3 safe ways to invest in AI

Stocks in the technology stocks can be tough for investors to navigate. While these companies create new products and services, the advances are not always easy to understand. In a rapidly changing environment, picking winners and avoiding the losers is a challenge.

One of the best ways to succeed is to focus on the companies that are most affected by the changes. These are often global players with the money to invest in research and development, and the leeway to make mistakes.

In the second part of a series on emerging technology trends, we look at artificial intelligence and machine learning:

 What it means: At this year’s World Economic Forum in
Davos, Switzerland, Google CEO Sundar Pichai said that artificial intelligence (AI) will be more important to us  than electricity. AI is the area of computer science which aims to replicate how we think. Agriculture firms are
using AI to maximize crop yields. Doctors are using AI for diagnosis and treatment options. Investment firms  use AI to identify market trends. Netflix and Amazon use
AI to recommend movies and books based on our habits.

Some companies involved: While Alphabet and Amazon are ways to capture the theme, another is through the companies that make the software and systems that run the algorithms. These companies make Graphics Processing Units (GPUs), offer server space
and cloud computing, and custom semiconductor chips.

For example, IBM is exploring the use of AI in medical diagnostics. One of the top causes of medical deaths in the U.S. is inaccurate or incomplete diagnosis. IBM has developed a solution using its Watson super computer to analyze tens of thousands of patient files to compare symptoms and treatments.

In another area, IBM and ABB Group (NYSE: ABB), the Swiss-­Swedish engineering firm, are collaborating to create software that controls and monitors ABB’s robotic
manufacturing systems.
Nvidia (NDQ: NVDA) is a leader in the manufacture of GPUs used in development of artificial intelligence. The stock has had a big run up in the last year and, despite a
recent pullback, comes with a high PE ratio of 50 and a small dividend yield of 0.26%.

Intel (NDQ: INTC) provides server space to facilitate big data and machine learning capabilities. Qualcomm (NDQ: QCOM), whose takeover by Singapore’s Broadcom was quashed by U.S. President Donald Trump, is a leader in processor space, with a focus on
deep learning and high-­speed capabilities for  developers. The stock traded as high as high as US$69.80 in January, but last week was 24% lower at US$53.12.

This article appeared in the April 9, 2018 edition of Gordon Pape’s Internet Wealth Builder newsletter.