Artificial Intelligence (AI) has been the investing theme of 2023. Indeed, almost all of the S&P 500’s gains in 2023 have come from just seven companies — the so-called ‘magnificent seven’ — all of whom are potentially riding the AI wave to some degree.
While this may be yet another bubble, Artificial Intelligence is arguably different to similar tech manias. It’s already in use across a wide variety of real-world applications, including in entertainment, social media, art, retail, security, sport analytics, manufacturing, self-driving cars, healthcare, and warehousing alongside dozens of other sectors.
Every Netflix recommendation, every supermarket rewards purchase, and every football match is analysed ever more relentlessly in order to provide more and better data. And while consumers have always understood — even peripherally — that AI was taking over more and more of the heavy lifting; the sector’s investment catalyst finally arrived earlier this year.
This catalyst is of course ChatGPT, the OpenAI-developed chatbot which garnered over 1 million users in just five days. It took Facebook 10 months, and Netflix three and a half years to hit the same milestone. ChatGPT now boasts over 100 million weekly active users, and investors are now considering whether the innovation could make careers across the spectrum entirely redundant.
From an investment perspective, interest rates are relatively high, and quantitative easing appears all but over for the foreseeable future. AI development is exceptionally expensive, and for every ChatGPT breakthrough, there are hundreds of costly failures.
Therefore, the best AI stocks to watch could be predominantly the larger blue chips — which also helps to diversify any investment in the event that their AI projects fail. However, it’s also worth noting that some commentators consider the large US stocks are inside an AI bubble that will eventually pop.
And remember, past performance is not an indicator of future returns. While the following are the largest AI-focused companies stateside, Apple and several others are excluded because analysts disagree on whether they qualify as AI companies.
