Artificial intelligence may be the biggest disruption in tech since the internet itself, with thousands of investors looking to break into the AI stock market. Over the past three years, generative AI has revolutionized home tech as consumers discover its capabilities. It’s also changing the way the world does business on a grand scale.
Just as it did when the internet went mainstream, the tech sector is feeling the AI boom in full force. Investors are seeing more start-ups and small-cap companies focusing on AI, along with the big players that manufacture or supply the parts and equipment required to power these systems.
How can everyday investors like you break into the AI stock market? In this piece, Gorilla Trades examines the types of AI businesses, the companies playing major roles in AI development, strategies for investing, upcoming trends, and some tips on forming an AI-heavy portfolio.
Types of Companies in the AI Stock Market
The leading artificial intelligence companies range from emerging start-ups to megacorporations. They can be divided into four categories.
AI Software as a Service (SaaS)
AI SaaS companies use the technology for software solutions, typically offering their products via subscription. They give businesses access to advanced features and functions designed to work within a company’s existing infrastructure, usually via the cloud.
AI Ecosystems
An AI ecosystem is a network of several companies and technologies that collaborate in creating and developing AI solutions. Data is the starting point for these efforts, which include algorithms, hardware, software, applications, and human specialists.
AI ecosystems are typically the domain of big-name players like IBM, Google, Amazon Web Services (AWS), and Microsoft.
General-Purpose AI
ChatGPT by OpenAI is the most well-known general-purpose AI service. Companies in this category offer AI platforms directly to consumers, who use them for a range of purposes (including purposes the developers may not have intended).
Domain-Specific AI
These AI solutions are developed for specific business sectors, such as healthcare, government, finance, retail, and manufacturing. Domain-specific AI developers tailor their products to work for each client’s distinct business needs and functionality.
Leading AI Companies
Major corporate players in the AI stock market include:
- NVIDIA (NASDAQ: NVDA)
- Alphabet (NASDAQ: GOOGL)
- Microsoft (NASDAQ: MSFT)
- IBM (NYSE: IBM)
- Amazon (NASDAQ: AMZN)
- Meta (NASDAQ: META)
- Adobe (NASDAQ: ADBE)
- Palantir Technologies (NYSE:PLTR)
- C3.ai (NYSE: AI)
- Qualcomm (NASDAQ: QCOM)
Although OpenAI is arguably the best-known AI-exclusive business thanks to ChatGPT, it is still a private company, though efforts to launch an IPO are underway. Other private entities that are major drivers of AI technology include Anthropic, Anduril, MaestroQA, Kustomer, Grammarly, and Nexthink.
AI Stock Market Investing Strategies
In many ways, AI investment strategies echo the common approaches that investors deploy in other sectors. They include value investing in blue-chip companies, growth investing in start-ups, and portfolio diversification. Here are some general strategies that work for many AI stock market players.
Direct Investing in AI Companies
The basic approach to investing in tech stocks is the simplest route to take. It can include both corporate giants and small- to mid-cap smaller businesses. Keep in mind that as an emerging industry, the AI stock market is more volatile and hype-driven than other sectors.
Finding Up-and-Coming AI Companies
To find promising upstarts and small-cap influencers, stock market players spend a lot of time researching the fundamentals of AI stocks. Some of the indicators they research include market share, balance sheets, cash flow analysis, management teams, and profitability. It’s also important to analyze companies’ contributions to developing hardware and software for AI applications.
Investing in AI ETFs
The age of the exchange-traded fund (ETF) marches on, and several ETFs are centered on the AI industry. Some of the more notable include:
- Invesco AI and Next Gen Software ETF (NASDAQ: IGPT)
- iShares Future AI & Tech ETF (NASDAQ: ARTY)
- Global X Artificial Intelligence & Technology ETF (NASDAQ: AIQ)
- Roundhill Generative AI & Technology ETF (NASDAQ: CHAT)
- WisdomTree Artificial Intelligence and Innovation Fund (NASDAQ: WTAI)
Retail investors can find all of these AI ETFs on the stock exchange.
Investing in Non-Tech AI Innovators
If your portfolio is heavy on the tech sector, you can diversify by investing in companies that are using AI for innovative purposes.
For example, Tesla (NASDAQ: TSLA) and General Motors (NYSE: GM) use AI for new automotive features. Pfizer (NYSE: PFE) uses machine learning and the cloud to develop new medications. Even John Deere (NYSE: DE) used AI to create an autonomous, self-driving tractor that makes planting and harvesting decisions.
Current and Future AI Market Trends
What kinds of trends are shaping the AI industry for the future? Here are a few to watch for now and in 2025.
Taking Over Every Industry
Most businesses that incorporate AI use it for routine, repetitive tasks so that employees can work on more creative and meaningful work. This trend should greatly expand in 2025, giving early-adopter businesses an upper hand in efficiency and goal setting. AI may play a major part in healthcare, cybersecurity, sustainability, and manufacturing.
Creating Content
We’ve already seen how consumers can use AI to create anything from images to blog posts to business presentations with just a few prompts. There’s every reason to believe this will continue — as will the rise of AI detectors that aim to ferret out work composed entirely with AI.
Promoting Ethical AI Use
The inherent lack of bias in AI means that it is able to create systems that make ethical decisions, especially in healthcare and law enforcement.
However, this lack of bias can also result in content that appears to support discrimination and breaches of privacy. In today’s climate, this may result in unforeseen damage that activists will push to fix.
Co-Existing With Human Workers
The most common fear about AI industry growth is that it could replace the human worker. However, that perception is slowly changing as developers try to make AI systems that complement human efforts by solving common problems rather than jeopardizing their jobs. This will be a key aspect to watch in 2025.
Regulating the Industry
With America emerging from the 2024 American election, it’s unclear how AI will be affected by regulatory changes under the new administration. Some believe there will be a general relaxation of regulations, while others think AI is too important to leave unchecked. We’ll see how this develops in the coming months.
Risk Management in AI
The technology sector is arguably the most volatile in the stock market. AI is just as susceptible to wild fluctuations as many cyber start-ups are.
Memories of the dotcom bust at the turn of the century make investors worry about unduly inflated valuations, overhyped growth, and overinvestment in corporate tech giants over smaller innovators. There’s also the possibility of overregulation.
Diversification, as always, is one of the more effective guardrails against market volatility. Investors can diversify their AI portfolios by spreading assets across companies of different sizes, sectors, and market caps.
Quick Tips on Investing in the AI Stock Market
Take a disciplined approach to AI investing, just as you would with other commodities. Start small and make gradual deposits in your brokerage account. Conduct thorough research from various sources and keep a close eye on developing trends. Anticipate market volatility and set long-term financial goals to guide your way.
It’s always a good idea to reach out to a financial advisor who can keep you on the straight and narrow in AI investing. With the right strategy and thoughtful consideration, you may be in a position to reap great rewards from a rapidly evolving industry.
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