Investing in the artificial intelligence future
Since the Industrial Revolution, machines have been doing more and more of our muscle-work. We used to pull ships up the Thames, load planes by hand, and cut down trees with axes and saws. These days everything is self-powered. At most, our tools need a guiding hand telling them what to do.
The coming industrial revolution is different. This time machines will take over our brainwork too. Decision making, creativity, cooperation and much more are becoming possible for machines to execute. Their ability to mimic the human body is reaching into the brain. And we’ve named this phenomenon artificial intelligence, or AI.
Ever wondered who sets petrol prices? They swing about all over the place and vary from one station to the next. The answer in many cases is that AI does it using algorithms. Half of shares traded are bought and sold by AI too. Most flights are controlled by AI most of the time in autopilot.
In other words, AI is already all around us to some extent. It enhances our lives enormously. And has made some people a lot of money. The question is, how do you become the person to profit from the next developments in AI technology? The simple answer is the stockmarket. But that doesn’t narrow things down much, does it?
Let’s take a look at what functions AI is set to take over next, and how you can position yourself to profit by investing in AI stocks.
Self-driving vehicles have been in our imagination since vehicles became a reality.
Tesla (TSLA:NASDAQ) is the obvious choice for investors looking to profit, although other big companies’ divisions are not far behind. Tesla’s cars can drive themselves on the highway and park themselves already. Tesla is soon to release its first profitable car. The first two models were loss-making ventures – an attempt to get the infrastructure and concept off the ground.
There’s an additional reason why I think self-driving vehicles are such a great bet. They solve many of the government’s problems. Road fatalities and congestion would be reduced while redirection of traffic could be made far more efficient, all automatically without human effort. When governments realise how popular they’ll become for allowing self-driving vehicles, you’ll see them get out of the way fast.
But perhaps the real opportunity to profit is in self-driving trucks. The cost, safety and efficiency of self-driving trucks would dramatically change logistics. Uber purchased the key player in this industry – Otto. But there aren’t any listed companies trying it out just yet.
Moving people isn’t the only AI business. Domino’s Pizza already has a delivery robot. Soon your supermarket might be fully automated, from online right to your door. And drones could make things even more efficient by taking to the air instead of roads.
The sports camera company GoPro (GPRO:NASDAQ) is developing a line of drones for consumer use. You’ll find skiers are being followed around by such buzzing AI cameramen already.
IBM (IBM:NYSE) has turned itself into a tech company over the years. Its attempt at making AI work for businesses is called Watson. According to IBM’s former business chief, 90% of nurses in the lung cancer field who use Watson follow its guidelines. So it works.
But what does it do? The original idea behind Watson was to beat the reigning champions of the TV show Jeopardy! The idea now is that you can ask it any question in ordinary spoken language and it finds the answer. For business management decisions, this is immensely valuable because Watson can handle far more data and variables than the human mind in a fraction of the time.
Targeting your marketing
New technology, especially AI, often scares people. But of all the technologies people fear, marketing is the most exasperating.
So many people become suspicious when the advertisements that pop up are related to their Google searches. This is ridiculous.
It’s a dramatic improvement to our quality of life to have advertising catered to us. Making people aware of better, cheaper and newer products that are relevant to them is a huge service. It saves time, money and effort for businesses and consumers. People understand this when Amazon and Netflix display recommendations, but when Google and Facebook do it in their advertising it becomes some sort of crime.
Enough ranting. Facebook and Google have harnessed AI by designing such effective advertising algorithms they spook people. I’ve been on the business end of this – targeting potential customers based on their searches and Facebook interests. It’s a wonderful tool for the business world and it benefits the customers by making them aware of something they weren’t.
Facebook (FB:NASDAQ) and Google, now known as Alphabet (GOOGL:NASDAQ), also happen to be two of the most innovative companies in other AI areas.
All this AI technology needs chips to make it work. The silicon kind, not just the potato ones. And Nvidia (NVDA:NASDAQ) is the dominant company when it comes to making chips. Nvidia CEO and cofounder Jensen Huang explained why his company delivered an unexpected surge in earnings on AI technology.
“The AI revolution is moving fast and continuing to accelerate,” […] “Nvidia’s GPU deep learning platform is the instrument of choice for researchers, internet giants and startups as they invent the future.
“Our Datacenter GPU computing business nearly tripled from last year, as more of the world’s computer scientists engage deep learning. One industry after another is awakening to the power of GPU deep learning and AI, the most important technology force of our time.”
Nvidia’s core business is graphics cards for gamers – another booming AI industry.
The risks of AI investing
The real pioneers of AI get bought up by big corporations like Uber, Google and Tesla. On the one hand, this means you miss out on big capital gains. On the other hand, it allows you to make more stable and safe bets on AI. It’s a form of diversification.
For example, Uber and Tesla are a great bet if you think AI is going to take over our roads. You don’t have to worry about a particular firm or technology if you diversify via a big company’s stock. One of their divisions will make it happen.
The real risk of AI investing is that a lot of the future is already priced in. Stock prices of these companies are very high, which means investors assume they’ll be successful. When and if they are, the stock price won’t surge like a biotech stock might.
Despite this, investing in AI could deliver enormous gains over time. In fact, tech-related companies seem to be the only ones doing particularly well in the last few years. The famous “Fang” stocks – Facebook, Apple, Netflix and Google – are dominating the stockmarket as much as the tech world.