Are these the best AI stocks and ETFs to watch?
Artificial intelligence stocks have been attracting a lot of attention from investors. Read about some AI stocks and ETFs to watch, as well as steps for how to trade or invest in artificial intelligence.
AI stocks and ETFs: what you need to know about the sector
Artificial intelligence (AI) is a catch-all term to describe machine learning. While it may still feel like a concept from a sci-fi movie, most of us are already using AI in some shape or form. AI helps us to connect with long-lost school friends on Facebook, to filter out spam emails, to tailor our search results on Google, and to help us plan journeys based on real-time traffic reports.
Scores of countries are using machine learning capabilities to introduce new technologies and to streamline existing processes. For example, self-driving cars rely on AI processes, while AI-powered digital health solutions have been used to manage the Covid-19 pandemic. This means that as the self-driving car and digital health sectors grow, the AI sector stands to benefit too.
AI is also a key component in graphics cards and APIs (application programming interface), which can be used to power everything from smartphones to supercomputers. Many established companies have invested heavily in AI in anticipation of an AI boom, which could happen if the world becomes more and more reliant on functional technology and the internet of things.
While the AI sector is still in its infancy, there are signs that it’s starting to mature. The sheer volume of publicly listed AI firms points towards a growing trend, while the creation of bespoke AI-based indices and index-tracking ETFs proves that there is increasing investor interest in the area.
How to trade or invest in AI shares and ETFs
Trading and investing are two different ways to take a position on artificial intelligence shares and ETFs. When you trade, you are making short-term decisions to make quick gains in growing markets. When you invest, you effectively take a long-term position in a company or fund in the hope that its value will rise over time.
Find out more about the differences between trading and investing
Follow these steps to trade or invest in AI shares and ETFs:
- Choose whether to trade or invest
- Create an account or log in
- Identify your opportunity
- Carry out your own analysis and research
- Open and monitor your position
Learn more about how to start trading or investing in AI
AI shares to watch
Alphabet Inc. (NASDAQ: GOOGL), the parent company of Google, began pivoting away from its core search engine business towards AI research and AI-based innovations as early as 2018.
This was what the company stated in a 10k filing in 2018: ‘Across the company, machine learning and artificial intelligence (AI) are increasingly driving many of our latest innovations, from YouTube recommendations to driverless cars to healthcare diagnostics.’
Through its Google Cloud AI solution, Google has been disrupting healthcare, automobile, US government departments like the US Air Force, and more.
Now, the Alphabet is looking to take its AI ventures further, beginning with Google Quantum AI, which it claims to be ‘advancing’ quantum computing for it to ‘operate beyond classical capabilities’.
Although there is some doubt around whether Quantum AI will be as profitable as the company’s search engine business, Alphabet has already unveiled a couple of quantum AI tools, such as the CIRQ programming framework.
Palantir Technologies Inc.
Palantir Technologies Inc. (NYSE: PLTR) is a US software company that specialises in combining big data analytics and artificial intelligence/ machine learning (AI/ML) end-to-end solutions.
One of Palantir’s main business models is in making AI/ML models operational by deploying them on top of data infrastructures.
One issue currently facing most organisations is how they can make sense of AI/ML technologies for their businesses and turn them into truly valuable tools. Palantir aims to help solve this problem by ‘propelling AI/ML out of the experimental vacuum and into the real world’ through its end-to-end AI/ML platforms.
Palantir was founded in 2003 in the US. The company’s name is based on the mystical palantíri stones in The Lord of the Rings. These ‘seeing stones’ are described as indestructible balls of crystal with the power to communicate with and see events in other parts of the world.
Nvidia Corporation (NASDAQ: NVDA) was founded in 1993, with its focus on designing graphics processing units (GPU) and application programming interfaces for high-performance computing.
In the last decade or so, the company started to become more AI-centric, by developing a series of products – from deep learning training interventions to autonomous transport solutions – all leveraging AI.
Two years ago, at the height of the pandemic, the company widened its AI offerings, introducing a new GPU computing architecture, Ampere, along with a suite of new AI-powered solutions, such as cloud services and robot kits.
Nvidia’s success in AI has largely been attributed to the company’s willingness to adopt the technology when it emerged as a viable tool.
AI ETFs to watch
Invesco QQQ Trust
Although Invesco QQQ Trust (NASDAQ: QQQ) is not a strictly AI or ML-only exchange-traded fund (ETF), it counts many AI-centric or AI-focused tech companies among its holdings, including Alphabet, Nvidia, Microsoft, Tesla and Meta.
QQQ, which tracks the Nasdaq 100 Index, is one of the most popular tech ETFs. It is often looked at as an indication of how technology stocks are doing, being that it is heavily comprised of large-cap tech holdings.
Due to its passive management, QQQ is described as having low fees, which rewards investors with total returns if the Nasdaq 100 Index gains. However, due to the tech sector’s volatility and high risk factors, investors often suffer huge losses during a bear market.
As of Q3 2022, QQQ had assets under management amounting to U$154 billion. QQQ pays out quarterly dividends.
Global X Robotics & Artificial Intelligence ETF
The Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ) was launched in 2016 by US-based provider of ETFs, Global X ETFs.
BOTZ seeks to invest in companies that potentially stand to benefit from increased adoption and utilisation of robotics and AI, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
The fund’s top sectors are information technology (43.9%), industrials (36.5%) and healthcare (16.5%). Its top five holdings, which account for roughly 40% of total assets, include Intuitive Surgical, Keyence, ABB, Nvidia and Fanuc.
BOTZ has net assets of $1.38 billion as of December 2022. The fund pays out dividends two times a year, with its latest 30-day SEC yield at 0.26%.
Why do people trade and invest in AI stocks and ETFs?
- Trading and investing in AI stocks and ETFs offers a chance to be part of an exciting new growth industry
- There are endless ways to use machine learning in our day-to-day lives
- AI is an incredibly innovative technology that is constantly progressing
- AI stocks will benefit from the growth of related markets, such as self-driving cars and smartphone manufacturing
AI shares and ETFs summed up
- AI is an emerging industry with plenty of growth potential
- AI has many applications in other growth industries such as self-driving cars
- Some of the world’s largest companies are investing in AI solutions
- You can trade or invest in AI stocks or ETFs on our platform
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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