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Artificial intelligence stocks & ETFs to watch

Artificial intelligence (AI) is one of the hottest new trends within the technology sector and is attracting a lot of investor attention. Join us as we discuss some top AI company stocks to watch right now, based on revenue, market share and growth potential.

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What is artificial intelligence (AI)?

Artificial intelligence refers to the development of computer systems or machines that are able to perform everyday tasks that usually require human intelligence, which they do by processing huge swathes of data in a process that is called machine learning. This can include speech recognition, problem solving and decision-making.

Artificial intelligence can be applied to an endless number of fields, but in particular relating to data science, technology, computer science, transportation and engineering. Although it shares similarities with the robotics sector, AI processes do not exclusively rely on the use of robots or automated machines but rather focus on simulating the brain’s activities with software.

What is the role of AI in the stock market?

The growing technology trend makes AI in the stock market an increasingly attractive investment and there has been a significant rise in AI start-ups and IPOs within the last decade. Artificial intelligence companies can be involved in many different processes, including the following:

  • Technology chips and GPUs
  • Cloud computing
  • Driverless/autonomous vehicles
  • Robotics
  • Voice-activated technology and smart speakers
  • Software as a service (SaaS)

According to Gartner, the number of businesses adopting artificial intelligence has grown by 270% in recent years and more than 1/3 of organisations are either using AI or have plans to do so. Therefore, AI investment is becoming increasingly popular among short-term traders and long-term buyers alike.

Top AI stocks

Below is a list of top artificial intelligence companies to watch right now, based on revenue, earnings growth and P/E ratios. These can all be traded on via spread bets or CFDs on our Next Generation trading platform.

Nvidia [NVDA]

Nvidia is the inventor and world’s top producer of graphic processing units (GPUs) which are used for AI’s deep learning, controlling over 80% of the market in 2021, according to JPR. It provides GPUs for the gaming, automotive and mobile computing markets, as well as selling to data centres that carry out AI and machine learning tasks. Alphabet, Microsoft and Amazon are three of the largest tech giants that use Nvidia’s products to power their AI services. In particular, demand for the company’s computing solutions has been rising over recent years, as well as the use of GPUs for cryptocurrency mining, which saw a rally throughout 2020.

C3.ai [AI]

C3.ai can be described as a pure-play AI company that dabbles in both the AI and SaaS markets. It develops cloud-based software for the operation of AI applications, accelerating digital transformation for its customers, which include blue-chip stocks such as Royal Dutch Shell, 3M and Engie. Customers can use the C3 AI suite for predictive maintenance and monitoring of equipment, which has been shown to improve safety and extend the life of company assets. Despite only going public in December 2020, the company has estimated that its addressable market could expand from $170bn in 2020 to $270bn in 2024. It has also seen increasing revenues throughout 2021.

Palantir [PLTR]

Palantir specialises in data analytics to help organisations around the world to integrate data, make decisions and improve operations. The company operates in a number of markets including financial services, technology, defense and healthcare, where it operates two main platforms: Gotham and Foundry. These serve both governmental agencies such as the CIA, and large enterprises such as Merck and Rio Tinto, via the integration of software solutions using AI and machine learning. Since having its IPO in September 2020, the company’s share price has risen by over 170% and the company expects its revenues to grow at least 30% on an annual basis from 2021 onwards.

Micron Technology [MU]

Micron has a broad portfolio of products, offering memory and storage technologies that turn information into intelligence, including dynamic random-access memory (DRAM), flash memory (NOR) and USB flash drives. It is a leader in the semiconductor industry, producing silicon-to-semiconductor solutions for the cloud server, enterprise, graphics and networking markets. Among some of Micron’s most well-known clients are tech companies such as HP, Intel and Kingston. In 2019, the company acquired AI software and hardware start-up Fwdnxt, where it is planning to combine both companies to explore deep learning AI solutions for data analysis. If successful, this could bring Micron into direct competition with other rivals on this list.

Alphabet [GOOGL]

Alphabet is the parent company of the world’s largest search engine, Google. Although it is perhaps best-known for Google’s services, the company also has a number of fully owned ventures that focus on artificial intelligence, robotics and machine learning. Examples of subsidiaries within relevant fields include DeepMind, Nest, and Waymo. The business uses artificial intelligence for Google’s algorithms, and it is transitioning into the EV market for self-driving car technologies. Alphabet’s own ventures are specifically focused on AI enablers. The company is also a leading cloud provider, controlling over 7% of the growing market.

IBM [IBM]

International Business Machines (IBM) is a tech giant that provides services in the fields of cloud architecture, IT infrastructure and enterprise security, as well as offering AI-powered solutions. According to Analytics Insight, IBM has a market share of around 10% within the artificial intelligence industry. Some of its relevant projects include building the Summit supercomputer (the second-fastest in the world), offering hybrid cloud solutions based on blockchain technology, and creating the IBM Watson data analytics processor that analyses human language and speech. IBM announced a partnership with Palantir in early 2021, which will combine the capabilities of both companies to integrate and analyse large amounts of data within the healthcare, financial services and telecommunications sectors.

