Investing directly in companies that are heavily focused on artificial intelligence (AI) and actively integrating it into their products and services currently presents significant growth potential.
This is partly due to current industry trends and the growth of individual stocks – such as Nvidia, Alphabet and Microsoft – as well as recent innovations in AI chatbots like ChatGPT.
However, direct investments are risky due to intense competition, regulatory uncertainties, and market volatility.
These tech giants are leaders in AI development but emerging firms like China’s DeepSeek are also pushing the boundaries of AI, leading to market disruption.
For instance, DeepSeek’s introduction of their own AI platform routed Nvidia stock earlier this year, seeing the company’s shares tumble by 17 per cent (they have now mostly recovered).
Reducing risk with AI-focused ETFs
Diversification helps spread risk by investing across multiple companies and sectors, reducing the impact of any one underperforming asset.
AI-focused ETFs, like the iShares Automation & Robotics UCITS ETF (RBOT), offer diversified exposure to the AI industry.
RBOT holds 157 companies and is weighted 38.87 per cent in the software and computer services sector, reducing the risk of relying on a single company’s performance.
However, while this approach can smooth returns and lessen volatility, it does not eliminate risk entirely.
External factors, like regulatory changes or economic downturns, can still impact the broader market.
If you are looking to invest in AI without the risk of single-share depressions, you might want to consider ETFs.
Investing in AI? Speak to our independent financial advisers.
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