Are you busy selecting Artificial Intelligence (AI) stocks for your portfolio? Often combined with Machine Learning (ML) technology, AI innovations are seizing the investment world by storm. Investors are always looking for the next hottest item, and although AI companies have existed for years, their recognition is heating up of late.
Often shrouded in thematic investing terms, AI stocks do represent the future and the basic tenet of thematic investing is to invest now in stocks that will benefit from predictable mega-trends, which will drive up value over a much longer-term, generally 10 years or more. The rush, however, is on to find bargains and little diamonds in the rough before the masses drive the prices of these securities into the upper atmosphere.
Once the expressed purview of science fiction movies with humanoid-type robots, AI represents the potential of replacing any human thought process with a computer design that improves over time. The process mimics us, much in the same way that the brain assimilates new data and associations to innovate and create new solutions for existing mental challenges. As you might expect, customer service has been the initial focal point, providing support and answers to routine queries that pervade online Internet platforms.
Perhaps, one current example will drive home the point. Capital.com is an impressive online broker that broke into the investment scene five years back and has already amassed a clientele upwards of 2 million registered customers. One reason for its success can be attributed to its innovative trading platform that uses AI to analyse 20 biases that traders exhibit and then provides feedback to the client to improve their approach and enhance the opportunity for success.
Unfortunately, AI capabilities have been over-hyped. Hopefully, the waves of investors that buy on rumour before doing any analysis has subsided, and reality has set in to subdue over-the-top perceptions. Experts in the field tend to be the voices of dissent. Rodney Brooks, a MIT roboticist and co-founder of iRobot, claims that Artificial General Intelligence (AGI) will not arrive until 2300. These sanguine quotes may speak more to the long-term nature of AI:
Rodney Brooks: “It is a fraught time understanding the true promise and dangers of AI. Most of what we read in the headlines… is, I believe, completely off the mark”.
Yann LeCun, a professor at the Courant Institute of Mathematical Sciences at New York University (NYU): “It’s hard to explain to non-specialists that AGI is not a ‘thing’, and that most venues that have AGI in their name deal in highly speculative and theoretical issues”.
Richard Sutton, professor of computer science of the University of Alberta: “Understanding human-level AI will be a profound scientific achievement (and economic boon) and may well happen by 2030 (25% chance), or by 2040 (50% chance)—or never (10% chance)”.
The issues are that it will take a long time to mimic sensory perception, fine motor skills, natural language understanding, problem-solving, navigation, creativity, and social and emotional engagement. How do we measure progress by AI researchers in this arena? Brooks distils it down to four achievements: 1) The object-recognition capabilities of a two-year-old; 2) The language-understanding capabilities of a four-year-old; 3) The manual dexterity of a six-year-old, and 4) The social understanding of an eight-year-old (source: McKinsey)
Does this sombre diatribe suggest that AI stocks are to be avoided for now? There are significant benefits to be had with the state of the art at this juncture, certainly in the next 10 years. You may have to do a little digging and ensure that the early wave of price-hypers has subsided, but there are still jewels to be discovered on the AI landscape.
Several analysts have done this prospecting for you and have prepared lists of future hopefuls with current prices hovering below the $10 level. Here for your review are 10 such suggestions from the efforts of analysts that follow this field of play.
The best AI stocks can typically be found on the Nasdaq exchange, but there are a few on the NYSE, as well. Be sure to review previous pricing behaviour to ensure that prices have not been driven skyward, well beyond the $10 level. Buy on the dips, only if due diligence warrants.
Here are further details on our top 10 picks in alphabetical order:
What are your next steps if you want to grab the AI tiger by the tail? Delay making any choices until after you have done your homework. The AI field has been over-hyped for the past few years. Current prices may not reflect a true value buy, and whenever a list like this one is published, stock mavens tend to buy at will, and up go the prices. There are also thematic ETFs that focus on this arena, as well, another way to diversify your investment. In either case, your time horizon will be roughly 10 years for these stocks, so there is no rush. Enjoy the process.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage . 68 % of retail investor accounts lose money when trading CFDs with this provider . You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money .