OpenAI’s launch of an artificial intelligence (AI) chatbot based on its ground-breaking Generative Pre-Trained Transformer (GPT) in late 2022 ignited new investor interest in an AI stock investment theme that has created new millionaires in record time. The chatbot, ChatGPT, ushered exposure to generative AI to millions of users globally, and growth-oriented Canadian investors may capitalize on investment opportunities in ChatGPT stocks today.
While ChatGPT itself is not a stock, and its creator, OpenAI, remains a privately owned startup, Canadians can still invest in companies directly involved in ChatGPT’s development and in stocks that benefit from the broader AI industry ChatGPT has helped to popularize over the past 18 months.
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Understanding the ChatGPT stock investment landscape
OpenAI, the company behind ChatGPT, remains privately held in 2024. However, the wide adoption of generative AI could significantly benefit several publicly traded AI stocks. AI companies stand to make billions in revenue and earnings as global businesses adopt generative AI in their daily workflows. The generative AI market could grow to a US$356 billion (CA$480 billion) annual market by 2030, up from a US$36 billion (CA$48.6 billion) market in 2024.
The early gainers from ChatGPT’s wild success included super-computing and networking hardware suppliers like Nvidia stock, which is up 650% in 18 months, and most recently, Broadcom stock, which has nearly doubled over the past 12 months. There are many more.
Potential AI stock investment strategies for Canadians
Canadian investors could directly invest in AI-related stocks, buy Canadian Depository Receipts (CDRs) that work around currency risk exposures, or invest in ChatGPT-related stocks through Canadian AI-focused exchange-traded funds (ETFs). Let’s look at each investment approach.
Direct investments in AI-related stocks
Canadian investors can directly invest in hardware suppliers like Nvidia and Broadcom, which provide the essential hardware components for AI development.
They can directly invest in cloud service providers that host generative AI services and provide platforms for model research and development. Microsoft Azure and Amazon.com’s Web Services are common platforms used for AI. So is Alphabet’s wide ecosystem, which has churned competing offerings to ChatGPT.
Software development stocks specializing in AI software, machine learning, deep learning, and natural language processing benefit from the AI boom.
Although the TSX hosts some Canadian AI stocks, the most active and largest ones are foreign-listed stocks that trade on U.S. exchanges. Your broker must allow foreign stock trading capabilities, and you have to convert Canadian dollars to U.S. dollars, which involves an added layer of trading costs, and ushers exchange-rate risks and opportunities to the portfolio.
Canadian Depository Receipts (CDRs)
Canadians can buy U.S. AI stocks in Canadian Dollars through Canadian Depository Receipts (CDRs) and avoid foreign currency risk exposure.
CDRs are Canadian Dollar-denominated securities representing shares of foreign stocks. They are mostly traded on the CBOE Canada Exchange (formerly NEO Exchange). You can find CDRs on the most popular large-cap AI stocks.
Buy AI-focused Canadian ETFs
Investors can buy shares in a Canadian exchange-traded fund (ETF) that offers access to a diversified portfolio of actively selected AI stocks. CI Global Artificial Intelligence ETF (TSX:CIAI) is one of the largest ChatGPT stock ETFs on the TSX.
Launched recently in May 2024, the CIAI ETF has already amassed nearly $590 million in net assets. The actively managed ETF offers exposure to a portfolio of 40 global AI stocks actively involved in AI research, development, and application. Constituents could benefit from their roles in advancing artificial intelligence, and Nvidia stock comprised 12.44% of the portfolio at writing.
The portfolio manager is running a low-cost promotion by lowering management fees from 0.55% to 0.20% annually during the fund’s first year of trading. The ETF is tradable in Canadian dollars and gains Canadians instant diversification into the ChatGPT ecosystems and into the AI economy in a single trade.
Shares in the ETF have gained about 7% in value since inception.
Investor takeaway
Local investors have a variety of ways to buy AI stocks, some of which mitigate currency exposures. Notably, the AI industry is still evolving; therefore, diversification could help optimize investment risk. Further, taking a long-term investment perspective could allow investors to sit through the volatility inherent in AI stock investments for maximum profit.
