Investing in Artificial Intelligence (AI): A Beginner’s Guide

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The rapid pace of innovation in artificial intelligence (AI) has enabled many experiments to come to fruition that were previously considered to be fiction. As AI continues to disrupt the way we live and work, in what ways can an investor invest their money in this kind of cutting edge technology that is rapidly reshaping society?

We’ve put together this handy, beginner’s guide to help you better understand what AI is, how technology is used, and to identify some popular investments in the rapidly growing space.

What is AI?

AI attempts to replicate human intelligence in a computer or machine with faster speed and greater precision. Companies like Amazon and Google are using technology to program machines to solve problems, answer questions, and perform tasks previously performed by humans.

As systems get smarter, AI becomes more powerful, and its uses and applications cut across all sectors of the stock market and industry. For example, the transportation industry is undergoing a massive transformation around electric and autonomous vehicles, potentially bringing billions of dollars to the global economy. Likewise, the banking industry relies on AI to improve decision-making in tasks such as trading, automate back-office processes such as risk management, and reduce costs by using humanoid robots in branches. And that’s just the beginning.

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Analysts at International Data Corp. (IDC), a market information provider, predicts that the global AI market revenue could reach $ 500 billion by 2024, recording a five-year compound annual growth rate of 17.5% .

Artificial intelligence is the most disruptive innovation of our lives,” said Ritu Jyoti, program vice president, Artificial Intelligence Research at IDC, in a recent note to clients. “AI is no longer just ‘nice to have’. The global pandemic has accelerated the adoption of AI and it is becoming pervasive in all business processes. “

How AI is used

Whether it’s law enforcement agencies using facial recognition software to conduct investigations, AI powered home devices like Samsung’s smart fridges that make our lives easier, or From robo-advisers using automated algorithm-based models to optimize our investments and make financial planning recommendations, AI is everywhere.

At the heart of AI is big data, which data scientists, engineers, and other experts use to create complex algorithms that can integrate new information to improve performance and accuracy. With machine learning, for example, a subdomain of AI, organizations like Facebook use user data to make content recommendations and predictions. And as users enter more data, such as giving an item a thumbs-up or a thumbs-down, the system stores and then processes that information, gradually becoming smarter.

Impact of AI on employment
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According to a survey of over 350 AI researchers conducted by Oxford University and Yale University in 2015, there is a 50% chance that machines will outperform humans in all tasks by 2060. And some tech visionaries like Tesla CEO Elon Musk. believe it could be much sooner.

Organizations are increasingly harnessing the power of AI to inform critical business decisions, such as prioritizing medical care in emergencies, improving recruiting practices, and determining a candidate’s eligibility. person to credit, housing and other essential services.

There is also a lot of debate about the impact of AI on the job market. As humans’ dependence on machines increases, so does the need for employees to improve themselves and learn new skills. The World Economic Forum estimates that by 2022, 42% of basic role skills are likely to change. And by 2030, more than a billion people, or about a third of the world’s jobs, could be affected by the technological revolution.

To accommodate the limitations of AI – at least until the technology evolves further – business leaders have relied on augmented intelligence, which combines artificial intelligence and human expertise. In essence, augmented intelligence allows humans to work better and faster. The need for human input, however, diminishes as AI grows stronger.

Best AI ETFs

For most retail investors, it is possible that you already have exposure to AI, as many large US public companies are already using AI or are actively looking to invest in the technology.

But for those looking for broader exposure, exchange-traded funds offer an efficient and easy way to invest in AI-specific stocks.

Like other types of thematic investing, such as blockchain technology, cybersecurity, and genomics, AI ETFs hold a basket of publicly traded companies involved in all phases of AI, development to implementation.

Here are some of the most widely held AI ETFs on the market. When considering these options, be sure to review the fund’s prospectus to understand the investment strategy, holdings, and fees.

Note: The data displayed is as of October 7, 2021.

ETF Global X Robotics and Artificial Intelligence (BOTZ)

BOTZ invests in companies focused on AI and robotics technologies in all sectors of developed global markets.

Fund issuer: Mirae Asset Global Investments

Assets under management: $ 2.65 billion

Main titles: Upstart Holdings (UPST), NVIDIA (NVDA) and Intuitive Surgical (ISRG)

Spending rate: 0.68 percent

ARK Autonomous Technology and Robotics ETF (ARKQ)

ARKQ identifies and invests in domestic and foreign companies that could benefit from emerging technologies and automation.

Fund issuer: ARK Invest

Assets under management: $ 2.78 billion

Main titles: Tesla (TSLA), Kratos Defense & Security Solutions (KTOS) and Trimble (TRMB)

Spending rate: 0.75%

ETF Global Robotics and Automation Index ROBO (ROBO)

ROBO invests in a global index of companies that drive innovation through robotics, automation and AI.

Fund issuer: Exchange Traded Concepts

Assets under management: $ 1.78 billion

Main titles: Brooks Automation (BRKS), iRhythm Technologies (IRTC) and iRobot Corp. (IRBT)

Spending rate: 0.95%

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Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past performance of investment products is not a guarantee of future price appreciation.


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