Much like the gold rush of the 19th century, the current frenzy around artificial intelligence (AI) technology stocks is a high-stakes gamble that will inevitably see its fair share of winners and losers.
There will be prospectors who strike it rich, finding that one startup that revolutionizes machine learning or natural language processing. Then there will be those who go bust, betting their hard-earned money on ventures that prove to be nothing more than fool’s gold.
By trying to pick individual AI stocks, investors are relegating themselves to this dichotomy: it’s either boom or bust; Lamborghinis or food stamps.
But what if there’s another way? Remember, during the gold rush, it wasn’t the miners who got rich. In many cases, the most prosperous individuals were those selling the picks, shovels, clothes, and other essentials to the miners.
The same principle holds true for the AI landscape. Instead of risking it all on the companies on the cutting edge of AI development, why not consider investing in the companies that supply these AI ventures with their lifeblood: semiconductors and data? Here are two exchange-traded funds (ETFs) you can do this with.
Investing in semiconductors
Semiconductors are the tiny chips that power the vast data centres and specialized hardware that are required to train and run complex AI algorithms.
These chips are essential for executing the billions of calculations per second that AI algorithms require, and as AI systems become more advanced, they will need even more processing power, ensuring a consistent and growing demand for state-of-the-art semiconductors.
The semiconductor industry itself is rapidly evolving to meet these specialized needs, with companies developing AI-optimized chips that promise to deliver better performance and lower energy consumption.
Companies leading in this space are not just serving the AI sector but are deeply integrated into it, often developing custom solutions in close collaboration with AI companies, fueling long-term demand.
To bet on semiconductors, consider Horizons Global Semiconductor Index ETF (TSX:CHPS). This ETF tracks the Solactive Capped Global Semiconductor Index, which holds some of the largest chipmaker stocks from around the world.
Investing in big data
If semiconductors are the engines that power AI, then big data is the fuel that these engines run on. AI and machine learning algorithms require vast amounts of data for training, validation, and execution.
Whether it’s natural language processing, image recognition, or predictive analytics, quality data is essential for the successful deployment and improvement of AI technologies.
As the world continues to generate data at an unprecedented rate—from smartphones, Internet of Things devices, social media, and more—companies that specialize in collecting, storing, and analyzing this data stand to gain significantly.
Big data companies play a crucial role in the AI ecosystem, providing the tools and platforms necessary for AI applications to glean insights from unstructured and structured data. They offer specialized databases, analytics software, and data processing services that are integral to AI development.
For access to big data companies, consider Horizons Big Data & Hardware Index ETF (TSX:HBGD), which tracks global companies that focus on data development, storage, and hardware services by tracking the Solactive Big Data and Hardware Index.
