Artificial intelligence as an investment

Two of my best-performing stocks over the past 12 months are FB and NVDA. Each of these companies is involved to some extent in artificial intelligence (“AI”). I’m happy with both stocks regardless of the AI aspect.

But I’m wondering how others on this board feel about AI in terms of investments. A few years back I got caught up in “3-D stocks” and, for the most part, they did not turn out well for me.

Perhaps I do not fully understand the potential uses of AI that would cause a company’s stock to do well, aside from gaming and that sort of thing.

Anyway, I’m mostly just curious what others think about investing in companies that are involved AI.

Anyway, I’m mostly just curious what others think about investing in companies that are involved AI.

AI will grow to make computers smarter than smart people. I would hesitate to invest in individual AI companies unless you really know lot about them. But an AI ETF might be interesting…

Growth in AI

Artificial intelligence is widely seen as a technology that will replace human work. While robots have taken a lot of manufacturing jobs, artificial intelligence has thus far only complemented knowledge workers by making their jobs easier. Mustafa Suleyman, co-founder of Alphabet’s DeepMind, believes that AI is still decades away from replacing knowledge workers on a large scale, although it’s something people should “pay attention to.”

According to ReportsnReports, the artificial intelligence market is expected to grow at a 53.65% compound annual growth rate from $419.7 million in 2014 to $5.05 billion by 2020. Machine learning technology is expected to account for the largest share of the growth as it’s used to improve media and advertising, as well as the financials sector. Furthermore, artificial intelligence as a replacement for human intelligence could emerge over the next five years.

http://etfdb.com/technology-etfs/best-etfs-to-capitalize-on-…

Thanks for bringing up the subject. I already have a semiconductor and a small cap IT ETF. I will investigate the AI ETFs.

About 15 years ago we had a discussion about who would benefit the most from high tech. The OP’s argument was that users of technology would be the real beneficiaries, not the providers of the technology. I think this idea is also applicable to AI. Note that the article mentions the use of AI by FaceBook, Amazon, and Goggle. Not too long ago there was an article about an irate father complaining to Target that they were sending inappropriate advertising to his daughter, maternity stuff. Target responded by saying that the advertising was based on her shopping habits (AI). Later the father apologized to Target telling them that they knew more about his household than he did!

Interesting stuff!

Denny Schlesinger

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The three ETFs mentioned in the article have less than year’s price data and are thus of no use to me. :frowning:

Denny Schlesinger

AI will grow to make computers smarter than smart people. I would hesitate to invest in individual AI companies unless you really know lot about them. But an AI ETF might be interesting…

You make a good point, Denny. Probably the way to go.

Interesting stuff!

It certainly is! I find it all fascinating. I don’t seem to understand the difference between AI and super smart computers, but my understanding is that AI deals with computers that somehow learn…perhaps like Amazon’s Alexis, but on a grander scale(?)

Thanks for posting the article…great stuff.

I don’t seem to understand the difference between AI and super smart computers, but my understanding is that AI deals with computers that somehow learn…

I don’t know the formal definition of AI but to me it’s software that learns and because they need lots of data and are complicated, need large and fast hardware to run on.

Denny Schlesinger

Hi az5speedy.

I thankfully side-stepped the “3-D printing” hype. I’ve mentioned previously, though, that I do believe that “Internet of Things” is worth investment, although I (generally) stick to companies that are exploiting its growth profitably. My favorite example (and a favorite of this board’s, if no longer owned by Saul himself) is Skyworks Solutions.

Artificial Intelligence is a technology that has broad applications.

That said, I think the best way to profit from AI is to buy companies that seem to be using AI in smart, useful, and profitable ways, rather than more central plays like FB and NVDA (both of which are large holdings for me).

Perhaps Matt (CMFCochrane) can chime in here, as he has far more industry knowledge than I do, but it occurs to me that MasterCard (MA) is using AI in smart ways. They know that once a card is rejected, consumers no longer feel trusting of the card, seeking to avoid further embarrassment. This is the LAST THING credit card issuers want, as their profits are enhanced by card usage. So MasterCard has AI-based services that it offers to its card issuers that reduce the number of false rejections. This helps keep card issuers tethered to MasterCard, rather than looking to its competitor.

MA is but one example of many. The closer one looks for AI applications, the more one sees.

Just some food for thought…

Thanks and best wishes,
TMFDatabaseBob (long: FB, MA, NVDA)
See my holdings here: http://my.fool.com/profile/TMFDatabasebob/info.aspx
Peace on Earth

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I thankfully side-stepped the “3-D printing” hype. I’ve mentioned previously, though, that I do believe that “Internet of Things” is worth investment, although I (generally) stick to companies that are exploiting its growth profitably. My favorite example (and a favorite of this board’s, if no longer owned by Saul himself) is Skyworks Solutions.

