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New AI-driven tools like ChatGPT and Midjourney have proven incredibly popular, and controversial, since they emerged in 2022. Despite ethical concerns and fears of jobs being lost to machines, proponents of AI point to a new era of increased productivity and innovation across multiple industries.
Startups in the AI space are booming, and it seems venture capitalists are equally as enthused, resulting in billions being raised by AI companies and soaring valuations. Incumbent industry leaders are also rapidly transforming their AI capabilities as a means to automate and improve.
Let’s explore the opportunity for Australians to gain exposure to this sophisticated leap forward in technology by investing in AI stocks listed on the Australian Securities Exchange (ASX).
Related: What is ChatGPT? A Review of the AI In Its Own Words
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Artificial Intelligence Stocks Explained
AI stocks generally refers to shares in companies that use artificial intelligence (AI) in the delivery of products, applications or services. Few companies currently listed on the ASX incorporate AI as a core part of their offering to customers. However the economic impact of AI is expected to grow considerably as more businesses look for ways to embed AI in their operations.
In 2023, Microsoft founder Bill Gates described the recent evolution of AI as a critical technological advancement—on par with the invention of microprocessors, personal computers, the internet and mobile phones. Gates said: “It will change the way people work, learn, travel, get health care, and communicate with each other. Entire industries will reorient around it. Businesses will distinguish themselves by how well they use it.”
So, AI is set to change the world—but what is it exactly? Digital systems that can predict, solve problems, and learn, without human intervention come under the umbrella term artificial intelligence (AI). It’s also sometimes considered a branch of data science, because creating AI applications depends on collecting and processing vast amounts of data to ‘train’ the algorithm that provides instructions for a machine to execute.
How Do AI Stocks Differ from Other Stocks?
A small contingent of publicly listed companies on the ASX are creating products powered by artificial intelligence, or delivering services that specifically enable AI’s uptake. For instance, a well-known ASX-listed AI stock is BrainChip (BRN), which makes computer chips and software that brings AI-enabled processing to sensors used in an Internet of Things (IoT) network.
AI stocks are not limited to the technology sector. AI-enabled applications are being developed across varied industries including manufacturing, healthcare, finance, marketing, education and resources.
Because AI is an emerging technology that is still being developed, companies focused on AI may be relatively untried, not highly profitable, or susceptible to disruption by competitors. As a result, AI stocks’ share prices may be more volatile.
Investors need to weigh up the risks based on a clear understanding of a company’s long-term prospects.
Related: ASX Stocks to Watch in 2023
Other Stocks Offering Exposure to AI
As well as new companies entering the market with specific AI solutions, it’s worth keeping in mind that AI is likely to transform the way many existing companies generate value. For example, Amazon announced a partnership with an AI startup to expand its offering to AWS cloud customers looking to build their own AI apps.
Because AI is an emerging technology that is still being developed, companies focused on AI may be relatively untried, not highly profitable, or susceptible to disruption by competitors.
Investors with an interest in AI, but who also want to hold consistently performing stocks on the ASX, may benefit from monitoring the innovation capabilities of established companies with large datasets. For instance, Woolworths (ASX:WOW) took control of data analytics firm Quantium in 2021 to enable a new business unit that uses advanced data science to solve retail problems.
The future performance of many stocks will also be impacted by how well they realise AI projects. Chinese tech company Baidu’s stock jumped by over 13% in February 2023 following the announcement of its new AI chatbot. However, shares in Alphabet fell the same month, wiping $100 billion off its market value, after a demo of Google’s new AI chatbot Bard failed to impress.
AI Stocks Listed On The ASX
Here’s a brief rundown of some ASX-listed AI stocks:
- Appen Limited (APX): Appen essentially helps other companies manage their AI project lifecycles, through end-to-end services, training and its Appen Data Annotation Platform (ADAP). APX shares are valued at $2.71.
- BrainChip Holdings (BRN): BrainChip creates chips and software that enables ‘intelligent’ edge devices/sensors used in IoT. Its share price increased in March on the back of the launch of its upgraded platform and now sits at $0.46.
- Bigtincan Holdings (BTH): An AI-powered sales enablement platform for enterprise customers across a range of industries. Bigtincan was included in Fast Company’s list of World’s Most Innovative companies in 2023. Its share price is $0.40.
- Access Innovation Holdings (AIM): Ai-Media is Australia’s biggest captioning provider and has a strong international footprint. Its platform uses AI to convert speech to text. Its current share price is $0.32.
- Unith (UNT): Unith is an AI-enabled marketing and customer support solution that has been testing the integration of ChatGPT to meet demand for conversational AI. UNT was trading at $0.029 per share at the time of writing.
Some other top ASX-listed companies that are leading the way in leveraging AI to enhance how they operate include TechnologyOne (TNE), NextDC (NXT), WiseTech Global (WTC), Seek (SEK), Xero (XRO), Imdex (IMD), and Altium (ALU).
How to Invest In AI Stocks on the ASX
You can purchase AI stocks on the ASX through an online share trading platform or via a full-service broker. You can purchase individual shares in companies or gain exposure to AI stocks through an exchange-traded fund (ETF). There are a number of ETFs you can buy via the ASX that offer exposure to global companies involved in AI.
Here are three steps to take If you plan to manage your investment in AI stocks yourself:
- Create a brokerage account via a share trading platform: Some things to look for when choosing a share trading app include: regulated by ASIC; affordable brokerage and foreign exchange fees; reasonable minimum and maximum withdrawal amounts; access to the stock markets you want; and ease of use.
- Research companies: Explore information about what the company does, available financials, and details of future plans such as partnerships and product roadmaps. Read expert opinions and monitor the stock/ETF performance to see how its price tends to move.
- Select investments based on clear goals and your risk appetite: What kind of exposure to AI stocks makes sense for your investment strategy? If you want a hands-off, diversified mix of global shares where you’ll invest a small amount regularly, an ETF might be a good option.
The advice and information provided by ForbesAdvisor is general in nature and is not intended to replace independent financial advice. ForbesAdvisor encourages readers to seek expert advice in relation to their own financial decisions and investments.
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Frequently Asked Questions (FAQs)
Should I invest in artificial intelligence?
Investing in AI stocks could offer an opportunity to capitalise on market changes being driven by the adoption of AI. While AI is still in its early stages of development, it’s being rapidly adopted by businesses across every industry and investor funding is pouring into AI-related ventures. Global consultancy PwC believes AI could contribute up to $15.7 trillion to the global economy by 2030. Nevertheless, investing in AI stocks is no different from any other kind of investing in that success depends on your financial situation, market knowledge and risk appetite.
What are the best AI stocks to buy?
The best way to get exposure to AI stocks will depend on your investment strategy and how well you think a company is positioned to grow and reliably generate returns. Some of the key AI stocks listed on the ASX include Appen (APX), BrainChip (BRN) and Bigtincan (BTH). A number of more prominent Aussie companies also have AI-powered features, such as Xero (XRO), Seek (SEK), and NextDC (NXT). There are also a number of ETFs available on the ASX that include global AI stocks.
Is investing in AI stocks profitable?
Given the growing interest in AI and the fact that many companies are investing in their AI capabilities, investing in AI stocks may prove to be a strong long-term investment. Carefully consider the competitiveness and revenue-generating potential of any company you invest in.