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Artificial Intelligence Stocks - How to Invest in A.I. and Machine Learning Companies

If you're wondering how to invest in artificial intelligence stocks, this article is for you. A.I. will be one of the dominant topics in the next decade as companies automate their businesses and use A.I. use to stay competitive. In this post, we discuss the A.I. industry, the different types of artificial intelligence stocks, and how to value them. Some of the leading artificial intelligence companies that you might consider are also considered.

What is Artificial Intelligence and Machine Learning?

Artificial intelligence is a broad term that refers to machines and computer programs that can make intelligent decisions. This technology can, for example, help computer programs recognize images, interpret the meaning and intent of text, or calculate the most efficient way to accomplish a task. The programs can in turn control robots and other machines, make medical diagnoses or give recommendations for action.

Machine learning, deep learning, and neural networks all fall into the realm of artificial intelligence. In machine learning, computer programs are trained on large data sets and gradually improve the algorithms with which they make decisions. Deep learning and neural networks are more specialized approaches that use mathematical and statistical methods.

Artificial intelligence can not only make decisions that may be superior to human decision-making, it can also make those decisions very quickly. A key element of A.I. are data. Since A.I. systems are trained with data, the quality and quantity of the data they use is crucial. Because of this, some of the best artificial intelligence stocks are companies that store, organize, and process data.

Application areas of artificial intelligence

A.I. has applications in almost all areas of business and daily life. When it comes to investing in artificial intelligence companies, it pays to know how widespread their applications can be to get an idea of ​​the market potential. Automation and robotics cannot function without some form of computer intelligence. The same applies to autonomous vehicles that are equipped with A.I. Plan routes, navigate and avoid obstacles.

In healthcare, machine learning is used to identify diseases using x-rays, blood samples, and other samples. A.I. can also be used to evaluate medical records to predict risk factors for individual patients. Ecommerce websites use the technology to make purchase recommendations, predict behavior, and set prices. Social networks like Facebook use A.I. also to determine which advertisements should be shown to users. Music streaming services use similar algorithms to recommend suitable music to users.

The technology is used extensively in the human resources and recruiting sectors to match applicants for positions and predict their likely success. A.I. is also used extensively in almost all areas of the financial industry. The areas of algorithmic trading and quantitative investing were among the first to introduce A.I. (see below for an example). A.I. is now also used for customer service, insurance, financial planning and investment analysis.

What are artificial intelligence stocks?

There are very few companies that are solely involved in artificial intelligence. Most companies that offer complete A.I. Offering solutions do so as part of a wider range of products.

The remaining artificial intelligence stocks are companies that provide the hardware, components, intellectual property, or services that make up an AI platform. You can look at this from the perspective of a business that needs some type of A.I. capability. They need to collect, organize and store data, they need software programs, and they need hardware or access to the computing power of cloud-based infrastructure. Further down the value chain there are manufacturers who produce chips that can process large amounts of data. Many of the leading companies in the field of artificial intelligence are therefore specialists in big data analysis, cloud computing or hardware.

Other leaders in artificial intelligence are those who have extensive experience with A.I. in their own business. feature. Companies like Google, Amazon, and Baidu weren't founded as A.I. companies, but they are now able to monetize their A.I. competency. Autonomous vehicles and the technology developed for them are also an essential part of the A.I. landscape. The reality is that most of these operating systems, along with other A.I. Applications are being developed in companies like Google, Baidu, Tesla and Apple.

What to look for in artificial intelligence stocks

It's important to note that just because a company is interested in A.I. involved, it does not automatically mean the stock is or ever will be a good investment. First of all, many of the smaller companies, especially those with a narrow focus on cloud computing or big data, trade with high price / earnings ratios or negative cash flows. Like many technology companies, such stocks must be viewed as speculative investments.

On the other hand, for many very large companies, artificial intelligence is, for the most part, just one aspect of their business. When investing in companies like Microsoft or Google, consider the investment case for the entire company, not just the A.I. segment. In order to be able to assess whether A.I. companies can monetize their services in the long term, there are a few things to consider.

First, the company should have unique intellectual property. If the solutions offered are easy to replicate, then larger companies will do just that. Every company that offers A.I. solutions should develop intellectual property with the help of its own research. The company should have basic expertise in the relevant industry. When investing in artificial intelligence, you should consider the size of the market, the potential growth rates for that market, and the likelihood that it will become competitive.

The ability of an A.I. Company selling its own products will also be the key to success. Because of this, some of the best artificial intelligence stocks may be those that have well-established corporate relationships and sales channels. Companies like Microsoft and IBM are ideally positioned in this regard. Start-ups that do not have such distribution platforms have to have something very special to be competitive.

When it comes to investing in artificial intelligence, the saying goes more than ever "During a gold rush, sell picks and shovels instead of digging for gold". It may be difficult to predict who will be successful in providing artificial intelligence solutions, but any company that uses A.I. uses, requires computing power and data storage. Because of this, chipmakers and cloud computing companies might be the lower-risk investment approach.

Overview of the most important stocks of artificial intelligence

Below are some artificial intelligence stocks that are well-placed to capitalize on as the industry grows. By no means is this an exhaustive list, it encompasses the largest companies that have significant exposure to A.I. to have. There are other smaller, pure artificial intelligence stocks out there as well, although many of their business models have yet to prove themselves. Other big companies like Facebook, Apple, and Tesla are using A.I. intensive, but more as a tool than as a profit center.

