Read on to find out more about AI stocks.
Best AI Stocks in 2023
Regardless of whether you're a newcomer to the stock market or you're more of a veteran, artificial intelligence (AI) is something you seriously need to start paying attention to.
In fact, because of how novel this industry is, investors with little to no trading experience shouldn't feel like they've missed the boat here — you don't have the same disadvantages of trading against esteemed investors that already have years of experience under their belt.
AI stocks are essentially your opportunity to make money off of the rise of AI, and with this industry showing no signs of slowing down, it's worth coming to terms with a few AI stocks that you can get into on the ground floor with.
But still, what even are AI stocks, and how do they actually work? Many of us are familiar with new software development/generative AI like ChatGPT and the Bing search engine already, but how exactly can we make money from this industry?
Well, firstly, it's important that you have a baseline understanding of AI stocks before we get into some of the specifics. So, throughout this article, we'll be taking a look at some of their notable features, including which artificial intelligence companies stand the best chance of giving you a healthy return on your investments.
Let's get started with a simple definition:
What Are Artificial Intelligence Stocks?
Put simply, AI stocks are exactly what they sound like — shares in companies that are generally seen as being at the forefront of both developing and utilising tech that's related to artificial intelligence.
There are quite a few different companies leading the line with AI-related products, notably OpenAI, but they can ultimately be summed up as businesses that employ AI to enhance their products.
Whether it's improving their services — like Bing, for instance — or their general business operations, their aim here is usually to gain a competitive edge within their respective industries.
How are they actually integrating AI into their business operations, though? It usually comes in a few different forms and depends on the company that's using it.
Mainly, the most common ways AI is being used is for things such as:
- Predictive analytics
- Natural language processing
- Machine learning
- Deep learning algorithms
So, because of how widely applicable artificial intelligence can be for modern businesses, we're seeing more and more companies employ the technology in hopes to capitalise on the AI boom. And as a result, we now have AI stocks that investors like you can get involved with.
How Do Artificial Intelligence Stocks Work?
So, as mentioned, investing in AI stocks is really all about purchasing shares of companies that are paving the way in terms of AI innovation. Just like most other tradable financial assets, the value of these stocks is linked directly to the success and growth of whatever underlying technologies are being used by these companies.
Still, like you would with other technology-related stocks, you're going to want to understand how these stocks actually work so that you have the best chance of making a solid investment.
For example, you wouldn't start investing in random semiconductor stocks without having some baseline knowledge of how the technology actually works, so why treat the AI industry any differently?
Features That Define AI Stocks
Innovation in Diverse Sectors
The best part about AI stocks is that they aren't just limited to one specific industry; they span across a range of them. Whether it's healthcare and finance or manufacturing and entertainment, AI capabilities can be utilised in industries you might not typically expect it to be.
Because of how diverse AI is proving to be, it allows investors to choose various different companies that are aligned with their own interests and beliefs — all while you're gaining exposure to AI's potential in these sectors.
Even from AI's introduction to mainstream audiences within the last few years, the development that the industry has already taken has been incredibly rapid. Whether it's from AI image generation to self-driving cars, the AI space is evolving before our eyes.
Compare this to other, more stagnant financial assets like precious metals, and it's clear why AI stocks are becoming more and more popular.
Generally speaking, AI companies end up relying on huge amounts of data so that they can train their algorithms and models. Because of this, these companies typically accumulate and gain access to quite valuable datasets across a range of different fields.
If you're less familiar, data is king in many tech industries, so a company having access to this level of information means they can either use it to enhance their own products or they can sell it to other companies for a profit.
As far as investors should be concerned, this basically means the company has less of a reliance on one single revenue stream, so this generally gives it quite high investment appeal as their eggs aren't all in one basket.
AI Stocks Pros and Cons
While we've talked fairly positively about AI stock trading so far, it's vital to remember that, like all stocks, investing is inherently risky.
So that you're not going into any trades with biased conviction, we've put together a few of the main pros and cons you should consider before getting involved with the AI stocks we'll be exploring later in the article:
✔️ Potential for Exponential Growth
Even based on the short time it's been in the public eye, AI technology has demonstrated the potential it has to revolutionise multiple different industries and ultimately create new market leaders.
As such, investing in AI stocks puts you at the forefront of an exciting new financial prospect, giving you the potential to participate in long-term growth for your investment portfolio.
✔️ Diversification of Portfolio
As mentioned earlier, AI stocks aren't exactly limited to one industry like many other financial assets are. Because of this, they give investors a great opportunity to diversify their portfolio since they're exposing themselves to a range of different technology sectors, which is generally very helpful in terms of reducing your overall risk.
✔️ Innovation and Adaptability
Because of how competitive the AI industry is becoming, the various companies involved in it need to thrive on innovation so they can quickly adapt to any changing market conditions.
Nowhere else is this example as apparent as it is with generative AI technology like ChatGPT — within months of the technology becoming viral, you began seeing copycats from Google, Microsoft, and even social media companies like Snapchat that now offer a personal AI chatbot.
Ultimately, it's this kind of competitiveness that's going to drive innovation within the field and make certain companies more profitable as a result.
