Technology companies are generally considered growth stocks that offer investors significant upside potential, but few sub-sectors have provided the super-charged returns that artificial intelligence (AI) delivered over last few years.
While not a new technology – AI has been in development since the early 2000s, with industry titan Nvidia (NVDA-NASQ) gaining traction in the GPU space in 2009 – the launch of OpenAI’s ChatGPT Large Language Model (LLM) in November 2022 was when investment into AI exploded in public markets.
JP Morgan now calls AI “one of the most revolutionary technological advancements in recent history”.
According to IDC data, AI spending will exceed $631 billion by 2028, which will create multiple avenues for investors to gain exposure to this hyper-growth market beyond simply investing in companies that develop AI hardware and software.
AI exposure
To gain AI exposure in public markets, investors can invest in individual AI stocks, AI-focused Exchange-Traded Funds (ETFs) or unit trusts (mutual funds), or include companies in portfolios that provide infrastructure, services, or hardware for AI applications.
Invest directly in AI companies
The most straightforward way to gain exposure to AI is to invest directly in companies that have a strong focus on AI technology.
The main beneficiaries of the AI boom have been semiconductor companies that provide the infrastructure and hardware that powers AI.
These AI stocks include Nvidia, Broadcom (AVGO-NASQ), Super Micro Computer Inc. (SMCI-NASQ), Micron Technology Inc. (MU-NASQ), Advanced Micro Devices (AMD-NASQ), and Qualcomm (QCOM-NASQ).
Microsoft (MSFT-NASQ) and Alphabet (GOOGL-NASQ) have made significant investments into developing AI software and technology in the United States.
Generative AI (GenAI) is one sub-sector in the broader AI market where investment into development continues to skyrocket, with players like Microsoft-backed OpenAI. Meta (META-NASQ) has also ventured into the world of generative AI, developing open source advanced models like LLaMA (Large Language Model Meta AI).
Google is another tech company known for its extensive investment in AI, including Google Cloud and its AI research division, DeepMind, with particular focus in areas like natural language processing and machine learning, with products like Google Translate, and the Google AI platform, Gemini.
Invest in companies using AI
Amazon (AMZN-NASQ), Apple (AAPL-NASQ) and Microsoft all integrate AI into their products and services.
Examples include Apple’s Siri and Amazon’s Alexa AI assistants and Microsoft Copilot, an AI-powered chat service that integrates with various Microsoft applications and services, offering users an AI companion to enhance productivity, creativity, and efficiency by generating content, providing suggestions, and automating tasks.
Amazon also uses GenAI capabilities to improve customer experience, improve employee productivity, and optimise processes.
Invest in AI-themed ETFs and unit trusts
Investors looking for broader exposure to the AI theme can invest in ETFs or unit trusts. These funds give investors access to a basket of related stocks, offering diversification across the sector and different themes like semiconductors, robotics, and industry automation, as examples.
There are also actively managed unit trusts that include AI-related stocks selected by professional fund managers who make these selections based on in-depth research and their industry experience.
Invest in Companies that Support the AI Ecosystem
Companies that construct, operate, and power data centres are already emerging as strong beneficiaries of the AI trend.
These companies provide the infrastructure and services that AI applications and LLM models like ChatGPT run on. These companies include cloud computing providers like Amazon Web Services and Meta.
Other less obvious beneficiaries of the AI trend include data centre REITs and companies involved in data centre construction.
The data centres that support the immense computing power needed to run AI engines consume large amounts of electricity, which has had a positive effect on utilities and private renewable energy producers. According to McKinsey estimates, electricity demand from data centres is expected to rise by over 150% by 2030.
Hyper-scalers like Alphabet, Meta, Amazon, Microsoft, and Oracle (ORCL-NASQ) account for around 40% of the data centre capacity, suggests data from Data Center Knowledge.
Making a Return from AI
Gaining exposure to AI in public markets offers a wealth of opportunities for investors—from backing the leading names in semiconductors and software to investing in the broader ecosystem powering AI innovation.
Whether investing directly in the stocks of AI-driven companies, diversified ETFs and unit trusts, or infrastructure players enabling the AI boom, investors can tailor their approach based on their risk appetite and market outlook using platforms like Clarity, by Investec.
With AI adoption set to accelerate across industries and global spending continues to rise, AI remains a transformative trend that could offer significant long-term growth potential and investment returns.
