HOW TO INVEST IN AI

It's too early to pick the ultimate winners in artificial intelligence, and it's already expensive to get in on the ground floor. But these companies stand to benefit from the boom.

- KIM CLARK

ARTIFICIAL intelligence is already writing our kids’ essays, driving cars, producing new computer programs and helping scientists seek cures for cancer. It also promises lower costs and bigger profit margins for millions of businesses. By 2030, a new report from the consulting firm McKinsey predicts, AI could increase global productivity by more than 3%, adding trillions to the world’s wealth. Microsoft founder Bill Gates, who knows a thing or two about technology, calls AI a “revolutionary” development that will likely soon “be able to do everything that a human brain can, but without any practical limits. This new technology can help people everywhere improve their lives.”

There’s a dark side to AI, too: It might also empower criminals, eliminate millions of jobs or even spin out of control and kill us all, say AI alarmists.

Extravagant claims about the potentially world-changing impacts of computers that can learn and reason on their own are raising hopes— and fears—around the world. The hype is also sending the stocks of AI-related companies soaring. The tech-heavy Nasdaq Composite index rose at almost double the S&P 500’s 17% pace in the first half of 2023. And most of that was driven by a handful of AI-related firms. Nvidia, which designs the chips used in more than 90% of AI applications (according to technology industry research firm CB Insights), returned an eye-popping 190% over the period. Many AI-related stocks trade at more than 40 times next year’s expected earnings—about twice the level of the overall market.