3 ways to invest in fast-growing artificial intelligence (AI) growth stocks

Growth stocks related to artificial intelligence (AI) have been driving recent growth. S&P500 The index exceeded 5,000 points for the first time.

Meanwhile, the UK-based semiconductor company’s stock price is arm holdings On February 8, the company surged a whopping 50% in New York on the back of AI revenue growth.

Here we consider three ways investors can get in on the action.

individual stocks

The easiest way is to buy stocks in companies that are already benefiting from AI.

It could be the so-called “Magnificent Seven” group of tech stocks.

However, after a year of strong gains in their respective stocks, this group is now highly valued.

We expect the average price/earnings ratio (PER) to be approximately 50 times. This means paying a significant premium.

ETF

Another way to invest in AI might be through exchange-traded funds (ETFs). Is it a proprietary technology, e.g. Nasdaq 100 Or the S&P500.

However, valuation is an issue here as well. After an astounding 53.8% rise last year, his P/E on the Nasdaq 100 Technology Index stands at 31x, which is extremely high by historical standards.

Additionally, the top five stocks (Microsoft, Apple, Alphabet, Amazon, and Nvidia) account for approximately 25% of the S&P 500, so there is a risk of overconcentration.

funds and trusts

A third way to invest is through mutual funds or mutual funds that have a sufficient level of exposure to the theme.

For funds, Blue whale growth Check the checkbox. It owns some world-class AI stocks, including Meta, Nvidia, and chip equipment suppliers. ram research.

However, it also has investments in other sectors that could provide downside protection should the AI ​​revolution falter or face growing pains.

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Blue Whale is a truly active fund with a highly concentrated portfolio of just 29 stocks. Risk is increased because a few duds can significantly underperform a more diversified fund.

However, it’s up 122% since its launch in 2017, easily outpacing the global market.

Things to consider

My best idea here is: Scottish Mortgage Investment Trust (LSE:SMT).

It owns companies such as Amazon and Tesla, but it also has investments in top companies such as: Shopify. The e-commerce platform has launched Shopify Magic, a suite of AI-enabled features integrated across its products.

Unlike stocks and funds, trusts can trade at a discount to the underlying assets. This means the market price may be lower than his net asset value per share.

Scottish Mortgage is currently trading at a discount of 12.4% and I think this provides a safer way to invest in AI at the moment.

One of the risks here is that interest rates remain high for a longer period of time than expected. Higher interest rates are generally negative for the types of fast-growth stocks held by the trust.

However, I am confident that Scottish Mortgage’s world-class growth portfolio will deliver market-beating returns in the only period that matters. long term.

The post 3 Ways to Invest in Fast-Growing Artificial Intelligence (AI) Growth Stocks appeared first on Motley Fool UK.

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Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Ben McPoland has held roles at Alphabet, Apple, Nvidia, Scottish Mortgage Investment Trust Plc, Shopify and Tesla. The Motley Fool recommends Aj Bell Plc, Alphabet, Amazon, Apple, Lam Research, Meta Platforms, Microsoft, Nvidia, Shopify, and Tesla. The views expressed on the companies mentioned in this article are those of the writer and may differ from official recommendations we make on subscription services such as Share Advisor, Hidden Winners, or Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.

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