AI investment: 3 ways to invest in artificial intelligence

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Recent years have seen remarkable advances in the world of artificial intelligence (AI), the much-hyped technology that has exploded onto the global public consciousness. Propelled by the meteoric rise of Open AI’s ChatGPT as the world’s most talked about new tech since Google, AI is being hailed as the disruptor of virtually every industry from information technology and finance to healthcare and transport.

What is artificial intelligence?

AI refers to technology that can simulate human intelligence and perform human-like tasks. AI-powered machines and computer systems can even learn from experience to improve and adapt, just like humans. Real-life examples include chatbots.

Billions of dollars are being poured into AI research and development, with AI spending predicted to top US$300 billion in 20261 as researchers seek to uncover more applications and possibilities for this transformative tech.

As applications become more sophisticated and adoption accelerates across mainstream business sectors, this of course begs the question, how can Australian investors gain exposure to this new wave of AI technology, automation and robotics, which has the potential to change so much of the world as we know it?

1. ASX-listed artificial intelligence companies

Although countless businesses stand to benefit from artificial intelligence, the AI market in Australia is still very small. At present, only a smattering of ASX-listed companies work on the frontlines of AI technology development, although this is likely to grow over time.

Most ASX-listed AI stocks are tiny by market capitalisation standards, and their share prices can be volatile. Another problem for would-be investors is that the technologies being developed by ASX-listed AI companies are yet to be commercially proven, making them risky investment options. Would-be investors should do thorough research before investing to understand the company’s business model, growth prospects and challenges.

Some of the top ASX-listed AI companies by market cap2 are as follows:

Brainchip Holdings Ltd (ASX: BRN)

Market cap: $728M

A leader in AI edge chip processing and learning, Brainchip has developed what it says is the world’s first commercial neuromorphic processor, using a type of AI that simulates the way our brain neurons work.

Bigtincan Holdings Ltd (ASX: BTH)

Market cap: $307M

Bigtincan provides sales enablement automation software powered by AI and machine learning. Its customers include Nike and Guess and the company has recently seen some increased revenue growth.

Appen (ASX: APX)

Market cap: $443M

A global leader in providing and improving data used to power AI products, Appen’s customers include tech giants like Microsoft, Google and Amazon. Appen sources and annotates image, video, audio, text, 3D sensor and multi-modal data to help build and enhance AI systems.

Dubber (ASX: DUB)

Market cap: $45M

Dubber is a leader in the field of cloud-based call recording and voice AI, using machine-learning to create insights and transcriptions from voice, video and chat conversations.

2. US-listed artificial intelligence stocks

For investors willing to look overseas, some of the biggest tech companies listed on the NASDAQ in the US are racing to be at the forefront of the AI revolution and roll-out AI powered technologies and applications.

Microsoft (NASDAQ: MSFT)

Recently confirmed a multi-year, multi-billion-dollar investment in Open AI, the company behind ChatGPT and Dall-E 2, the AI powered image generator that can create digital images based on natural language prompts.

Alphabet Inc (NASDAQ: GOOGL)

The parent company of Google and YouTube, was an early leader in the use of AI and automation to power content promotion, ad pricing, spam filtering and many other facets of its business. The tech giant is reportedly doubling down on AI and is said to be working on major new AI initiatives.

Amazon.com Inc (NASDAQ: AMZN)

Harnesses the power of AI across many areas of its business, from e-commerce product recommendations to Amazon Web Services and its Alexa virtual assistant.

NVIDIA Corporation (NASDAQ: NVDA)

Engineers advanced chips, software and platforms that power and help drive advances in AI, robotics, high performance computing, gaming and autonomous vehicles.

Other US-listed stocks with a deep focus on AI-powered intelligence and automation include Workday, Inc (NASDAQ: WDAY), Salesforce Inc (NYSE: CRM) and Palantir (NYSE: PLTR).

NDQ Nasdaq 100 ETF gives investors exposure to Microsoft, Alphabet (Google), Amazon, NVIDIA and other companies in one single trade.

3. Artificial Intelligence ETFs (Exchange Traded Funds)

For investors looking to gain portfolio exposure to artificial intelligence while minimising the risks related to individual stock-picking, investing in an AI-focussed ETF can provide exposure to a basket of AI companies in a single trade.

Investing through an AI ETF helps investors to avoid the challenge of trying to pick the winners from the losers in the AI race.

RBTZ Global Robotics and Artificial Intelligence ETF is traded on the ASX and invests in a portfolio of global companies involved in the production or use of AI and robotics products and services.

RBTZ provides cost-effective exposure to the world’s leading AI and robotics companies, including NVIDIA Corp (AI) and Intuitive Surgical (robotics).

 

FAQ: Investing in Artificial Intelligence

1. What are the pros and cons of investing in AI stocks?

Investing in AI stocks provides exposure to an investment megatrend with growth potential. Downsides of investing in AI stocks include the challenge of picking the winners from the losers and the potential for AI-powered companies to be impacted by future regulation, emerging competition or even obsolescence.

2. What are the pros and cons of investing in AI ETFs?

AI ETFs can offer exposure to a rapidly growing industry with the potential for large-scale disruption. Risk is a key downside of investing in such ETFs. As many new AI technologies are still commercially unproven, these ETFs should be considered as part of a broader investment portfolio.

3. Are there any other ways Australians can invest in AI?

Investors wanting some exposure to AI without the risk of over-exposure could consider investing in a broader technology ETF such as the NDQ Nasdaq 100 ETF An alternative strategy could involve investing in an industry (or industries) with the potential for significant AI disruption, such as healthcare and transport.

FAQ: About Artificial Intelligence

Want to know more about AI? We put ChatGPT to the test by asking it some common AI questions. Here’s what it said….

1. What is Artificial Intelligence?

ChatGPT: AI refers to the development of computer systems that can perform tasks that typically require human intelligence, such as visual perception, speech recognition, decision-making, and language translation.

2. How does Artificial Intelligence work?

ChatGPT: AI works by using algorithms and statistical models to analyse and identify patterns in data, then making predictions or taking actions based on that data.

3. What are the applications of Artificial Intelligence?

ChatGPT: Applications of AI include natural language processing, image recognition, self-driving cars, and recommendation systems.

4. What are the advantages of Artificial Intelligence?

ChatGPT: Advantages of AI include increased efficiency and accuracy, the ability to process large amounts of data, and the ability to perform tasks that are too dangerous or difficult for humans.

5. What is the future of Artificial Intelligence?

ChatGPT: The future of AI is uncertain, but it is expected to continue to grow and play an increasingly important role in various industries and aspects of daily life.

 

[1] https://www.idc.com/getdoc.jsp?containerId=prUS49670322

[2] Data sourced from TradingView Stock Screener as at 31 January 2023

There are risks associated with an investment in RBTZ or NDQ, including market risk, sector risk, country risk and currency risk, as well as robotics & artificial intelligence companies risk and smaller companies risk for RBTZ. Investment value can go up and down. An investment in each Fund should only be considered as a part of a broader portfolio, taking into account your particular circumstances, including your tolerance for risk. For more information on risks and other features of the Fund, please see the Product Disclosure Statement and Target Market Determination, both available at www.betashares.com.au.

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Written by

Kirsty Lamont

Marketing Director

Kirsty is responsible for the direction and oversight of marketing and content strategy, educational initiatives, B2B marketing and communications. 15+ years’ experience in financial services. Passionate about helping Australians financially progress.

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