Proactive Investors - With tech stocks like Microsoft Corporation (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) plummeting in value over the past year, the emergence of AI in our everyday lives may be what’s needed to reignite investor confidence.
Since launching 60 days ago ChatGPT has dominated (and written a few) headlines, gaining one million users in five days and tempting Microsoft to invest around US$10bln in the program.
This has led to the first three weeks of 2023 seeing a 126% increase in volumes of purchase for basket of AI-related stocks compared to the last three weeks of 2022, online broker Freetrade noted.
As well as Microsoft and Google owner Alphabet, the basket includes L&G's AI ETF, NVIDIA Corporation (NASDAQ:NVDA), International Business Machines Corp. (NYSE:IBM), Intel Corporation (NASDAQ:INTC), and Meta Platforms Inc (NASDAQ:FB).
“This stands out as the single largest increase in buys for this group of stocks across all of 2022," Freetrade said.
It showed that retail investors were evaluating different opportunities to get exposure to this new trend.
Open AI, which owns ChatGTP and art generation software DALLE-E-2, could become deeper integrated into Microsoft’s software, Freetrade spokesman Alex Campbell said.
“Microsoft will no doubt benefit from the AI revolution due to the tools and services offered by its Azure cloud computing platform,” he said.
Microsoft's Azure, which offers a wide range of cloud services, could play an important role in allowing AI software developers to build and grow their businesses, Campbell believes.
Google’s owner Alphabet has also got its finger in the AI pie, early adopters of the trend it bought British start-up DeepMind in 2014 and owns tech developer X, the moonshot factory.
Google products such as Google Maps, Street View and Google Translate were all “moonshots” at first.
One current project at X is “Intrinsic” which focuses on developing AI software within robotics for commercial use.
“Rumours of Alphabet’s founders getting involved in research and development,” means that the tech giant could be gearing up for further AI investments, Campbell said.
Some investors look to NVIDIA as a company creating the infrastructure that will take computing power to the next level required for more advanced artificial intelligence, with the company known for its high-powered graphics processing units (GPU) used to power high-quality video games and animation.
However, the company is also developing products to quicken AI and machine learning.
NVIDIA is allowing developers access to its GPUs; providing tools and libraries to build and develop deep learning; and developing computing tech for AI-applicable devices like drones, robots, and smart cameras.
Palantir Technologies Inc (NYSE:PLTR) was another option suggested by analyst at IG, as the US software company specialises in combining big data analytics and AI and machine learning (ML) solutions.
One of its business models is in making AI/ML models operational by deploying them on top of data infrastructures.
It's not just the tech titans interested in this space, with smaller tech businesses including Alteryx Inc, a company offering data blending and analytics, and Rapid7, a cybersecurity software organisation, are specialists in AI.
Though both the company’s share price remains volatile- Alteryx has outperformed many of the tech giants over the last year rising by 5% whilst Rapid 7 fell by more than 60% in the same period.
Among London stocks, Engage XR Holdings PLC (AIM:EXR) has used OpenAI models ChatGPT and DALL.E for its AI-powered virtual employee called Athena, which can answer questions, create AI imagery, source media for playback, find 3D objects, provide tutorials, and interact with other key functions of the company's platform.
Analysts at FinnCap said: "As Athena interacts with more people she will continue to learn and enhance her performance, and the team will give her access to hundreds of technical documents so that she is trained to become an expert on the ENGAGE platform.
"In the future, the deployment of custom AI employees for ENGAGE’s enterprise customers will enable the avatars to fulfil a range of client-facing tasks, such as tech support, training, education, and moderation."
ETFs like the L&G Artificial Intelligence UCITS ETF and WisdomTree Artificial Intelligence UCITS ETF provide investors with the opportunity to invest in the whole sector.
Companies in both are weighted in the index according to the proportion of their revenue derived from AI services, offering a different level of exposure compared to a broad market ETF.
The L&G ETF portfolio is led by Fair Isaac Corp, Global Unichip, Nvidia, Arista Networks Inc and Analog Devices Inc (NASDAQ:ADI), while the WisdomTree fund top five are Autostore Holdings Ltd, Pros Holdings, Infineon Technologies AG, Cerence Inc and Workday Inc (NASDAQ:WDAY).
Microsoft’s share price (1.6%) has remained steady in 2023, whilst Alphabet (7.5%) and the L&G AI ETF (9%) have made reasonable gains- yet NVIDIA (35.4%) has started the year the strongest, having fallen the sharpest last year.