How to Invest in AI in Australia

What is AI and why is it so popular?

AI is an emerging field of technology that combines computer science and data processing to create programs that attempt to make decisions and solve problems in a similar way to the human mind. AI technology uses hardware and software systems to access information, create connections and deliver value to end users. It encompasses the sub-fields of machine learning and deep learning, which have found their way into a broad array of applications.

With such a broad definition and so many moving variables, AI is best described by what it does. AI systems can mimic human intelligence in many ways, from speech recognition and digital vision to input mapping and language translation. They're also getting better at creating information, as witnessed by the rise of Open AI's ChatGPT and other natural language tools. This technology is being developed and adopted on several fronts, from chatbots and cloud-based business tools to mobile computing and smart devices.

The business world has already been impacted by AI, and it's likely to influence almost every industry sector in the coming years. While the sharp rise of ChatGPT is seen as something of an evolutionary jump, in reality, it's the result of significant hard work over a long period of time. These efforts will continue to mature and splinter across the commercial world in the coming years. When AI is adopted effectively and scaled properly, it's likely to deliver more efficient business processes, enhanced connectivity, improved security standards and reduced operating costs.

In many ways, today's AI is just the tip of the iceberg — and yes, the hype is very much real. The current level of excitement may seem like a bubble, but the underlying technology is based on something solid. While no one knows exactly what the future will hold, AI will become a central part of the conversation for business owners and investors for many years to come.

What are the next big trends in AI?

The future of AI is unfolding before our eyes. While commercial and public interests are attempting to make forecasts and lay roadmaps, in reality, they're struggling to keep up. The sheer size and scope of this technology is immense, and the potential applications are incredibly broad and impactful. A report by PwC predicts the following by the end of the decade:

• AI will have a massive impact on the global economy, with a potential contribution of US$15.7 trillion by 2030. Over this time, 45 percent of total economic gains will come from product enhancements, the firm believes, because "AI will drive greater product variety, with increased personalisation, attractiveness and affordability over time."

• The greatest economic gains from AI will come from China and North America, with GDP boosts of 26 percent and 14.5 percent, respectively, by 2030. These are two of Australia's biggest trading partners, presenting a great opportunity for the country's investors.

• It's not all good news, however, with AI also likely to have a significant impact on employment. Four hundred million workers will possibly be displaced before 2030, which is around 15 percent of the global workforce.

The following AI trends are likely to have the biggest impact:

Machine learning

Machine learning is a form of software automation that enables computers to produce work without being explicitly programmed to do so. Machine-learning algorithms can process and analyse vast datasets incredibly quickly and accurately. Software platforms and applications are increasingly automated in areas as diverse as finance, marketing, healthcare and education.

Hardware automation

Along with software automation, AI technology continues to drive growth in robotics and other forms of hardware automation. Machines are capable of performing complex tasks in manufacturing, logistics, healthcare and transportation, among other industries. The intersection of robotics and machine learning is fertile ground, with self-driving cars perhaps the most obvious example.

Natural language tools

Human language is flexible and complex, but AI is up to the challenge. Chatbots and virtual assistants are some of the earliest examples of AI, and this technology continues to improve with each iteration. These tools work through a combination of natural language processing (NLP) and natural language generation (NLG), and respond to human text input. ChatGPT by OpenAI and Google's Bard are two examples of this technology.

Smart devices

Smart devices include mobile and wearable technologies, which combine integrated hardware with intelligent software systems. These devices are widely used by the health and fitness industries, and they also have applications in autonomous vehicles, smart manufacturing, home entertainment and domestic security. This field includes edge computing, which involves processing data close to its physical source.

Along with these technology-based trends, we're likely to see profound changes in how people, industries and governments approach AI. From the increasing democratisation of AI research to the growing need for AI frameworks and regulations, how we respond to this technology is far from set in stone. From an individual user's perspective, we're likely to see more emphasis on explainable AI and increased collaboration between humans and AI tools.

The future of AI looks very bright, and there's never been a better time to invest. While there have already been significant evolutions in AI development, the implementation of this technology will continue to roll out for many years to come. As existing technologies mature and new use cases present themselves, opportunities for investment are only likely to grow.

How to invest in AI in Australia?

Based on data from CSIRO and Data61, Australia could boost its domestic economy by AU$315 billion by 2028 by adopting AI and other digital technologies. Among other benefits, the country could capture AU$30 billion to AU$50 billion in future Asia-Pacific markets for healthcare innovations and boost the farm gate value of agriculture by AU$20 billion.

According to IDC's latest Worldwide Artificial Intelligence Spending Guide, Australia's spending on AI systems will grow to US$3.6 billion by 2025. This represents a compound annual growth rate (CAGR) of 24.4 percent for the period of 2020 to 2025. Banking will be the leading industry in AI spending, with a five year CAGR of 23.1 percent.

In PwC's AI report, Australia is included in the "developed Asia" category, where AI is forecast to reach 10.4 percent of GDP, or US$0.9 trillion, by 2030. While this is much lower than China at US$7 trillion, or the global total of US$15.7 trillion, it is still notable.

If you want to invest in AI in Australia, there are lots of opportunities available. The domestic AI sector is growing all the time, and local markets are increasingly connected to global industry movements.

The biggest ASX-listed AI stocks by market cap include:

• WiseTech Global (ASX:WTC,OTC Pink:WTCHF) — This firm provides cloud-based software solutions to logistics businesses in 173 countries.

• Xero (ASX:XRO,OTC Pink:XROLF) — This technology company provides cloud-based accounting software to small- and medium-sized businesses.

• TechnologyOne (ASX:TNE) — Australia’s largest enterprise resource planning software-as-a-service company.

• Hub24 (ASX:HUB) — This financial services company serves the wealth industry with an investment and superannuation platform.

• Brainchip Holdings (ASX:BRN,OTCQX:BRCHF) — This company is focused on the commercialisation of an AI neuromorphic processor.

• Appen (ASX:APX,OTC Pink:APPEF) — This data company is involved with the development of machine learning and AI.

• Bigtincan Holdings (ASX:BTH,OTC Pink:BTGHF) — This leading data centre operator is involved with cloud-based computing services and provides an AI-powered sales enablement automation platform.

Of course, buying stocks is not the only way to invest in Australia's AI sector. Investors have access to a range of opportunities, including professionally managed exchange-traded funds (ETFs) and mutual funds that invest in AI companies. At the moment there is only one ASX-listed AI ETF: the ROBO Global Robotics & Automation Index ETF (ASX:ROBO). You can also choose to invest directly in AI-related businesses, AI startups or even AI art projects.

If you're thinking about investing in AI in Australia, it's important to get accurate advice from leading AI financial experts. This field is moving forward at a rapid rate and access to current information is absolutely critical.