Artificial intelligence (AI) continues to make an entry into the mass consciousness in 2019. Through applications such as deep learning and machine learning, thrilling breakthroughs will be realized in the next few years and decades.
This will fundamentally change the technological landscape across the globe. In many ways, finance and AI are made for each other. Techniques within these two concepts make it easy to find patterns that may not be detected by the human eye.
In the past, financial firms have invested heavily in AI, and more are beginning to tap into financial applications of deep and machine learning. In stock trading, AI is certainly not a strange phenomenon; rather, access to its capabilities has in the past been limited to large firms.
Essentially, with AI expected to steer much of the world’s economic growth, investing in its stocks is worthwhile. Before then, it is important to have answers to the following questions:
- What exactly is AI?
- What should one look for in AI stocks?
- How can you invest in AI stocks?
- What are the best AI stocks?
What is artificial intelligence?
Artificial intelligence is defined as the simulation of human knowledge in programmed machines that think like people and imitate their actions. This concept is applied to any machine that demonstrates traits linked with a human mind, for instance, problem-solving and learning. The ability of AI to rationalize and execute functions that stand higher chances of attaining a specific goal is its ultimate characteristic.
When most people hear this term, the first thing that crosses their minds is robots. This is because novels and big-budget companies tell stories about human-like machines that cause chaos on earth. This misconception is far away from the truth.
AI is founded on the pillar that human intelligence can be explored from the view that machines easily imitate and execute simple and complex activities. The objectives of AI include perception, reasoning, and learning. AI stocks are financial assets that represent a public trading company in the area of AI. These stocks are similar to others but are specific to a particular sector. +
As the world continues to experience advancements in technology, past benchmarks that described AI become obsolete. For instance, machines that recognize text through optical recognition of character or calculate essential functions are no longer viewed to exemplify AI. This is because this function is now perceived as an integral computer function.
It is worth noting that artificial intelligence is continuously progressing to benefit varying industries. Wiring of machines using a cross-disciplinary approach founded on psychology, linguistics, computer science, and mathematics is guiding this concept. Algorithms also play a crucial role in the structure of AI. Complex ones contribute to framing reliable AI, while simple algorithms are adopted in simple applications.
Key takeaways:
- Artificial intelligence is the simulation of human knowledge in machines
- The key objectives of artificial intelligence are perception, reasoning, and learning
- AI is being adopted in industries such as healthcare and finance
- Weak AI tends to be single task-oriented and straightforward, while more complicated and human-like duties are carried by strong artificial intelligence
What to look for
Analysis of AI stocks by investors is performed in a similar way as standard stocks. However, there exist some industry-specific differences.
Price-to-earnings (P/E) ratio
This ratio of stocks measures the profitability of AI. As an index, it takes into account the earnings per share and price per share of the stock to create the index. Higher P/E ratios point to non-profitability of the stock. On the contrary, lower P/E ratio means that the stock pays higher amounts as compared to stock price.
Projects
Company research and development announcements, as well as projects, are imperative for this sector. Each new innovative intention or scheme is likely to boost the cost of an AI stock.
Beta
The beta of stocks measures the correlation of the security to the benchmark index. Also, the beta indicates price volatility and varies between -1 and 1. In some rare cases, the beta goes below -1 and above 1. When the stock is more correlated to the benchmark index, the beta is above 0. Volatility amplifies as the value rises.
On the contrary, stock less correlated to the benchmark index yields a beta below 0. It is vital to highlight that when the beta lowers, volatility also reduces. Besides, stocks with low beta depict smoother price changes.
Trend
Identification of the current technical state of a stock price is fundamental. Hopping into an ongoing trend is always better than entering the market on the thought that a pattern is forming.
Performance
Since the AI sector is now trending, pivotal to assess the constant performance of a stock.
How to invest in artificial intelligence stocks
You can purchase AI stocks through any stock brokerage company that deals with stock trading. Some of them include:
E*TRADE
This is a broker in the United States that you can use when trading AI stocks. The firm complies with the highest financial rules since it conforms to the domestic regulations and laws. E*TRADE is also a publicly traded company on the Nasdaq.
The agency zeros in on people who are passionate about the markets and offers them a blend of intuitive tools. It also devoted to service to match the distinctive needs of such investors.
A competitive price of $6.95, for every trade, is provided for stocks. In case you carry out 30 deals and above during each quarter, you will gain access to a reduced fee of $4.95 per trade.
Thought nugget: By and large, the reflective element of pricing positions E*TRADE among the prominent stock trading brokers.
