With the AI revolution in full swing and statistics suggesting the global artificial intelligence (AI) software market is forecast to grow to reach around 126 billion U.S. dollars by 2025, it may be a good time for investors to start paying notice.
My guide will detail how to invest in AI through various assets such as stocks, ETFs and mutual funds.
Quick answer: how to invest in AI in the UK? To invest in AI (Artificial Intelligence) in the UK, start by researching companies and funds that focus on AI technology. Consider investing in UK-based or global tech firms that are leading in AI development, or look for investment funds specifically targeting AI and technology sectors. You can invest through a brokerage account, with many online platforms offering access to a range of AI-focused stocks and funds. It’s also advisable to diversify your investments and stay updated with AI industry trends to make informed decisions.
eToro has a cool feature that offers the ability to invest in ready-made and diversified portfolios based on themes, one their most popular is AI. You can also invest in individual AI stocks.
30 million users globally trust eToro. 30 million users globally trust eToro. Smart Portfolios are innovative, long-term investment portfolios, curated by eToro analysts. Convenient and diversified way to access major market trends, without paying portfolio management fees.
Table of Contents
How to Invest in AI (Artificial Intelligence): Quick Steps
How to invest in AI? Investing in AI can be done by investing in individual AI stocks or through AI-focused ETFs or mutual funds. You may consider both widely held, well-known AI stocks and lesser-known AI stocks that show promising investment potential.
Use the following steps below to get started:
- Select a stock broker or investment platform and create an account – Consider eToro, a reputable broker known for AI stock options.
- Deposit funds into your account – Use your preferred payment method to add funds.
- Identify the AI industry shares you want to invest in – Research and search for specific AI companies or explore available artificial intelligence ETFs.
- Determine the number of shares you wish to purchase – Your broker will provide the current value of the AI shares.
- Execute your purchase – Proceed to the checkout process to finalise your investment in AI shares.
AI Landscape
The current AI landscape presents a highly enticing opportunity for investors due to several key factors.
Firstly, AI technology has experienced significant advancements, driving its widespread adoption across various industries.
It has become an integral part of our daily lives, impacting sectors such as finance, healthcare, transportation, and more.
Investors are drawn to the AI industry because of its immense growth potential.
The AI market is projected to reach astonishing heights. This exponential growth is fueled by advancements in machine learning, natural language processing, computer vision, and other AI subfields.
The versatility of AI is also a compelling aspect for investors. It has the capacity to revolutionise multiple domains, ranging from autonomous vehicles and robotics to personalised healthcare solutions and smart cities.
As AI continues to evolve, its transformative power offers immense opportunities for innovative companies and investors to capitalise on.
Additionally, governments and organisations worldwide recognise the strategic importance of AI.
Investments, grants, and initiatives are being launched to foster AI research and development, ensuring competitiveness on a global scale.
For instance, in the UK, substantial funding has been allocated to establish AI-focused initiatives and bolster the nation’s position in the AI landscape.
Investing in AI allows individuals to participate in shaping the future and revolutionising industries.
The continuous innovation and potential for substantial financial gains make the AI landscape an enticing prospect for investors seeking high-growth opportunities in the ever-evolving technological landscape.
Ways of Investing in AI
Investing in AI can be approached through various avenues, including stocks, ETFs (exchange-traded funds), and mutual funds.
Each method offers unique advantages and considerations:
- Stocks: Investing directly in AI stocks involves purchasing shares of individual companies that are involved in AI technology. This approach allows investors to focus on specific companies they believe have strong growth potential. For example, investing in AI giants like NVIDIA Corporation or Alphabet Inc. provides direct exposure to their AI-related businesses. However, investing in individual stocks carries higher risk compared to diversified investment options.
- ETFs: AI-focused ETFs provide a diversified approach to investing in the AI sector. These funds pool investors’ money and invest in a basket of AI-related stocks. By investing in an AI ETF, investors gain exposure to multiple companies involved in AI technology, reducing the risk associated with investing in individual stocks. AI ETFs can provide a convenient way to gain broad exposure to the AI sector without the need for extensive research and stock selection.
- Mutual Funds: Similar to ETFs, mutual funds offer a diversified approach by pooling investors’ funds to invest in a portfolio of AI-related stocks. Mutual funds are managed by professional fund managers who make investment decisions on behalf of investors. This can be advantageous for investors who prefer a hands-off approach and rely on the expertise of professional fund managers. Mutual funds may have higher fees compared to ETFs.
How to Invest in AI Stocks UK
To invest in AI stocks in the UK, follow these steps:
- Research AI Companies: Identify AI-focused companies that are publicly traded in the UK stock market. Look for companies involved in areas such as artificial intelligence, machine learning, robotics, and data analytics.
- Choose an Online Broker: Select a reputable online brokerage platform that provides access to UK stock markets. Ensure the broker offers a user-friendly interface, competitive trading fees, and reliable customer support. I recommend eToro for beginners.
- Open an Investment Account: Complete the account opening process with the chosen online broker. This usually involves providing personal information, verifying your identity, and agreeing to the broker’s terms and conditions.
