The buzz around artificial intelligence (AI) has reached a fever pitch, especially since the release of OpenAI's GPT-4 in March 2023. This latest model showcases remarkable capabilities, scoring impressively on standardized tests like the Uniform Bar Examination and Law School Admission Test—far surpassing its predecessor, GPT-3.5. Such advancements raise an intriguing question for investors: what exactly are AI stocks?
In essence, AI stocks represent shares in companies that have significant interests or investments in artificial intelligence technologies. According to Haydar Haba, founder of Andra Capital—a venture capital firm focused on AI—these stocks generally fall into two categories: established blue-chip technology firms that collaborate with or invest in AI developers and smaller startups dedicated solely to creating innovative AI solutions.
While it might seem logical to consider investing directly in small-scale AI developers for a more straightforward approach to tapping into this burgeoning field, experts suggest caution. Michael Brenner from FBB Capital Partners points out that developing large language models requires vast amounts of data and substantial financial resources; thus, these smaller entities often find themselves needing partnerships with larger corporations equipped with the necessary infrastructure.
For those looking at potential investment opportunities within this sector, several prominent names stand out:
- NVIDIA (NVDA) - A leader in hardware for machine learning and graphics processing units essential for training algorithms.
- Taiwan Semiconductor Manufacturing (TSM) - Key player providing high-end chips crucial for powering various AI applications.
- Meta Platforms (META) - Heavily invested in advancing LLMs as part of their broader tech strategy.
- Amazon.com (AMZN) - With its cloud computing services already supporting numerous businesses' needs for running extensive AI models.
- Microsoft (MSFT) - Notable investments include a $10 billion stake in OpenAI itself.
- Alphabet (GOOG) - Google’s commitment includes strategic moves like investing in competitors such as Anthropic to bolster its own offerings.
- Snowflake (SNOW) - Another cloud company positioned well due to rising demand related to data storage and analysis needed by many enterprises leveraging AI technologies.
Investors can also explore exchange-traded funds (ETFs) focusing on baskets of companies involved with artificial intelligence development through indexes like the Indxx Global Robotics & Artificial Intelligence Thematic Index or Nasdaq CTA Artificial Intelligence & Robotics Index—though diligence is required when selecting which ETFs genuinely align with one’s investment goals versus those merely using 'AI' as a marketing term without substantive backing.
As excitement grows over potential returns from these emerging technologies, some analysts warn about signs resembling an 'AI bubble.' Recent trends show stock prices skyrocketing after mere mentions of involvement with any form of artificial intelligence—as seen when BuzzFeed's stock surged following news about partnering with OpenAI on content generation tools despite limited product-market fit among many so-called ‘AI’ ventures currently attracting investor interest.