Can you invest in artificial intelligence (and ChatGPT)?

If you are looking for a sector in which there is a vast amount of development and research going on, the competition is fierce and global and which will be one of the crucial sectors for the rest of this decade, then artificial intelligence has to be among the top choices.

There is a serious amount of investment being channelled into start-ups and by major tech companies into their own R&D. More broadly, a race is on to be the first in Artificial Intelligence advances, not only between companies, but also between countries, with the US and China and India leading the pack. The development of AI will affect almost every industry in a myriad of ways and companies not using it will risk being left behind.

How did AI companies perform versus the broader market?

The COVID years have been particularly strong in AI development. According to Stamford University’s latest Artificial Intelligence Index Report, private investment in AI and AI-related start-ups increased by 103% year-on-year in 2021, bringing it up to a total of $96.5 billion. This doesn’t include the amount of money major tech companies have spent on their own in-house AI R&D.

The NASDAQ CTA Artificial Intelligence & Robotics index soared from 940 in 2020 to a peak of 2009 in in February 2021. The rally was slightly exaggerated in terms of size compared with the rest of the market at it happened against a background of lockdowns and investors looking for “pandemic proof” shares. As the lockdowns eased, so did the index’s strength, but only by a small margin, until the inflation and high interest rates in the Europe and the US started affecting the equity markets more broadly.

Compared with the NASDAQ Composite Index, which dropped by almost 17% in the last year, the NASDAQ CTA AI index held up a little bit better with a decline of 15%. Since the start of the year, both indices started recovering with the Nasdaq CTA AI Index lagging slightly, but also being the index with the capacity to rally faster given how much interest there is in this sector and the level of R&D.

• Beginners Guide to Indices
• Gold price forecast for 2025: Can it go to $3000?
• Apple stock hits ATH but will 2025 see a correction?
• WisdomTree launches new global ETF on London Stock Exchange

Which companies to look at?

There is only a handful of pure AI companies out there, but also a small universe of AI-related stocks. Of the top ones are Microsoft [NasdaqGS:MSFT], which has recently increased its stake in Open AI, the maker of next generation chatbot technology ChatGPT. ChatGPT has the potential to change how we search the web and the capacity to replace Google NASDAQ:GOOGL in the future, as it responds to any query in what sounds like a human answer, frequently lengthy and elaborate.

The other top AI developers are Google parent company Alphabet Inc. and AI maker C3 ai NYSE:AI.

Other interesting investment picks are what could be described as “support industries” such as chip maker Nvidia NASDAQ:NVDA, US computer networking company Arista Networks NYSE:NET and data storage company Seagate Technology [NasdaqGS:STX].

This will be an incredibly busy sector over the coming years and one definitely worth keeping an eye on.

WisdomTree Artificial Intelligence ETF