AI companies in the UK

Artificial intelligence is a growing industry in the UK, and according to the Global AI Adoption Index, the UK has an AI adoption rate of more than 20%. The number of companies that use AI services and solutions has grown by 145% between 2010 and 2020, and this figure is expected to increase in the future.

There are a number of well-established companies in the UK that rely on AI as a major part of their business, which we will detail below. Please note that some of these companies are not yet public on the stock market, therefore they cannot be traded on. However, some have raised funds for potential listings in the near future, so keep an eye out for upcoming IPOs​.

Some AI companies in the UK to look out for include:

  • Babylon Health. This health service provider uses an AI-powered app to connect patients with doctors and healthcare professionals. It is a market leader of AI-based healthcare, serving over 170 partners globally. Babylon’s services are even offered through the NHS.
  • Darktrace [DARK]​. This cybersecurity company uses artificial intelligence to identify cyber threats for its clients, which include Coca-Cola and Rolls-Royce. It uses self-learning technology to detect and respond to cyber attacks in operational technology (OT) environments.
  • Graphcore. This chipmaker utilises intelligence process unit (IPU) technology to accelerate AI and machine learning tasks and is a leader within the UK’s semiconductor industry. It supplies chips to tech giants like Microsoft and Dell for their computer software solutions.
  • Ocado [OCDO]​. This online retailer develops AI software, robotics and automation systems for brands such as Morrisons, Coles and Kroger. It is one of the only grocery chains in the world to incorporate AI services into its warehouse services, using robot-operated systems to pick and pack products.
  • OneTrust. This company is one of the fastest-growing software developers in the UK and has designed an enterprise platform that helps users to manage their cybersecurity, privacy and third-party risk. This is used by over 10,000 customers and the company has multiple offices worldwide. It is known as a “unicorn company” with a valuation of over £1bn.

How to trade on artificial intelligence stocks

  1. Open an account.
  2. Choose whether you want to spread bet or trade CFDs.
  3. Browse our product library for over 9,000 stocks that we offer.
  4. Pick a strategy – whether you want to go long or short on your chosen company.
  5. Apply risk-management controls such as stop-loss orders to minimise risk.
  6. Keep up to date with technology and AI-based news for changes or developments within the industry.
  7. Try the range of technical indicators on our platform that can be applied to any stock chart. We also offer fundamental analysis tools such as Morningstar equity reports and a Reuters news feed.

Are there any AI ETFs?

Exchange-traded funds (ETFs) can provide a trader with greater exposure to the AI and robotics markets through a single position. Our ETF derivatives allow you to trade on a multitude of stocks at once for a diversified portfolio. Here are some AI-based ETFs to watch out for.

Global X Robotics & Artificial Intelligence ETF

This ETF seeks to invest in companies that may benefit from an increased utilisation of AI technology, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles. The fund has over 35 holdings, including Nvidia, Upstart, and Keyence, giving investors global exposure to multiple and sectors and industries.

ARK Autonomous Technology & Robotics ETF

This ETF seeks long-term growth of capital by investing in equities involved in the development and production of robotics and automation, autonomous transportation, space exploration, 3D printing, and energy storage. The fund’s investment theme is ‘disruptive innovation’, with top-weighted holdings that include Tesla, UiPath, Trimble, and Lockheed Martin.

Innovator Loup Frontier Tech ETF

This ETF seeks to provide exposure to an index that tracks companies influencing the future of technology, including AI, fintech, robotics, autonomous and electric vehicles, and virtual/augmented reality. These are mainly US-based companies but also from Japan, South Korea and China. Top-weighted holdings of the fund include Snap, Baidu, and Harmonic Drive Systems.

iShares Robotics and Artificial Intelligence ETF

This ETF provides exposure to an equal-weighted index composed of global companies across the robotics and AI value chain. It seeks long-term growth of companies that are shaping the global economic future, including HubSpot, Snowflake, Ambarella, and Teradata.

Trade on our thematic Automation & Robotics share basket

Want to trade on a basket of stocks rather than individual ones? You can spread bet or trade CFDs on our new Automation & Robotics share basket​, which gives you exposure to 15 companies that promote, design, develop or use artificial intelligence within the workplace. This includes products like automated software, machinery and control systems. Our share baskets come with lower holding costs than regular stocks and zero commission fees also (other charges may apply). Examples of constituents include Nvidia, Qualcomm, Autodesk, Illumina, and Rockwell Automation.

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FAQS

What are some cloud-based companies that use AI?

Leaders of the cloud industry that use artificial intelligence within their products and services include Amazon, IBM, Microsoft, and Alphabet. These companies are known as tech giants, which you can also trade on via our Big Tech share basket using a single position.

What is deep learning?

Deep learning is a sub-field of machine learning and AI based on artificial neural networks. This imitates the way humans process and extract higher levels of knowledge from data. Some examples of deep learning in real-life products include virtual assistants, face recognition tools and driverless cars.

What are some AI chipmakers?

Nvidia [NVDA] is a world leader for chip-making, producing the largest number of GPUs in the market. Following suit is Intel [INTC] and Qualcomm [QCOM], which also operate a small share of the market.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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