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Should You Invest In AI Stocks?

By:
Carolane De Palmas
Published: Sep 15, 2022, 07:50 UTC

The technology has been around in various primitive forms for decades, but it’s become far more complex in recent years and its use is becoming more widespread in countless industries.

Microsoft FX Empire

In this article:

What Is AI?

Artificial Intelligence, or AI, is basically machine learning, or a process by which computers simulate our human intelligence through a collection of complex systems. There are many different applications of AI, including speech recognition, vision, language processing, and expert systems.

AI makes it possible for computers or machines to receive data through various means of technology – like movement or heat sensors for example – to interpret and arrange what they perceive into a somewhat logical order, solve a problem, and then act in a way that achieves the desired outcome.

On some level, the hardware that possesses AI is capable of adapting what they do to suit its environment or even ‘learn’ from previous behavior with the use of analysis and the ongoing collection of data.

The technology has been around in various primitive forms for decades, but it’s become far more complex in recent years and its use is becoming more widespread in countless industries. There are benefits to consider, such as enhanced productivity, technological advances, medical advances, and cheaper goods and services, but also concerns to take into consideration too, such as potential issues with privacy, safety, and security for example.

The public can be naturally dubious and uncertain about some applications of AI – after all, we don’t really know where the technology is headed long term.

So, is AI the way of the future for your investment strategy? How can you take advantage of this growing space and invest wisely with a secure broker like ActivTrades? Let’s take a bit of a look into the world of AI and you can decide what options might be suitable for you.

How Do Companies Use AI In Their Businesses?

There are so many industries that are being enormously affected by investment and growth in AI technology at the moment. Some include Health Care, Automotive, Travel, Marketing, E-commerce, Social Media, Law Enforcement, and Finance, but there are many others.

One of the lesser known, but fairly important users of AI, is the Agricultural industry, with the most notable example in this space being John Deere. Their technology aims to take the guesswork out of farming and to use AI to target and fix trouble areas, like weeds or dry spots, among other things. They’re using specific sensors, drones, targeted spraying, and driverless tractors to be able to increase productivity and output by significant margins.

Another prominent company that is hugely reliant on AI is retail giant JD.com, located in China. An e-commerce site that sells almost every product imaginable expects its business to be completely automated in the future. And the company already has warehouses that are completely free of employee involvement, and deliveries of products to consumers have been conducted by a network of drones for a few years already.

How To Recognize Artificial Intelligence Stocks

You may already have investments in your portfolio that expose you to AI without being aware of it as it’s become so widespread, but if you’re actively on the hunt to focus on the technology there are a few options available. You’ll just need to do a little research because there aren’t too many companies with AI at the center of their business.

The top stocks to look at are from companies that are making ongoing investments in things like infrastructure for networking, data centers, cloud-based operations, and robotics, among other things. Think big tech companies like Amazon, IBM, Alphabet, Microsoft, Nvidia, and Meta, but also lesser-known companies like Intuitive Surgical, who specialize in creating technology for minimally invasive surgical procedures with the use of robotics and AI.

How To Trade Artificial Intelligence Stocks

You might like to purchase individual shares directly for your preferred company or look into financial derivatives such as Contracts for Difference (CFD) which allow you to invest in the price movements of a company, but not actually own the underlying stock. This method also allows the trader to take advantage of leverage and potentially make magnified returns on the emerging technology of his choosing.

Some Exchange-Traded Funds also offer products specific to AI. This is called Thematic Investing, which focuses on a specific theme such as AI, communications, or clean energy, for example. Different companies from different sectors may be involved, but they are all a part of the same objective or part of a popular trend.

Generally, the products to look for are those that contain a basket of the top publicly traded AI and robotics stocks that are selected by the fund based on their preferences. ARK Autonomous Technology & Robotics ETF is one such example and includes (as of September 2022) Tesla, Deere & Co, and Trimble Inc, among a few others.

Whatever your investment strategy, whether using derivatives, ETF, or buying individual stocks, it’s vitally important to have a trading plan in place and remember that AI is an emerging sector, one with risk involved. You’ll need to do your research and have a well-established risk management and trading plan that you’re prepared to stick to – and never invest more capital than you’re comfortable losing.

About the Author

Carolane graduated with a Masters in Corporate Finance & Financial Markets and got the AMF Certification (Financial Markets Regulator in France). Afterward, she became an independent trader, investing mostly in European and American stocks/indices.

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