Without question the hottest sector in technology and probably the entire stock market is Artificial Intelligence (AI). The catalyst came in November of 2022 when Open AI released its revolutionary chatbot called ChatGPT. ChatGPT was a quantum leap forward from leading search engines such as Google and Bing, with the mind blowing ability to pass the bar, pass medical exams and produce detailed research reports that look exactly like they were written by a human.
ChatGPT is part of a larger trend happening in the AI sector. Analysts are predicting massive growth in AI in the next 10 years. Here are some more details from leading market research firm Statista.
According to Next Move Strategy Consulting the market for artificial intelligence (AI) is expected to show strong growth in the coming decade. Its value of nearly 100 billion U.S. dollars is expected to grow twenty fold by 2030, up to nearly two trillion U.S. dollars. The AI market covers a vast amount of industries. Everything from supply chains, marketing, product making, research, analysis, and more are fields that will in some aspect adopt artificial intelligence within their business structures. Chatbots, image generating AI, mobile applications are all among the major trends improving AI in the coming years.
Keep in mind this is a projection and things usually change. However, the underlying theme is that the AI sector should grow sharply in the next 10 years. And naturally investors want to know how they can play the trend.
Today I am going to share two AI investment ideas – an AI mutual fund and an AI stock.
Global X Artificial Intelligence and Technology (NASDAQ: AIQ) is a popular mutual fund that invests in a basket of 95 AI stocks, including mega cap tech stocks such as Meta, Apple, Microsoft, Amazon and Tesla. This isn’t exactly a ‘pure play’ on the AI sector, but it does provide very broad exposure to the leading AI companies.
This fund is a more conservative way to invest in AI, compared to owning one individual AI stock, you get diversification with 95 stocks. Shares are having a great year, up 29% in 2023. However this fund has seen its fair share of volatility in the last few years. Take a look at the 5-year chart below.
C3.ai (NASDAQ: AI) is an early industry leader in the AI sector. Founded in 2009 and headquartered in San Fransisco, the company went public in December of 2020. C3 developed a software platform that helps large companies develop proprietary AI apps. Revenue growth has been solid in the last few years and the valuation on this company looks reasonable.
This stock has been surging in 2023 with investors getting fired up about AI stocks – shares are up almost 200% this year. However, after being crushed in the big tech sell off of 2021 and 2022, AI is still trading about 80% below the all-time high. To me, this looks like a compelling opportunity to buy low. Take a look at the big dip, and potential rebound, in the 2.5 year chart below.
Risk vs Reward: The AI sector and stocks are prone to extreme volatility. This sector is not for the faint of heart. Owning this AI fund or stock, shares can easily fall more than 50% in a few months. On the flip side, they can also deliver big gains as we see with the 200% gain in AI shares this year.
The bottom Line: The AI sector is exciting right now – some of the best technology we’ve seen in the last 20 years is happening. We are seeing legit game-changing technology come to life. While the upside is large, this sector is prone to extreme volatility.
I’ll be back with another update next week – have a great day!
Disclaimer: This is not investment advice. This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
