You are in search Best Stocks to Invest in Artificial Intelligence (AI)? liked NVIDIA Corp (NASDAQ: NVDA )? Or Tesla Inc (NASDAQ: TSLA )? Or looking for some tech ETFs for AI exposure?
NVIDIA Corp (NASDAQ: NVDA ) stock price
This article explains how I would invest in AI and why I am in no rush to do so.
Why I’m not ‘all in’ on AI
- Artificial Intelligence (AI)
- Machine learning
After years of playing in the background, AI tools are finally in the palm of ‘everyman’s’ hands.
And suddenly investors are calling it a ‘paradigm shift’.
Microsoft PowerPoint Slides that normally take 5 hours can be prepared in 15 minutes.
Printed circuit boards are designed in minutes with AI.
You can use Canva to create a business logo – in seconds!
Free copywriting to proof this email? Done!
Although I believe these tools are exceptional, and will change our lives (mostly for the better), I think some investors may be in danger To get ahead of yourself…
If we are not careful, we may enter a new age, viz The dotcom boom And Bust of 90/2000Where stocks like NVIDIA or Tesla continue to rise year after year.
It’s been a long time since I’ve seen this story that I’ve told before.
Remember pets.com? Yeah, me neither.
But let’s take stock…
Have non-technology companies started putting “AI” in their financial reports? check
Uber driver (asking) telling you to invest in NVIDIA? check
Is AI among the top 3 questions I get asked at the Rask Roadshow? check
Stock valuations have already skyrocketed? Check!
ETFs: Ways to Invest in AI (Without Blowing Yourself Up)
Along with ‘couples and money’, the most popular topic at Rusk roadshows is ‘what about those AI investments?’
I agree that companies like NVIDIA, are the best manufacturers in the world Graphics Processing Units (GPU), are exceptional. But this is not the only way to increase ‘machine-assisted productivity’…
You can use broad market ETFs in your core portfolio — such as iShares S&P 500 ETF (ASX: IVV), which owns over 500 US stocks Apple Inc (NASDAQ: AAPL ), Microsoft Corporation (NASDAQ: MSFT), NVIDIA, etc.
You can tweak the core ETF portfolio slightly, say Betashares Nasdaq 100 ETF (ASX: NDQ), which includes the top 100 stocks on the NASDAQ.
Betashares Nasdaq 100 ETF
Or you can put a magnifying glass on top of the technology sector, pushing your satellite portfolio towards something like Global X Fang+ ETF (ASX: FANG). It only includes 10 tech stocks, making it a narrow but focused bet on big tech.
(Transparency note: Betashares and Global Ex Rask is a longtime advertiser on the podcast. I am not paid to mention them.)
You can also go stock by stock trying to identify the winner(s). Here’s how I think about these kinds of things…
If you’re bent on ‘picking winning AI stocks’, here’s my advice: Don’t make it ‘all or nothing’.
Throw your mind back into any bubble…
For example, imagine that you invested with high confidence and bought a single cryptocurrency a few years ago. If you went ‘all in’ on a single currency, you might not get anything.
So if you’re here, reading this, try to take a basket perspective, thinking that AI is a real game-changing theme.
I like to buy 1-2 high-quality ETFs for themes like these. But I would consider buying very small stakes in a handful of companies.
I’ll wait a few years, assess the industry, then sell the losers and join the winning companies.
That way I get some exposure (via ETFs) and can scratch the itch to try to find winners, know who’s leading the field, and double down as the industry matures.
Finally, I want you to remember this quote from a former fund manager and author Peter Lynch:
“During the Gold Rush, most miners lost money, but the people who sold them picks, shovels, tents and blue-jeans (Levi Strauss) made a good profit.”
As I said, the easiest way to play the AI theme in my opinion is to hold a (good) ETF. But another way is to invest in a company that benefits from the trend.
Levi Strauss and Company (NYSE: LEVI ) sold jeans to miners who hoped to strike it rich.
Google sells ads to people trying to access the internet (real technology).
Microsoft will allow you to upgrade to the AI version of Microsoft Office (For an additional fee, of course).
Like design companies Altium Limited (ASX: ALU) and Cadence Design Systems Inc (NASDAQ: CDNS ) are two examples.
As are social media companies Meta Platform Inc (NASDAQ: META), through their better algorithms.
These aren’t exactly ‘AI stocks’, but they are still profitable.
List of popular AI stocks
Here is a list of popular AI stocks and ETFs:
- NVIDIA Corp (NASDAQ: NVDA) – The world leader in GPUs
- Advanced Micro Devices, Inc. (NASDAQ: AMD) – Another global leader in semiconductors
- Microsoft Corporation (NASDAQ: MSFT) – through a partnership with OpenAI
- Alphabet Inc Class C (NASDAQ: GOOG) – for its ownership of Google Bard and Search
- Tesla Inc (NASDAQ: TSLA) – Self-driving technology
- Meta Platform Inc (NASDAQ: META) – Global advertising network, social media and Metaverse technology
- Altium Limited (ASX: ALU) – a multinational software platform used to design printed circuit boards (PCBs), which are used to build ‘smart devices’.
- Betashares Global Robotics and Artificial Intelligence ETF (ASX: RBTZ) ~42 companies with a global technology and robotics focus
- Global X Fang+ ETF (ASX: FANG) – 10 stocks focused on big tech
- iShares S&P 500 ETF (ASX: IVV) – Top 500 US stocks with major technology and industrials
AI: Buy, Hold or Sell?
Other than my diversified and low-cost ETFs, as well as some tech stocks that are profitable (but not AI companies), I don’t invest directly in “AI stocks”.
I think many investors are caught up in the AI bubble, not realizing that they are taking a huge risk with their money.
for sure Get some exposure through ETFs.
But don’t get drunk on the AI Kool-Aid.
Founder and Chief Investment Officer
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