- Fund Your Account: Deposit funds into your investment account using a preferred payment method. This can typically be done through bank transfers, debit/credit cards, or electronic payment services.
- Conduct Due Diligence: Thoroughly research the AI companies you’re interested in investing in. Consider their financial performance, competitive advantages, growth prospects, and any relevant news or developments.
- Place Trades: Use the broker’s trading platform to place buy orders for the AI stocks you wish to invest in. Specify the number of shares you want to purchase and set your desired price.
- Monitor Your Investments: Keep a close eye on your AI stock investments and stay informed about market trends and company news. Regularly review and assess your portfolio’s performance.
AI Stocks to Consider
When considering top AI stocks for your portfolio, several companies stand out.
Here’s a brief overview of each:
- NVIDIA Corporation (NASDAQ: NVDA): A leading technology company, NVIDIA specialises in graphics processing units (GPUs) used in AI applications. Their GPUs are widely utilised for AI training and inference, making NVIDIA a key player in the AI hardware market.
- Alphabet Inc. (NASDAQ: GOOGL): Alphabet, the parent company of Google, has a strong presence in the AI landscape. Google’s AI-driven technologies and platforms, such as Google Cloud AI and Google Assistant, contribute to Alphabet’s position as a leader in AI-powered innovation.
- IBM (NYSE: IBM): IBM has a long-standing history in AI research and development. The company’s AI platform, Watson, offers advanced AI capabilities across industries, including healthcare, finance, and cybersecurity. IBM’s AI-driven solutions make it a significant player in the AI software market.
- C3 AI (NYSE: AI): C3 AI is a provider of enterprise AI software, enabling organizations to harness the power of AI for various applications. Their platform offers predictive analytics, machine learning, and AI-based insights, catering to industries like energy, manufacturing, and finance.
You may also find my guide on the best AI stocks to buy useful.
How to invest in AI ETFs UK
To invest in AI ETFs (Exchange-Traded Funds) in the UK, follow these steps:
- Research AI ETFs: Explore AI-focused ETFs available in the UK market. Look for ETFs that specifically target the AI or technology sector. Consider factors such as the ETF’s underlying holdings, expense ratio, performance history, and investment strategy.
- Choose an Online Broker: Select a reputable online brokerage platform that offers access to UK ETFs such as eToro. Ensure the broker provides a wide range of ETF options, competitive fees, and reliable customer support.
- Open an Investment Account: Complete the account opening process with your chosen online broker. Provide the required personal information, verify your identity, and agree to the terms and conditions.
- Fund Your Account: Deposit funds into your investment account using your preferred payment method. This can typically be done through bank transfers, debit/credit cards, or electronic payment services.
- Conduct Due Diligence: Thoroughly research the AI ETFs you are considering. Review their investment objectives, holdings, expense ratios, and performance history. Compare multiple options to find the ETF that aligns with your investment goals and risk tolerance.
- Place Trades: Once your account is funded, use the broker’s trading platform to place buy orders for the AI ETFs you wish to invest in. Specify the number of shares or the desired investment amount.
- Monitor Your Investments: Keep track of your AI ETF investments and stay informed about market trends and developments in the AI sector. Regularly review your portfolio’s performance and make adjustments as needed.
AI ETFs to Consider
When considering AI ETFs for your portfolio, several options provide exposure to the AI and robotics sectors.
Here are three notable AI ETFs to consider:
- Robo Global Healthcare Technology and Innovation ETF (NYSE: HTEC): This ETF focuses on the intersection of healthcare and technology, including AI. It invests in companies that leverage advanced technologies, such as AI, robotics, and cloud computing, to drive innovation in the healthcare sector. HTEC offers a targeted approach to investing in AI within the healthcare industry.
- Global X Robotics and Artificial Intelligence ETF (BOTZ): BOTZ targets companies involved in the development and utilization of robotics and AI technologies. It invests in companies worldwide across various sectors, including industrial automation, healthcare, and artificial intelligence. BOTZ provides broad exposure to the AI and robotics theme.
- ARK Innovation ETF (ARKK): While not solely focused on AI, ARKK is an actively managed ETF that invests in disruptive innovation across various sectors, including AI, genomics, and robotics. With an emphasis on innovation, ARKK seeks exposure to companies at the forefront of technological advancements, including AI-related firms.
These AI ETFs offer diversified exposure to the AI sector, allowing investors to benefit from the growth potential of AI technologies.
How to Decide Which AI Stocks or ETFs to Invest In?
When deciding which AI stock or ETF to invest in, consider the following factors:
- Research & Understand the AI Market: Gain a comprehensive understanding of the AI industry, including its current state, growth potential, and key trends. Stay informed about advancements in AI technologies and their impact on various sectors.
- Assess the Company or ETF’s Focus: Evaluate the specific focus of the AI stock or ETF. Determine whether it aligns with your investment goals and strategy. Consider factors such as the company’s core competencies, target markets, competitive advantages, and growth prospects.
