Riding the wave of artificial intelligence – A secular theme

As the trajectory of computing power surged exponentially, navigating through the challenges posed by the Global Financial Crisis, we transitioned into the era of Web 2.0.

This transformative phase witnessed the dominance of 4G, Cloud Services, and Semiconductor Chips. Often encapsulated as “Web 1.0 and 2.0,” this period marked the integration of home computing into our daily lives and the evolution of the mobile phone into an indispensable extension of ourselves. Now, on the cusp of Web 3.0, a new mega cycle unfolds – the era of Artificial Intelligence (AI). This 12-year epoch promises significant opportunities for businesses, end-users, and astute investors looking to capitalise on this burgeoning theme.

AI in 2023: The Next Coca Cola?

In a thought-provoking presentation at the iConnections Conference in February 2023, Canadian-American venture capitalist Chamath Palihapitiya drew an . He highlighted that while the refrigerator itself was a groundbreaking invention, it was the products stored within, like Coca Cola, that reaped substantial financial rewards. This analogy prompts a pertinent question for the year-end of 2024: who will emerge as the Coca Cola equivalent in the realm of AI?

AI Landscape: Beyond Buzzwords

AI continues to be a hot topic, featuring prominently in investor presentations, quarterly earnings reports, and CEO deliberations on integrating this transformative technology into their operations. The applications of AI range from the seemingly mundane, such as chatbots engaging in human-like conversations, to profound contributions like early disease detection and real-time data analytics optimising manufacturing processes.

AI Stocks: Navigating the Landscape

While there are few "pure" AI companies currently listed and investible, investors can still benefit from the broader AI revolution and its ecosystem. Investing avenues include companies involved in AI hardware, AI solution development, and the sale of AI development tools. Alternatively, investors can explore companies leveraging AI to enhance their products, marketing strategies, and operational efficiencies.

Here are some noteworthy stocks to consider:

• Adobe (ADBE): Renowned for its Creative Cloud suite, Adobe incorporates AI and machine learning capabilities into its Experience Cloud product, enhancing marketing and analytics.
• Alphabet (GOOGL): Google's parent company, Alphabet, not only provides AI tools and infrastructure through its cloud computing unit but also recently ventured into the realm of AI chatbots.
• Amazon (AMZN): Amazon employs AI in its web services, online store product recommendations, and the AI-powered virtual assistant, Alexa.
• Baidu (BIDU): A Chinese tech giant, Baidu operates the largest search engine in China and has been investing significantly in AI, including the development of its own AI chatbot.
• C3 AI (AI): C3 AI offers SaaS applications for enterprise-scale AI solutions, with a notable partnership with Alphabet in developing new AI applications.
• IBM (IBM): Through its Watson products, IBM provides AI and ML services for better decision-making and increased efficiency across various industries.
• Micron Technology (MU): Specialising in high-performance memory and storage hardware, Micron powers AI solutions in data centres and self-driving cars.
• Microsoft (MSFT): With a multiyear, multibillion-dollar investment in OpenAI, Microsoft aims to make AI technology universally accessible through its Azure cloud computing platform.
• Nvidia (NVDA): Known for high-performance microchips, Nvidia collaborates with Oracle to provide a comprehensive AI platform in Oracle Cloud Infrastructure.
• Oracle (ORCL): Offering cloud computing infrastructure, software, and hardware, Oracle enhances its AI capabilities through collaboration with Nvidia.
• Palantir (PLTR): Specialising in AI data mining platforms, Palantir serves government agencies and enterprise businesses, contributing to national security and organisational efficiency.
• Tesla (TSLA): Acknowledged as the best AI stock by fund manager Cathie Wood, Tesla's massive proprietary data sets and AI capabilities position it as a significant player in the AI revolution.

AI and Machine Learning Funds: A Wider Perspective

For investors seeking diversified exposure to AI without directly investing in individual stocks, AI exchange-traded funds (ETFs) present an attractive option. Notable funds include:

• Global X Robotics & Artificial Intelligence ETF (BOTZ): Holding 43 global stocks, BOTZ focuses on companies positioned for gains in robotics and AI adoption.

• ROBO Global Robotics & Automation ETF (ROBO): With 80 stocks, ROBO emphasises companies advancing robotics and AI innovation.

• iShares Robotics and Artificial Intelligence Multisector ETF (IRBO): The most diversified among AI funds, IRBO, with 118 holdings, provides exposure to various sectors including technology, healthcare, and industry.

• ARK Autonomous Tech & Robotics ETF (ARKQ): Managed by Ark Invest, ARKQ invests in 30 to 50 companies involved in autonomous transportation, robotics, automation, 3D printing, energy storage, and space exploration.

Conclusion

As we ride the wave of AI, the landscape is teeming with opportunities for investors. Whether through individual stocks or diversified ETFs, navigating the AI space requires strategic consideration. The AI revolution is not just a technological evolution but a profound shift with far-reaching implications for businesses and society. As we stand at the intersection of technological innovation and investment potential, the question persists: Who will be the next Coca Cola in the era of AI? The journey continues, and astute investors are poised to navigate the complexities and ride the wave to success.

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