How to Invest in AI: Your Guide to AI Investments
Are you considering investing in Artificial Intelligence? AI has already started to change everything from how we search for information to how we shop. This guide explains how you can invest in AI and outlines the associated opportunities and risks.
Investing involves risk.
Categorizing AI Investments
When you invest in AI, you put your capital into companies that develop, build, or utilize artificial intelligence. Experts typically divide AI investments into three main categories:
- AI Enablers: Companies that build the physical and digital infrastructure for AI, such as semiconductor manufacturers (e.g., Nvidia) and data center operators.
- AI Builders: Companies that build software models and integrate AI directly into their products (e.g., Microsoft or Adobe).
- AI Users: Traditional companies that deploy AI to drastically improve their operational efficiency (e.g., logistics companies automating their supply chains).
Opportunities and Risks
Just like any targeted sector investment, investing in AI involves unique dynamics.
Opportunities:
- The AI market is growing explosively and is expected to capture significant market share across all industries.
- Because AI affects many different sectors, it is possible to achieve diversification even within an AI-focused portfolio.
- Companies that successfully adopt AI often grow significantly faster than their traditional competitors.
Risks:
- Many AI companies are valued highly based on future potential rather than current profits, which can lead to extreme price volatility.
- Upcoming AI regulations may heavily restrict how companies use the technology, directly impacting their growth and profitability.
- Large tech giants dominate the market with massive capital, potentially limiting the success rate of smaller, specialized startups.
Different Ways to Invest in AI
Individual AI Stocks
If you want to be a highly active investor, you can buy shares in individual AI companies. You can choose between established tech giants or smaller, specialized firms. Keep in mind that investing in individual stocks involves significantly higher risk than investing in a broad fund.
AI-focused ETFs
Exchange-Traded Funds (ETFs) give you broad exposure to a basket of AI companies at a relatively low cost. They track an index and trade like stocks on the exchange, serving as a good middle ground between individual stocks and mutual funds.
Actively Managed AI Funds
For most investors, actively managed mutual funds are the easiest way to invest in AI. The fund manager handles risk diversification by investing in many different companies across the sector.
Quartal has launched the Quartal Global AI Innovators fund in collaboration with Sands Capital. This fund provides:
- Broad exposure across all three AI categories (enablers, builders, and users).
- Global diversification across the US, Europe, and Asia.
- Active management that rapidly adapts to shifting market conditions.
Past performance is no guarantee of future returns. Funds with high risk classifications (levels 5 to 7) can fluctuate significantly in value.
