Not so long ago, the term “artificial intelligence” or AI would probably conjure images of life-like, sentient robots that were secretly plotting to replace or overthrow humankind—a notion popularised by science fiction films like “The Terminator” and “The Matrix”.
Fast forward to today, and the reality of AI is less about robots gone rogue (not yet, anyway) and more about groundbreaking technologies that are revolutionising industries. If you’re keen on investing in this rapidly growing industry, here are some of the best AI stocks that might be worth considering.
This is an ever-changing space that moves at a rapid pace, and the best AI stocks of today may not be the best AI stocks of tomorrow. But to give you some starting inspiration, here are the top holdings in one of the largest AI-related investment funds around, the WisdomTree Artificial Intelligence UCITS ETF (WTAI):
| AI stock | Icon | 1-year performance (to 31 July 2024) | 5-year performance (to July 2024) | Link to invest |
|---|---|---|---|---|
| Nvidia (NVDA) |  | 121.98% | 2,473.95% | Invest with XTBCapital at risk |
| MediaTek (2454) |  | 76.81% | 286.08% | Invest with XTBCapital at risk |
| Broadcom (AVGO) |  | 59.70% | 415.33% | Invest with XTBCapital at risk |
| SK Hynix (000660) |  | 57.70% | 155.72% | Invest with XTBCapital at risk |
| Taiwan Semiconductor Manufacturing (TSM) |  | 55.86% | 271.04% | Invest with XTBCapital at risk |
| Micron Technology (MU) |  | 43.66% | 132.67% | Invest with XTBCapital at risk |
| Qualcomm (QCOM) |  | 26.31% | 134.63% | Invest with XTBCapital at risk |
| Analog Devices (ADI) |  | 12.55% | 329.94% | Invest with XTBCapital at risk |
| Teradyne (TER) |  | 7.44% | 126.93% | Invest with XTBCapital at risk |
| Microchip Technology (PATH) |  | -7.88% | 96.55% | Invest with XTBCapital at risk |
Artificial intelligence means the ability of machines, such as computers, to perform tasks and activities that would normally require human intelligence. AI stocks, then, represent companies at the forefront of this transformation.
These firms are involved either in the research, development, or application of AI. This could be companies whose entire business model revolves around AI, or those where AI constitutes only a small segment of their operations.
Though the concept of AI is not new, the industry is still in its early stages of development. As time progresses, we’re likely to witness the emergence of more specific segments of this industry. For now, we can break down AI stocks into the following categories:
Here’s a glimpse into why many investors are turning their attention toward artificial intelligence.
While the visions of human-like robots taking over the world remain the object of science fiction movies and stories rather than reality for now, there are still some very real risks to investing in this industry you should be aware of:
"It’s looking that way, but there’s no guarantees. If AI becomes commonplace, and the technology is open-source, this could make it much cheaper, devaluing companies. At the moment, AI stocks can generate high profit margins because the technology is advanced and hard to compete with.
If AI becomes a normal part of everyday life, this might actually be a negative for the profitability of AI stocks. This happened with the airline industry. Airline travel was a new technology that many were betting on. It did become a hugely important industry, but not necessarily a profitable one, running on extremely slim margins."
Beyond directly buying individual stock in AI companies, there are several other ways to gain exposure to this dynamic industry.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
The robots haven’t taken over, but it appears artificial intelligence is here to stay. Finding the best AI stocks to invest in presents a challenge because no one knows just yet how much of a role AI will play in the future of human civilization. Sorry for sounding philosophical.
There’s no need to worry about AI being a threat to human existence, not just yet anyway. If you want to make money with AI stocks, make sure you understand the risks and aim for companies you think will still be around in 10 or more years. This is challenging with AI technology that’s still in its infancy, but try your best.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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