- Financial Performance & Fundamentals: Analyse the financial performance and fundamentals of the AI company or ETF. Review metrics like revenue growth, profitability, cash flow, and balance sheet strength. For ETFs, examine the expense ratio, tracking error, and assets under management (AUM).
- Holdings & Diversification: For ETFs, analyse the underlying holdings and diversification. Assess the composition of the portfolio to ensure it includes a mix of established AI companies and potential disruptors. Consider the weightings of different holdings and their relevance to the AI industry.
- Management Team & Expertise: Evaluate the management team behind the AI company or ETF. Look for experienced leaders with a strong track record in the AI industry. For ETFs, assess the expertise of the fund managers and their ability to navigate the AI landscape.
- Risk & Volatility: Understand the inherent risks associated with investing in AI stocks or ETFs. Consider factors such as market volatility, regulatory challenges, technological disruptions, and competitive dynamics. Assess your risk tolerance and determine if the investment aligns with your comfort level.
- Long-Term Outlook: Take a long-term perspective when investing in AI. Consider the potential for sustained growth in the AI sector and the company or ETF’s ability to adapt to evolving technologies and market conditions.
- Seek Professional Advice: If you are uncertain or lack expertise in AI investing, consider consulting with a financial advisor or investment professional. They can provide personalised advice based on your financial goals, risk tolerance, and investment horizon.
If you don’t want the hassle of picking individual stocks, consider a diversified portfolio approach.
For instance, eToro’s AI-Revolution Smart Portfolio allocates capital to stocks of companies that are developing cutting-edge technologies that provide the infrastructure of AI applications, as well as leading companies using AI as part of their business strategy.
You can see some of the AI portfolio below:
30 million users globally trust eToro. 30 million users globally trust eToro. Smart Portfolios are innovative, long-term investment portfolios, curated by eToro analysts. Convenient and diversified way to access major market trends, without paying portfolio management fees.
Risks & Benefits of Investing in AI Technology?
Investing in AI technology offers both risks and benefits. Here are some key considerations:
Risks of Investing in AI Technology
- Volatility & Uncertainty: The AI industry is rapidly evolving, leading to potential volatility and uncertainty. New technologies and market disruptions can impact the performance of AI companies, making it essential to carefully assess risk tolerance and investment horizon.
- Regulatory & Ethical Challenges: AI technologies often raise concerns about privacy, data security, and ethical considerations. Regulatory changes or public backlash against certain AI applications can impact the performance and reputation of AI companies.
- Competitive Landscape: The AI sector is highly competitive, with numerous companies vying for market share. Investing in the wrong company or failing to keep up with technological advancements can result in underperformance or loss of market relevance.
- Technological Limitations: AI technologies are subject to technical limitations and potential failures. Investing in companies heavily dependent on unproven or immature technologies may carry higher risks.
Benefits of Investing in AI Technology
- Growth Potential: AI technology has the potential for significant growth across various industries. Advancements in AI algorithms, machine learning, and data analytics create opportunities for efficiency gains, cost reduction, and innovation.
- Disruptive Innovation: AI technology has the power to disrupt traditional industries, unlocking new business models and revenue streams. Investing in AI allows investors to participate in transformative advancements and potentially benefit from the disruption caused by AI adoption.
- Enhanced Productivity & Efficiency: AI applications can streamline operations, automate tasks, and improve decision-making processes. Companies leveraging AI effectively can gain a competitive edge, leading to increased productivity and profitability.
- Expanded Market Reach: AI technology enables companies to personalise offerings, improve customer experiences, and target new markets. Investing in AI companies that successfully leverage these capabilities can drive revenue growth and market expansion.
- Sector Diversification: Adding AI technology to an investment portfolio can provide diversification, as the sector operates independently of traditional industries. This diversification can help mitigate risk and potentially enhance overall portfolio performance.
Final Thoughts
Investing in AI (Artificial Intelligence) in the UK offers significant growth potential.
By understanding the AI landscape, researching AI companies, and diversifying investments, you can participate in this transformative and rapidly growing sector.
With the UK government’s focus on AI development and increasing demand for AI solutions, investing in AI may be a promising opportunity for long-term success.
Remember to conduct thorough research and align investments with your financial goals.
FAQs
Is AI a good investment?
AI can be a promising investment due to its potential for growth and disruptive impact across various industries. However, it’s important to conduct thorough research and assess the risks associated with specific AI investments.
How can I invest in AI?
To invest in AI, research and identify AI-focused companies or ETFs, open an investment account with a brokerage platform, and consider diversifying your portfolio with AI stocks or AI-focused ETFs.
Are AI stocks risky?
AI stocks can carry risks due to factors like market volatility, technological advancements, and regulatory challenges. Conduct thorough research and consider your risk tolerance before investing in AI stocks.
How much is AI used in UK?
AI is being increasingly adopted in the UK, with approximately one in six organizations (432,000 in total) embracing at least one AI technology, according to government research. Large companies lead the way with 68% implementing AI, followed by 34% of medium-sized companies and 15% of small companies.