How to invest in AI stocks

Business Insider

AI stocks are taking off. Here's everything you need to know before investing in this emerging technology sector.

Transcript

00:00 AI is expected to boom into a trillion dollar industry in less than 10 years, and stocks

00:07 in that sector are already taking off.

00:10 If you had invested $1,000 in NVIDIA five years ago, it would have been roughly worth

00:15 $20,000 today.

00:17 I'm Laila Maidan, and I cover all things finance.

00:20 So let's talk about how you can invest in AI.

00:23 AI is disruptive technology.

00:26 This means it's an innovation that comes to market and changes everything, the way we

00:30 live, work, and do business.

00:33 Some past examples include electricity, the internet, and smartphones.

00:38 These shifts don't happen often, but when they do, they create incredible investment

00:43 opportunities, and those who understand that can make smart bets and reap exponential benefits.

00:49 In the past, it was mainly Wall Street that benefited from this, but with the creation

00:53 of investment apps, it allows you to buy stock right from your phone, so now anyone can jump

00:58 in.

00:59 So what stocks should you be investing in for AI?

01:02 Well, we can ask ChatGPT, but I've also done the research.

01:06 The development of AI itself has different types of technologies that actually go into

01:11 it.

01:12 This creates a lot of subsectors of AI that we can invest in, one of which is quantum

01:17 computing, which solves complex problems faster than a regular computer.

01:22 Sectors under this include Wipro, MediaTek, Nokia, and Mitsubishi.

01:29 Another sector is machine learning.

01:30 This is the part where we train AI to have human intelligence so it can solve problems

01:35 like we do.

01:36 Here we have ASML, Lam Research, and Onto Innovation.

01:41 AI chips is another sector you can invest in.

01:43 These are little pieces of hardware that can process large amounts of data.

01:48 Sectors in this area include Advanced Micro Devices, Marvel Technology, NVIDIA, and Tower

01:53 Semiconductor.

01:54 Then there's the sector that makes GPUs.

01:57 This is the kind of hardware that creates the graphics, the videos, and the effects.

02:01 In this area, we've got names like Applied Materials, Qualcomm, and Microsoft.

02:07 The next sector is big data and cloud computing.

02:10 This is where data is stored, processed, analyzed, and accessed over the internet.

02:15 Here we have names like MicroStrategy, Juniper Networks, and Micron Technology.

02:21 And then there are the really big players in AI.

02:24 For example, take Microsoft that invested $10 billion in OpenAI, which is the company

02:29 that built ChatGPT.

02:31 And then Google's developing a bunch of its own versions of AI to plug into various products

02:36 that it offers.

02:37 You should also be paying attention to a few of the under-the-radar stocks, like Adobe,

02:42 which is one of the companies that's integrating AI's capability into its programs so that

02:47 you can create images from just a text prompt.

02:50 And then there's a small database and cloud company called MongoDB, which feeds data into

02:55 the AI.

02:56 And a lot of fund managers like this one.

02:59 If you don't want to get into the nitty-gritty of picking and choosing stocks, exchange-traded

03:04 funds, or ETFs, are one way to go.

03:06 They're a basket of stocks that are pooled together for a particular sector.

03:10 It could be AI, and they're managed by professionals.

03:13 Everyone wants a piece of the AI pie, or so it seems.

03:16 But actually, we could still be in the very early stages of adopting this technology.

03:22 Let me show you where we are along what's called the S-curve of adoption.

03:26 These are five stages which represent how technology is adopted by the population.

03:32 Adoption happens slowly at first, with the innovator stage being the early stage.

03:37 This is where people are taking the technology and working with it to create applications.

03:43 And then there are the early adopters.

03:45 These are people that catch on to this technology and they're curious, so they start experimenting

03:49 with it.

03:50 Chances are, if you're watching this video, you could be an early adopter.

03:54 The three stages that come after that are the early majority, the late majority, and

03:59 the laggards.

04:00 These are people that didn't want to adopt the technology, but they had no choice.

04:04 While there's a lot of discrepancy for where we might be along the curve for AI, a lot

04:08 of experts believe we're still in the innovator stage, very early on.

04:12 This means there's still a lot of time to invest in AI.

04:15 But it's an innovative technology, which makes it highly speculative, and that could make

04:19 it really risky.

04:21 So ideally, it should be a small percentage of your portfolio.

04:25 Let's go back to the dot-com boom.

04:27 A lot of excited investors threw a lot of cash at companies that pegged themselves to

04:32 dot-com.

04:33 Kind of like the AI hype now.

04:36 But many of these companies failed.

04:37 They went bankrupt, they got beat out by competitors, and we ended up with the dot-com bubble.

04:43 The Nasdaq, which is an index that tracks technology names, fell by 77 percent, and

04:48 it took it 15 years to get back to that peak.

04:51 But the companies that were successful went on to be some of the biggest in the country.

04:56 Now AI might be even bigger than the internet.

04:59 It's expected to boom to $1.3 trillion in 10 years from where it was in 2022, when it

05:07 was at $40 billion.

05:09 And we may be in the same predicament today as we were during the dot-com years.

05:13 We're not 100 percent sure who the winners will be, but we have some idea of who's innovating

05:18 and developing the grounds for this technology.

05:20 [MUSIC]

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