According to a UBS study, OpenAI’s ChatGPT reached the 100 million user milestone in January 2023. Attracting these user numbers in the space of just two months, they say, has made the chatbot “the fastest-growing consumer application in history”.
ChatGPT is just one of many examples of how AI is making waves. But how can investors capitalise on this success – and what risks are involved?
Ways to invest in the AI space
There are various ways of investing in companies at the forefront of AI:
- Individual AI stocks: Companies of all types are focusing on AI developments, from tiny tech startups to large global players. Some of the bigger names in this sector include the likes of Microsoft, Alphabet, Nvidia, AMD, Amazon and IBM. Smaller and newer companies, like C3.ai, are also touted by some as ones to watch.
- Exchange Traded Funds (ETFs): ETFs will normally include a variety of AI and other tech-focused stocks. By combining stocks from multiple companies, the idea is that the risk can be more balanced than if an investor chose just a single stock. Various AI-focused ETFs exist, including the AI Powered Equity ETF (AIEQ) and the Global X Robotics & Artificial Intelligence ETF (BOTZ).
- Venture Capital Funds: Venture capital firms invest in small businesses or startups with high growth potential – which includes AI and other tech companies. They allow investors access to a diverse portfolio of AI companies – and are generally high risk, but potentially offer high returns.
The risks of investing in AI
While the AI sector is growing, nothing in investing is guaranteed. The prospect of high returns is an attractive one, but those who are considering investing in AI should be aware of the risks that could be involved.
Any fast-growing sector can be volatile, and this is certainly true in AI. It’s a market that’s changing quickly, meaning that market share can change rapidly and players can come and go from month to month.
Some investors may also have concerns around regulation and ethics. As yet, the AI sector has limited regulation, which may put some investors off. There are also ethical concerns around AI: suggestions that it could impact on jobs and on consumer privacy.
With AI still in relative infancy, nobody currently knows how this space will develop. Whether it continues to flourish as it currently is or crashes and burns because of competition, risk and ethical concerns remains to be seen.
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