✔️ Longevity of Relevance
As AI becomes more and more integrated into our daily lives — ChatGPT being used to aid many people's daily workflow, for instance — companies that are specialising in AI are likely to remain fairly relevant and sought after, which is a guarantee that's fairly uncommon in other industries.
Although AI is developing at a rapid rate, this isn't always the positive that it may look like at the surface level. In reality, whenever technology advances at this kind of speed, there's a strong chance that it can lead to market volatility.
Anyone who has ever invested in financial assets such as cryptocurrency will be aware of how unsettling and potentially dangerous this kind of volatility can be, so if AI stocks experience quite significant price fluctuations, it can make the whole ordeal fairly risky for investors.
❌️ Regulatory Challenges
Again, similar to the cryptocurrency industry, the AI industry is subject to evolving regulations and ethical considerations because of how new the technology is and how fast it's developing.
Because of this, any companies that are operating within this space might face a few hurdles when it comes to complying with new rules and standards.
❌️ Competition and Uncertainty
It goes without saying that the AI sector at large is incredibly competitive, which means that it's not exactly easy to predict which companies are going to emerge as leaders, given how little time they've had to prove themselves.
Because of this, there's a significant amount of research that should be going into any investments that you're thinking of making, even the AI stocks we will be exploring on our list shortly.
❌️ Ethical Concerns
Whether it's data privacy, bias in certain algorithms, or the overall threat that automation poses on certain jobs, some of the ways AI is being used are certainly not without ethical concerns.
As such, it's possible that these kinds of concerns can have an impact on the way that the technology is perceived by the public, which can naturally have an impact on the performance of certain AI stocks.
Best Artificial Intelligence Stocks — Reviews
Here are 3 best artificial intelligence stocks:
1. Amazon.com Inc. (AMZN)
Amazon, of course, primarily known for their successful e-commerce platform, is actually one of the most prominent companies that are currently in the AI landscape.
As with a few of the options on this list, you may not directly associate Amazon with AI, but that only serves as a testament to how seamlessly they've integrated the technology within their operations to enhance the overall customer experience.
From its recommendation algorithms that give user browsing a personalised feel to voice assistants like Alexa, Amazon has been integrating AI into its ecosystem for a while now. Because of this, it's no surprise that their stock is performing exceptionally well this year — currently sitting at £105 per share.
2. Alphabet Inc. (GOOGL)
Alphabet Inc. (GOOGL) are the parent company of Google, and they're yet another company that has been at the forefront of AI innovation for a few years now.
You'll know them mostly for their search engines, and AI has been playing a role in its ease of use for quite some time — whether that's for refining search results, anticipating user needs, or even serving tailored advertisements.
Beyond search engines, though, Alphabet Inc's use of AI spans a few different domains, from self-driving technology with Waymo to healthcare research with their DeepMind project. All of which have contributed to their current stock price of £100 per share.
In addition, it's also worth paying attention to Alphabet's interest in cloud computing power, with Google's cloud AI platform offering a few different machine learning/data analytic tools.
3. Microsoft Corporation (MSFT)
Finally, let's round things off with Microsoft (MSFT).
Since taking over as chairman in 2021, Satya Nadella has been leading the company towards more AI-related services — their Azure cloud platform, for instance, is an excellent hub for AI services that let businesses dip their toes in the sector without having to break the bank.
Aside from this, Microsoft's investment in products like Cortana and Microsoft 365 is just a couple more examples of how they intend to use AI to enhance business productivity and ultimately provide a better user experience.
Although they're slightly less advanced in comparison to the two other companies we've mentioned on this list, Microsoft is yet another excellent option if you're a beginner and looking to enter the AI space with a household name — hence why their stock price is sitting close to their all-time high at £251 per share.
How to Choose the Right AI Stocks
1. Research Company Fundamentals
Whenever you're choosing AI stocks, it's always best to take a look at the company's underlying stance and plans for how they intend to use the technology, as well as other factors like their market share and revenue growth.
2. Monitor Regulatory and Ethical Considerations
As mentioned, regulations surrounding the AI industry are constantly evolving, so any company that's proactively addressing issues related to things like data privacy and how to mitigate bias are far more likely to be a sustainable option to invest in.
3. Track Record of Innovation
Naturally, the best AI stocks to invest in are going to come from innovative companies, given how heavily the market depends on innovation. So, always try to purchase shares from companies with a history of introducing groundbreaking products or solutions to the market.
To wrap things up, it's vital to understand that while the AI revolution is certainly real and seemingly here to stay, this doesn't mean you should go out there and invest in every single thing that has ‘AI' in its name.
As with all trends, there are going to be a lot of AI-related companies that are merely trying to ride off of the coattails of more established companies so that they can get in on the hype.
This is essentially why we've only listed major businesses with an established history — you can feel safe getting behind them as they have a proven record of success and are investing in all the right areas.
Of course, it's also worth mentioning that although the possibilities of AI seem endless and exciting, AI stocks are subject to all the same fluctuations as your average financial asset. As such, it's absolutely paramount that you exercise caution when investing money in these stocks — not to mention doing your own research.
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