How to use artificial intelligence as an investment opportunity

In the finance course we discuss funds and ETFs that have been put forward by the participants as case studies. Usually there is a colorful mix of world ETFs, sustainable themes, various pension funds. In the March course, the questions and examples about artificial intelligence piled up (and no, the group of participants was not a concentration of ETH folks).

Artificial intelligence has been around for a long time, its beginnings date back to 1956. But since ChatGTP, the chatbot that generates texts, answers questions and can program, has been available for free to interested parties and managed to inspire more than 100 million active users within 2 months, the topic of artificial intelligence (AI) has received media attention and discussions. I wondered: is AI a promising trend that is also worth looking at for investments, or is it more of a temporary hype like last year with the Metaverse, before that with NFTs, and once, long ago, with cannabis funds? Here are some thoughts and facts about it.

Besides the growing prominence of ChatGTP, there are a number of factors driving the rapid development of artificial intelligence:

In addition to all advancements, there is also great concern and criticism of the further spread and use of AI. That’s how thousands of tech experts around the world shout in one open letter to a temporary halt in development and the urgent introduction of security protocols. Some of the main fears are:

Artificial intelligence has the potential to transform industries from logistics to healthcare and finance. Here are a few things to keep in mind and ideas if you want to invest in AI.

As with any investment, it’s worth it Get to know the industry and the technology. You don’t have to become an AI super guru for this, but a basic knowledge of existing and new developments helps you to better assess the various possibilities. The AI ​​industry is huge and includes several sub-sectors such as: B. natural language processing and machine learning.

It can be exciting for your plant to watch which sub-areas show the greatest growth. For example, AI is used to optimize supply chains in logistics and transport and to improve diagnostics and personalized medicine in healthcare. Such sub-areas can offer interesting opportunities to take advantage of the growth opportunities. Information on this can be found in industry reports such as Stanford University’s AI Index Report, the EU’s AI Watch or the McKinsey report.

There are several ways to invest in AI, For example, buying shares in companies that stimulate technological development and application, investing in funds and ETFs, and direct investments in innovative start-ups. Here are some thoughts on individual stocks and examples of funds and ETFs.

One possibility is this Buy shares of AI specialized companies, which are also traded on the stock exchange. These are, for example, C3.ai (AI software manufacturer) or Palantir Technologies (data analytics and AI).

Those who prefer something more traditional can go to the big tech giants, who do a lot of research into AI and develop various applications. Here are some examples:

like you If you don’t want to invest directly in the tech giants, you can also look around in different industries and choose companies that specifically use AI for disruption. Here are some illustrative examples from the healthcare and financial industries:

Investing in shares of individual companies, AI or not, is highly volatile. To minimize the risk you need good research and should not risk everything here again, but ideally cover multiple areas of AI with different companies.

Funds and ETFs allow you to invest in a wide variety of different AI topics and companies. Compared to individual stocks, this has the advantage that you are diversified from the start and can also invest with smaller amounts, especially with ETFs. Here are some illustrative examples:

AI Powered Equity ETF (AIEQ): This ETF uses IBM Watson’s AI to make investment decisions and has generated approximately +17% total returns since 2017 (Morningstar, April 2, 2023).

Global X Robotics & Artificial Intelligence ETF (BOTZ): In existence since 2010, it invests in companies involved in the development and use of robotics and artificial intelligence and has a total return of +11% over the last 5 years (Google Finance, 2 April 2002).

Other examples of ETFs include: iShares Robotics and Artificial Intelligence ETF (IRBO), First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT), VanEck Vectors Video Gaming and eSports ETF (ESPO), Ark Autonomous Technology & Robotics ETF (ARKQ).

As you can see, artificial intelligence is already embedded in some areas of our lives and there are very different ways to participate in future developments. This article was not written by ChatGTP, by the way, but the chatbot was a useful additional resource for research 😉.

How do you see it: opportunity or hype? Is it worth investing in AI in the long run or is it just a short-term trend?