How To Ride the Artificial Intelligence Wave and Invest Wisely?

This post was originally posted on Planner Bee.

Artificial Intelligence (AI) is no longer just a term used by tech experts. It’s now part of everyday life and is changing the way industries work. It helps improve efficiency and is opening up new opportunities for investors across the world.

For Singaporeans interested in getting started with AI investments, knowing how and where to invest is essential. This guide covers the basics of AI investing, explains common terms, explores why AI is growing, highlights promising areas to consider, and outlines key points to think about before making any decisions.

Investing in AI

AI investing refers to allocating capital in companies, funds, or technologies that develop or make use of artificial intelligence. This includes areas like machine learning, data analysis, robotics, natural language processing, and automation.

You can invest in AI through individual stocks or broader exchange-traded funds (ETFs) that focus on companies using AI. Some investors look at well-known tech firms like NVIDIA or Alphabet. Others focus on sectors where AI is having a big impact, such as healthcare, finance, transport, and manufacturing.

With the growing use of tools like ChatGPT, DeepSeek, and Midjourney, interest in AI has increased. As a result, many AI-related stocks have performed well in recent years.

Key AI terms to know

Before you jump into AI investing, it’s useful to get familiar with some of the common terms you’ll come across in the field:

• Artificial Intelligence (AI): Computer systems designed to perform tasks that usually require human intelligence, such as recognising images, understanding speech, making decisions, and translating languages.
• Machine Learning (ML): A branch of AI that focuses on teaching machines to learn from data. These systems can improve over time without needing to be programmed for every single task.
• Generative AI: A type of AI that creates new content, such as images, text, or music, by learning from existing data.
• Neural Networks: A kind of machine learning inspired by how the human brain works. These systems are good at spotting patterns and making sense of complex data.
• Natural Language Processing (NLP): Enables computers to understand, interpret, and respond to human language, whether spoken or written.
• Computer Vision: Technology that allows machines to ‘see’ and interpret visual information, similar to how humans do.

Understanding these terms can give you a better sense of how a company uses AI and where its technology might fit in the market.

Why is AI investing growing?

There are a few key reasons why more people are investing in AI.

First, AI is no longer limited to the tech industry. It’s being used in many sectors. You might come across it more often than you think. For example, chatbots handle customer service, generative AI helps create art and media, and apps like Google Maps use AI to plan routes based on real-time traffic.

Businesses are turning to AI to handle repetitive tasks. This helps them work more efficiently and cut down on labour costs. Governments are also backing AI. In Singapore, for instance, the government is investing heavily in AI research and development, giving the sector even more momentum.

The market for AI is expected to grow rapidly from $189 billion in 2023 to $4.8 trillion by 2033. That kind of potential is drawing attention from both large institutions and everyday investors.

How can Singaporeans invest in AI?

There are several accessible ways for Singapore investors to gain exposure to AI. buying individual AI-related stocks, investing in AI-focused exchange-traded funds (ETFs), or using robo-advisors that offer curated portfolios with AI.

Individual AI stocks

One option is to buy shares in companies that are leading the way in AI development and applications. Some well-known examples are Microsoft, Nvidia, and Alphabet.

Microsoft has invested heavily in OpenAI and has built ChatGPT into its products like Word and Excel. Nvidia makes the specialised chips that power AI systems, including those used in data centres and self-driving cars. AI now contributes significantly to its revenue. Alphabet, the parent company of Google, has been focused on AI since 2017 and owns its own AI chatbot called Bard.

AI-related ETFs

Exchange-traded funds (ETFs) offer a simple way to invest in a range of AI companies at once. They help spread out your investment and reduce risk by giving you exposure to a basket of companies rather than just one.

Here are some well-known AI-related ETFs:

• Global X Robotics and Artificial Intelligence ETF (BOTZ): This fund invests in companies that benefit from increased adoption and utilisation of robotics and AI. It includes those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
• ARK Autonomous Technology and Robotics ETF (ARKQ): This fund invests primarily in domestic and foreign equity securities of autonomous technology and robotics companies relevant to the fund’s investment theme of disruptive innovation.
• Global Robotics and Automation Index ETF (ROBO): This fund tracks robotics-related and/or automation-related companies that are driving innovations in the robotics, automation, and AI industries.
• AllianzGI Global Artificial Intelligence Fund: Unlike the others, this is an actively managed fund that invests in global companies focusing on the development of AI, with an added emphasis on environmental and social responsibility.

Portfolios curated by robo-advisors

Robo-advisors like Syfe and Endowus may not focus solely on AI, but they provide indirect exposure through their tech-oriented portfolios.

For example, Endowus Technology Portfolio gives investors access to some of the most innovative companies around the world, which have links to AI, robotics, digitalisation, and blockchain. Likewise, Syfe’s Disruptive Technology Portfolio directly holds over 100 high-growth stocks like Tesla, Nvidia, Shopify, and Coinbase, which all use AI and blockchain in their operations.

Read more: AI in Trading: How To Use Artificial Intelligence To Achieve Success in the Markets

Important things to note before investing in AI

AI is complex and dynamic, and it requires a lot of new data to learn and adapt. This need for data raises important ethical, social, and legal concerns, such as privacy, security, and accountability. These issues often attract attention from regulators and governments, which can affect businesses and, in turn, your investments.

AI-related stocks can also be volatile, as many AI companies are high-growth and may not be profitable yet. Some, especially startups, are valued based on their potential rather than current profits, making them more vulnerable to market fluctuations. Price swings in AI stocks can be large, so it’s important to be ready for ups and downs.

Another factor to consider is the rapid pace of technological change. What’s considered cutting-edge AI today could become obsolete tomorrow. If companies fail to stay ahead, their competitive position may weaken, which can impact your investment returns.

Proceed with caution…

Investing in AI can be a rewarding part of a diversified portfolio. It offers an exciting opportunity to participate in one of the most transformative technological revolutions of our time.

However, it’s essential to balance the potential for high returns in AI investing with a clear understanding of the risks involved. By understanding the key concepts, identifying trustworthy investment vehicles, and conducting due diligence, you can make informed decisions that align with your financial goals.

You can also consider speaking with a licensed financial advisor to tailor your AI investment approach to your unique circumstances and risk tolerance.