Note: Our content is for educational and informational purposes only and is not to be understood as investment or tax advice. Investments can involve considerable financial risks. Past return is not a reliable indicator of future results. Further information can be found in our disclaimer.

alphabet

Alphabet and its primary operating subsidiary, Google, use A.I. comprehensive in all business areas. Google has developed its own programming library, TensorFlow, specifically for data processing and machine learning. Several large companies are already using TensorFlow for machine learning, which makes Google an important part of their A.I. ecosystem. Also, because Google collects so much data and has so many use cases to test A.I.applications, the company has inevitably become a global leader in A.I. Become solutions.

Amazon

Amazon has invested heavily in artificial intelligence from the start. The company uses A.I. to analyze customer behavior and make individual purchase recommendations. Amazon's cloud business, AWS, is also heavily reliant on A.I. to optimize data storage. Amazon is known for founding new companies and business fields based on their own developed skills. This is how Amazon's cloud business came about, and it is very likely that at some point the company will commercialize its A.I. capabilities as well.

Microsoft

While Microsoft isn't primarily an A.I. Company is known, the company invests heavily in A.I. in various fields, particularly in medicine and natural language processing. To keep up with companies like Google and Amazon in the cloud space, Microsoft is developing cloud-based, A.I.-driven applications. With so many companies already having relationships with Microsoft, it is likely that Microsoft will be one of the first companies they turn to to help with their artificial intelligence concerns.

IBM

IBM had been working on A.I long before most of the other companies even existed. The company has invested billions in A.I. research and unveiled one of its newest A.I. projects, Watson, in 2010. Watson is able to answer questions using natural language processing. In addition to a large department that deals with what she calls cognitive computing, IBM has well-established corporate relationships to continue building the artificial intelligence business.

Baidu

Baidu is often referred to as the Google of China because the company dominates online search in the country. Like Google, Baidu owns a variety of companies and uses A.I. for many areas of application. Baidu has filed numerous patents on deep learning technologies for comprehensive applications. The Apollo autonomous vehicle operating system is also considered to be one of the best in the world.

Tencent

Based in China, Tencent owns some of the most widely used social media, messaging and video streaming applications in the world. Tencent has invested heavily in artificial intelligence to help manage and share data across its ecosystem. In the future, we can expect Tencent to use this A.I. knowledge in other areas of application as well.

Twilio

Twilio creates applications that allow developers to incorporate voice and text messaging capabilities into programs. This has made Twilio a leader in voice-to-text processing and phone call understanding. As this type of technology will be in demand as more and more companies automate communication systems, Twilio is one of the A.I. to watch. Shares.

DXC Technology

In 2018, DXC Technology launched its Agile Process Automation, a platform that enables a manufacturer to add machines to its production line with artificial intelligence "work out". DXC is now a leader in machine learning.

Box Inc

Box offers cloud-based solutions for data and content management, storage and sharing. It's a little like Dropbox but has more advanced file management technologies. The company recently launched Box Skills, an application that enables businesses to create their desired A.I. Execute the application on all data that you save in Box. This means that Box enables its customers to have more than one A.I. Use the application and experiment with it without being tied to a single provider.

Nvidia

The graphics processing unit (GPU) was originally developed for digital output on monitors, but is able to execute several processes at the same time. This makes the GPU for A.I. better suited than the CPU, which can only run 1 to 4 programs at the same time. Nvidia has been the leading manufacturer of GPUs for the past decade. Although the company is now in competition with other chipmakers like AMD, it is still considered a leader in the field with annual sales of over $ 10 billion.

NXP Semiconductors

Each of A.I. Controlled devices, including autonomous vehicles, can only be as effective as the data it receives. NXP is a leading manufacturer of sensors and radars for machines and autonomous vehicles.

Alternative methods to invest in A.I. to benefit

In addition to investing directly in artificial intelligence stocks, investors can also invest in funds that use artificial intelligence to make investment decisions. A new era of investment based on A.I. and big data is ahead of us. In the context of quantitative investments, statistical analyzes and evidence-based investments found their way into the financial sector. A.I. and Big Data are part of the next step and add more computing power and new sources of information to the investment process.

A.I. algorithms can process very large amounts of data very quickly and find previously unknown patterns in the behavior of securities. The use of computing power also enables fund managers to monitor a far larger universe of stocks than fund managers can do with traditional fundamental analysis. An algorithmic approach to investing also eliminates the impact emotions can have on decision-making.

Big data refers to the process of collecting and analyzing large amounts of data collected from websites, applications, mobile devices, and other connected devices. From these data sets, new sources of information can be extracted that are available long before traditional financial data sources.

An example of the combination of these technologies is Catana Capital's Data Intelligence Fund. This fund pursues an unlevered long / short equity strategy based on big data analysis in combination with A.I. algorithms. In addition to traditional sources of information, data is collected from hundreds of sources, including news and research websites and social media platforms.

Natural language processing algorithms are used to extract useful information and calculate sentiment scores. A.I. Algorithms are used to find patterns and relationships between market sentiment and stock prices. Position and risk management processes optimize the fund's risk-adjusted returns. Catana Capital is an example of the next generation of quantitative asset managers and yet another way to benefit from the A.I. Benefit from revolution.

Conclusion: Artificial intelligence offers great opportunities and investment opportunities

Artificial intelligence promises to change the way the world works. Algorithms can make evidence-based decisions much faster than humans. But the driving force may be the fact that A.I. it enables companies to increase size and productivity while reducing costs. This means that companies must invest in artificial intelligence to stay competitive.

As with any investment in a growth industry, artificial intelligence stocks are unlikely to be a one-way street. Volatility will again and again offer long-term investors good entry opportunities to get away from the growth branch A.I. to benefit. Alternatively, investors could consider A.I. by investing in funds that actively use the technology.

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