How to Invest in Artificial Intelligence (Updated 2024)

What is artificial intelligence?

AI is defined by IBM (NYSE:IBM) as “technology that enables computers and machines to simulate human intelligence and problem-solving capabilities”. As concrete examples of AI, the tech firm lists digital assistants, GPS guidance, autonomous vehicles, and generative AI tools (like Open AI's Chat GPT).

AI and machine learning often get intertwined, but they are not the same thing. Putting it into simple terms, machine learning is a subset of AI. It's how a system looks at complex sets of data and learns from this information, while AI is how the data is expressed.

The rapid development of machine learning and subsequently AI technology in recent years can be attributed to significant advancements in graphics processing units (GPUs) which have allowed for the creation of powerful chips that can support machine learning and the training of AI models.

What is the outlook for artificial intelligence?

According to Allied Market Research, advancements in big data and the need to quickly analyze large datasets to generate actionable insights have contributed greatly to the accelerated adoption of AI technologies.

The research firm sees the healthcare, banking, automotive, and e-commerce industries as sectors for continued growth in new AI applications. In addition, AI-driven automation and robotics are also driving growth in this market. The report suggests North America will largely dominate the space due to its leading players, high government investment in AI and a strong technical base.

For its part, Fortune Business Insights is projecting a value of US$2.74 trillion for the AI market by 2032. The firm expects to see more partnerships and collaboration, a rise in small-scale AI providers, and increasing government investment as helping to grow the market space. The report’s authors point to Asia-Pacific as the region which will see the most growth over the forecast period, driven in large part by “China’s dominance over AI research”.

Narrowing down to the generative AI market, Grand View Research is forecasting that this segment of the overall AI market will see a compound annual growth rate of 36.5 percent to reach US$109.37 billion by 2030.

The report finds that the software segment is likely to account for the highest revenue share over the forecast period. “Rising use of generative AI-based software owing to its benefits, such as better image resolution, reduced conversion time, enhanced performance, and quick availability of output is attributed to market growth,” stated the firm.

How to invest in artificial intelligence?

With such growth potential in the AI market in the coming years, investors may very well want to dive into the sector. There are a number of ways to do so, including exchange-traded funds (ETFs) and stocks.