TD Ameritrade
This is another broker that is based in the United States and is suitable to trade AI stocks.
Like E*TRADE, TD Ameritrade adheres to eminent financial guidelines. Also, for stock trading, the broker’s rates are at $6.95 per trade. That is the standard for the trading sector.
An investor can also benefit from ‘broker-assisted stock trades for $44.99 per trade.’
Thought nugget: The web-based solution supported by the broker is quite ideal for beginners.
Ally Invest
This is another stock trading broker located in the United States. One of the most significant advantages of using the discount broker is its low costs. In light of stock trading, the standard pricing of Ally Invest is $4.95 per trade. For investors that conduct above 30 trades each quarter, the pricing is $3.95, which is more favorable.
The broker also provides a platform for mobile, web, and desktop trading, which fosters accessibility from any location.
Thought nugget: The trading platforms are convenient for stock trading beginners as well as more advanced investors.
Best artificial intelligence stocks
Here are 4 strong companies that have a large vested interest in artificial intelligence.
Microsoft Corporation (MSFT)
At the onset of 2018, Sayta Nadella, Microsoft’s CEO, indicated that artificial intelligence is “the run-time” that will mold all of our day-to-day functions. In an effort to be at par with Google and Amazon in the cloud-centric sector, Microsoft has made attempts in a number of artificial intelligence breakthroughs. These include the development of AI devices such as:
- Precision medicine and genomics
- Human language innovations
- Assistive robotics
- Machines that can decipher medical images
- Consumer-facing invention with Cortana
Among the most significant ways that Microsoft is gaining from AI is through cloud computing trade and AI investments. The rationale for that lies in the blurring lines between AI and cloud computing. The latter’s market is enlarging as developers and firms seek to automate a majority of their software and pursue more efficient techniques to gather data.
Microsoft’s business has the potential to grow as AI develops. The company has integrated the aforementioned AI services into its cloud computing platform referred to as Azure. Combining AI with Azure is fundamental to highlight owing to the fact that Microsoft’s Azure earnings increased by 73% in the most current quarter. In addition, the wider cloud computing spectrum will be valued at $278 billion by 2021.
Apple (AAPL)
So many devices that people use on a daily basis have been changed by Apple’s innovation, especially the smartphone. It is essential to note that the corporation utilizes plenty of intuitive software in its brands. Therefore, Apple’s Siri virtual aid is amalgamated into a large number of Apple products and employs AI.
Notably, Apple is a forerunner of numerous technological inventions. These provide a benchmark of competitive products in terms of effective marketing. In addition, Apple’s brand is an epitome of technological advancement and digital innovations.
Due to its diminishing interaction in China, Apple accounted for significant losses as 2018 came to an end. For that reason, the stock closed on a -13% loss that year for the first time in many years.
Amazon (AMZN)
From its Alexa devices to speedy Prime shipping, Amazon is trending in the AI space. One of the corporation’s most noteworthy inventions is its domestic robot, which will depend on AI to execute tasks. In view of that, this is a remarkable innovation because it does not have an existing analog in the market.
Amazon’s machine, at present, surmounts many of its competitors in:
- Personalized recommendations
- Product search queries
- Demand forecasting
- Warehouse fulfillment
- Fraud defense
According to Forbes, Alexa has been utilizing artificial intelligence for some time. Now, they are engaging in a paradigm shift into the healthcare industry; their alliances with Berkshire Hathaway and JPMorgan Chase & Co. will also form a company driven by AI. Such moves have aided the firm to be categorized among the leaders in the connected-home market. Thus, Amazon uses AI to widen its sphere of knowledge about the items that its consumers usually purchase and the time they do so.
Alphabet (GOOGL)
Google is over and above a search engine. Software that is under the Alphabet umbrella includes Gmail, Drive, Waymo, Maps, YouTube, and others. All of these utilize AI in their functionality. Artificial intelligence projects involve:
- Smart contact lenses
- Delivery drones
- Internet glowing drones and hot air balloons
Alphabet Inc. has made a majority of AI purchases as compared to any other tech firm as analyzed by research company Quid. The assessment reveals that GOOG has made 20 AI acquisitions, which include Kaggle, a predictive analytics platform in Q1 2017 single-handedly.
Bottom Line
Artificial intelligence spearheads the current technology industry toward global development. Top universal companies such as Microsoft, Apple, Amazon, and Google develop and assimilate AI into their operations. As a result, the sector is propelled to expansion. In turn, traders strive to gain from this growth, which precisely explains how the stock market functions.
We anticipate more amazing services and products to be launched by the big firms. Consequently, our lives will continue transforming.