing vehicles and commercial trucks. Alphabet is one of the leaders in AI development and a strong bet for investors seeking AI exposure.

2. Nvidia Stock

Few stocks have been hotter in the last few years than Nvidia (NASDAQ:NVDA), the trillion-dollar chipmaker from Santa Clara. Nvidia produces some of the most powerful computer processors on the planet and is uniquely positioned to leverage its technology into AI research. Its GPU-based deep learning branch has become a focus for analysts, and the company recently had an AI-based breakthrough in brain imaging through a partnership with the Mayo Clinic. Nvidia stock went down in the October correction, but the prospects for AI development are strong.

3. Microsoft Stock

Since Microsoft (NASDAQ:MSFT) has been around for nearly 40 years, the company has a head start in most research areas. Microsoft Azure is its strongest AI platform, and it incorporates a wide variety of tools so data can be better collected and analyzed. Microsoft's focus is on machine learning and works to incorporate AI systems democratically so all people have equal access to the technology. CEO Satya Nadella has reinvigorated the company and Microsoft investors have been rewarded over the last couple of years.

4. Artificial Intelligence ETFs

More AI-based ETFs are in the works. These are two of the options:

• Global X Robotics and Artificial Intelligence ETF (NASDAQ:BOTZ)
• Nasdaq Artificial Intelligence and Robotics ETF (NASDAQ:ROBT)

Both of these ETFs attempt to invest in medium-sized firms working with AI technology. Expense ratios for both are about the same (a high 0.65%), but if you're looking for diversified exposure to AI outside of giants like Google and Microsoft, these ETFs are your best bet. You can invest in AI ETFs and stocks with ease, but only if you have a great brokerage account. Check out some of Benzinga's favorites below. Some feature free trading with new accounts and commission-free ETFs.

5. Chip Producers

Nvidia is one of the largest chip producers in the industry. However, investors can also gain exposure to artificial intelligence through other chip makers. The rising demand for AI solutions will keep chip makers busy.

6. Data Centers

Artificial intelligence tools rely on data centers to operate. Data center companies like Supermicro (NASDAQ:SMCI) have critical servers that are required for AI tools to run smoothly. Rising demand for artificial intelligence will translate into more demand for data centers. 

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