Artificial Intelligence (AI) has transitioned from being a futuristic concept to becoming a reality that is transforming multiple aspects of daily life. From virtual assistants to autonomous vehicles, AI is present in almost everything. As a result, investing in companies related to the sector has become an attractive strategy, making it one of the most dynamic and promising sectors for investors.
To contextualize, according to Statista, the global market value of Artificial Intelligence could exceed $300 billion by 2026, making this industry one of the most attractive for the future.
However, to better understand and gain exposure by investing in AI, we must consider various aspects that provide a complete picture: analyzing its structure as a sector; evaluating existing investment options (the ones that suit us best); the markets in which it is present; opportunity and risk, as well as future advantages and disadvantages.
As Laura Helsinger, an Artificial Intelligence expert, points out, there are three key groups to understand this sector: innovators, users, and facilitators or resource providers.
The innovators refer to companies that are creating this technology, both in software (Google, Meta, IBM, or Microsoft) and in hardware (Tesla, Rockwell, Boston Dynamics, among others). The users are the companies that use Artificial Intelligence in their products, operations, or inventories and are present in various sectors, such as Target (in retail), John Deere (agriculture), or Lemonade (finance), to name a few. And the facilitators or resource providers are the companies that are creating the infrastructure for the innovators to develop Artificial Intelligence and for the users to adopt it.
In this last point, the role of companies like Nvidia stands out, whose stock was worth $14.61 at the end of 2022 and is now at $138.07, showing a return of more than 800%. Other similar cases are Intel, Oracle, AMD, among others.
From our perspective, it is important to outline key points to understand how to invest in AI. There are three categories to gain exposure to this niche: stocks, ETFs, and Investment Funds.
For stocks, it is important to choose companies that have broad exposure, with access to the International Quotation System (SIC) and the entire U.S. stock market. However, it is advisable that when deciding to invest under this category, one does not only bet on one or two stocks but rather try to form a more diversified portfolio, as in innovative sectors like AI, it is sometimes difficult to predict which company will be the winner or which will capture greater growth or a larger market share. The case of Nvidia is a clear example.
As advantages of investing in this instrument, direct exposure, flexibility, and customization stand out. Some disadvantages may be analysis and selection, concentration, and diversification, which implies a higher risk.
In the case of ETFs (Exchange-Traded Funds), investors can diversify their portfolios without having to buy each asset individually. With an ETF, an entire portfolio of selected companies is purchased by an expert team.
Some advantages of investing in these instruments are: professional management, simplicity, diversification, and a low minimum investment. Among the disadvantages, less directed exposure stands out.
In the Investment Fund category, there are instruments focused on investing in global innovation trends with exposure to Artificial Intelligence, which establish a strategy with broad diversification and long-term growth potential, with a low correlation of returns compared to traditional growth strategies.
The advantages of these instruments can be: active professional management, simplicity, diversification, and a low minimum investment. Disadvantages: diversified exposure to additional niches.
In this sense, Artificial Intelligence is shaping the future, while also offering a vast array of investment opportunities that should not be overlooked.
It is essential to understand that, like any investment, investing in Artificial Intelligence requires in-depth research and careful risk assessment. This is where financial advisory plays a key role: having the support of an expert not only helps to design a personalized strategy that maximizes returns but also provides the confidence needed to make informed decisions. With the right guidance, investing in AI not only becomes an opportunity for significant returns but also a way to be an active part of one of the most significant technological revolutions of our time.
By Moises Saad, VP Director of Advisory and Investment Solutions GBM