Artificial Intelligence is a technology that has broad applications.

That said, I think the best way to profit from AI is to buy companies that seem to be using AI in smart, useful, and profitable ways, rather than more central plays like FB and NVDA (both of which are large holdings for me).

Thanks Database Bob. I appreciate you sharing your insight. Fwiw- I still like Skyworks Solutions, and still own shares of it.

Perhaps Matt (CMFCochrane) can chime in here, as he has far more industry knowledge than I do, but it occurs to me that MasterCard (MA) is using AI in smart ways. They know that once a card is rejected, consumers no longer feel trusting of the card, seeking to avoid further embarrassment.

Well, with an opening like that it would be positively rude of me to not “shill” my latest article which is about that very subject :slight_smile:

http://www.fool.com/investing/2017/01/04/why-mastercards-ai-…

Mastercard is truly one of my favorite companies. It will probably be one of a number of smart companies that incorporates AI into its business model in smart and profitable ways.

When I think of AI, the first companies that come to mind are the FANG stocks: Facebook, Amazon, Netflix and Google. I’m not sure about Netflix’s current valuation, but I think the other three will make for profitable investments for a long time to come. But Netflix for another example on how it uses AI. Not only does the company use AI to recommend more shows and movies to its viewers based on their prior viewing habits, but also on what types of shows to produce for original content. Again, just one example of many.

Matt
Long AMZN, FB, GOOGL, MA, SWKS
Who unfortunately did not miss the 3D printing bubble and was lucky enough to get in right before the peak
MasterCard (MA), Nestle (NSRGY), PayPal (PYPL), and Verizon (VZ) Ticker Guide
See all my holdings at http://my.fool.com/profile/CMFCochrane/info.aspx

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you really need to separate different kinds of AI
there is localized type specific to one or two tasks. Like a welder on a car assembly line. We have these already. I expect ones that can do several tasks will get more popular soon.

then there is the generalized kind. Like dogs or people . We are still quite a way from this. More than 5 years for sure.

I doubt if anybody will have a monopoly on any of these.

As Denny suggests the big winner will be users. For instance Wal Mart was the first big user of technology for inventory control. Wal Mart knew almost to the day what was selling and what was in stock/ Competitors knew twice a year

AI is a nascent business at the moment. Few of the early participants will survive.

Wal Mart knew almost to the day what was selling and what was in stock/ Competitors knew twice a year

Really? Distributors using my software back into the 80s had maintained inventory counts on a transaction by transaction basis and a system for counting selected items little by little so there was never a big inventory event.

It certainly is! I find it all fascinating. I don’t seem to understand the difference between AI and super smart computers, but my understanding is that AI deals with computers that somehow learn

In 1856, Charles Babbage invented the first Calculating Machine. Then came the Computing Machine in 1946. Now we are on the cusp of the third wave, the Thinking Machine.

A super-smart computer simply has massive computing hardware power but is limited to running a fixed software program. The program will match input to output. Given the input X, the Computing Machine will always produce the value Y, without fail. If you want to modify the mapping X-to-Y, you will need to modify the software.

The Thinking Machine goes one giant step forward. It is not bound to always produce the same answer. The program “remembers” its past experience and learns from mistakes. Mistakes cause the software to modify itself by changing its own parameters so that it will produce more accurate answers in the future. This is something the Computing Machines cannot do.

I am not aware of any AI or Machine Learning pure-plays. Most of the big dogs in tech are beefing up their AI ranks as fast as they can.

NVDA is a critical arms-dealer to that revolution. Machine Learning software is very hungry for computing power and the NVDA processors are the gold standard here.

Not sure of an existing AI ETF but you can build your own:

FB, AMZN, GOOGL, AAPL, MSFT, NVDA, IBM, BIDU, TSLA, CEVA, CRTO, …

#6

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Getting software that keeps accurate inventory counts on thousands of items is not difficult. I wrote the specifications for such a system that kept track of all parts entered to and issued from treasury stores at a major aerospace company in the 80s. Treasury stores maintained non-designed purchase parts inventory which were directly installed in end-item products without modification or alteration, In other words, nuts, blots, rivets, grommets and the like. Also, certain pieces of avionics and other equipment.

The software worked great. The problem was getting store keepers to keep accurate transaction records. It was the company culture which allowed for lose controls on this type of inventory that defeated the intent of the s/w.