Since listed Nasdaq in 2010, tesla Shares are up 19,175%. An investment of £1,000 at the time of the electric vehicle maker's IPO would now be worth more than £190,000.
Like most investors, I'm on the lookout for the “next big thing.” artificial intelligence (ai) is dominating the headlines right now, which makes me think that some of the stocks in the sector could replicate Tesla's success over the next decade or so.
The contenders
There are three companies that are at the forefront of ai.
microsoft He reportedly owns 49% of OpenAI, the developers of ChatGPT, and has invested approximately $13 billion. The recent firing and subsequent rehiring of Open ai's CEO has been a public relations disaster. But normality has now been restored.
As an early adopter, Microsoft has a huge advantage over many others. According to the UK government, the cost of training a large language model triples every year. By 2030, it is likely to cost “many billions“, compared to the estimated $50 million needed for GPT4. This is a significant barrier to entry for those looking to compete.
And if technology evolves, the amount of computing power needed will increase enormously. NVIDIA makes graphics processing units, a type of chip used by ai applications. Its share price has tripled since December 2022, making it the sixth most valuable listed company in the world.
For many years, Alphabet —owner of Google— has been investing heavily in the sector. During the third quarter of 2023, it incurred capital expenditures of $8 billion, primarily on ai-related infrastructure. But although it is deploying machine learning in several fields, including its own chatbot (Bard), some investors argue that it is unclear how the company is going to turn this into profits.
Uncertain outlook
Currently, there is a lot of uncertainty surrounding the industry.
If enough influential figures believe that the technology has the potential to threaten humanity's existence (as some have claimed), then it may not be long before its use is banned or severely restricted.
But I think the jury is still out on this. More research is needed to fully understand the scope of the threat.
Until we know for sure, I think stocks exposed to the sector will increase in value faster than those outside the industry. But it's too early to say whether any of them will match Tesla's success of the past 13 years.
According to Next Move Strategy Consulting, the global market will grow to $1.8 trillion by 2030, an annual growth rate of 32.9%. And others predict something similar.
So next time I have some extra money, I will consider investing in ai.
But I don't know which of the three stocks highlighted above could benefit the most from the expected growth, although since they are among the largest investors in the sector, I think they will gain significantly.
To overcome this dilemma, I will start looking for an ETF that specializes in ai stocks. This will allow me to spread my risk across multiple companies. It also means that I don't have to decide now which company is going to grow the fastest in the coming years.
