Imagine, in healthcare, AI can detect, analyze, and predict cancer or other diseases like heart problems by scanning vast amounts of a patient’s data in a short time. In finance, investment institutions use AI to forecast financial crimes or fraud by digging into a sea of information.
The soon-to-be reality comes closer when you look at the recent stunning development of artificial intelligence across all industries.
You should take advantage of the opportunity to participate in AI development in Singapore and worldwide. Statista, a global data analysis and research company, points out that Singapore aims to lead as a global leader in AI and has invested about S$500 million over the past 5 years. Besides, the country has the highest rate of exploring and deploying AI globally in 2022, behind China and India.
Why is Artificial Intelligence Attractive to Investors?
Striving to lead as one of the AI technology hubs in the region, the Singapore government is active in promoting and nurturing AI development to increase productivity, such as:
- The government has invested S$500 million in AI research and development over the past 5 years, said the Communications and Information, Ms. Josephine Teo. The positive efforts create a favorable environment for further AI development in Singapore.
- Since 2017, the National University of Singapore has launched the National AI Singapore Program in partnership with research institutions, startups, and private companies to speed up the technology feasibility between these parties.
- The country continues to attract funding from venture capital and private equity in Fintechs. The finance industry has drawn USD4.89 billion over 2022. However, the funding source faded in the first half of 2023 due to economic uncertainty.
It’s not surprising Singapore has become a technology hot place for investors as it will remain so in the future.
How to Invest in AI?
With the buzz of the ChatGPT, technology is a prevailing and fashionable term for investing. Since November 2022, chatboxes like Google’s Bard and other AI conversation technology services have joined the race in content creation, image, and audio services to market. They’ve changed how we work and live in the real world and offer us investment opportunities.
Investing in Individual AI stocks
Technology giants are the main benefactors in the ongoing investment wave. You should include the following stocks in your portfolio.
- Amazon (AMZN): The tech giant uses AI technology to analyze customer data and patterns to predict regional or international product demand and develop optimal sales strategies. Besides, Amazon adopts artificial intelligence to speed up delivery time, like one-day or next-day deliveries, by pinpointing and relocating goods closest to clients.
Besides, Amazon utilizes AI robots to do repetitive tasks like lifting heavy packages. The company says Robots handle about 75% of customer orders in part.
- Google (GOOG): Besides its AI chatbox, Bard, Google develops its AI based on self-developed models, such as BURT, PALM, MUM, and LaMDA, on products like Search, Maps, Pixels, Photos, Youtube, Gmail, Ads, and Cloud. Google also uses AI on its popular products like Lens and Translate.
Soon, the tech company will use its Bard – the chatbox services on Docs, Sheet, and Slide services, so the AI will make work more productive and efficient.
- Microsoft (MSFT): As a sponsor of ChatGPT, Microsoft uses the service and its self-developed artificial intelligence across its various businesses. AI is now in place for flagship products like Microsoft 365 to make work easier, for example, correcting mistakes, scheduling tasks, and enhancing productivity.
Besides, the company’s segment, Intelligent Cloud, uses AI to turn innovative ideas into actionable business results. Another service, called Azure machine learning services, helps organizations transform and analyze data into meaningful information. Microsoft also uses AI in other products like LinkedIn to assist clients in improving business processes.
- Nvidia (NVDA): An international artificial intelligence hardware and software manufacturer, such as GPUs, the enterprise uses AI to develop new algorithms for machine learning and image processing. Moreover, it relies on AI to predict product demand and optimize the supply chain.
Nvidia also uses AI to create marketing strategies and find potential clients. Chatbox is another aftersale service to help resolve clients’ queries.
- Tesla (TSLA): The electric car company uses AI in its Autopilot and Full Self-Driving systems to detect and analyze a car’s surroundings to make decisions on navigation. Other AI systems for developing driving systems include computer vision, deep learning, and machine learning to help drivers on their road.
Besides, Tesla applies AI in its battery management to optimize battery lifespan and performance. The company uses AI to improve product quality and increase job efficiency in manufacturing. One example is the use of AI to detect defects that are difficult to be carried out by humans. Other uses of AI include sales, marketing, and customer support.
The above corporations are examples of enterprises using AI technology to make products and services for the market. You are better positioned to invest in AI stocks by thoroughly researching multiple companies with applications of the AI ecosystem and applications on their products.
Investing in AI ETFs
Investors unfamiliar with the AI sector should run the risk of losses due to unsuitable investments in the current AI boom. Furthermore, concentrated bets on a few companies may cause money downfalls if the stock market is volatile. Mutual funds or ETFs are better choices for investors to diversify investment risks. Below are some AI ETFs you should consider to include in your portfolio:
- ROBO Global Robotics and Automation Index ETF(ROBO): The ETF tracks the ROBO Global Robotics and Automation index comprising technology and industrial companies. The fund holds major companies like Intuitive Surgical Inc. and ServiceNow Inc. The ETF aims to gain from investing in these companies using artificial intelligence and robotics technology.
ROBO’s net assets are USD 1.4 billion as of Sep 20, 23, with an expense ratio of 0.95%. It holds 89 holdings globally. The ETF is a fund of higher risks and may undergo price swings during a market turmoil.
- Global Robotics and Artificial Intelligence ETF(BOTZ): The index fund tracks the Index Global Robotics & Artificial Intelligence Thematic Index, composing the most prominent and highest liquid companies in developing robotics and artificial intelligence products.
The ETF has USD 2.2 billion net assets as of Sep 21, 2023, with an expense ratio of 0.69%. It has a global holdings of 44 in total. The fund is suitable for investors tolerant of very high risks as the companies may undergo huge price changes in volatile times.
- ARK Autonomous Technology & Robotics ETF(ARKQ): ARKQ is an actively managed exchange-traded fund seeking long-term capital growth. It primarily invests in domestic and foreign technology and robotics companies with themes of disruptive innovation.
These companies focus on developing technological improvements and advancements in scientific research concerning manufacturing automation, energy, artificial intelligence, autonomous transportation, and 3D printing.
The fund’s net asset value is USD 1.17 billion as of Sep 21, 2023, with an expense ratio of 0.75%. The current number of holdings ranges from 30 to 50.
- iShare Robotics and Artificial Intelligence Multisector ETF(IRBO): IRBO is an ETF tracking the NYSE FactSet Global Robotics and Artificial Intelligence Index, comprising robotics and artificial intelligence companies. Like other AI ETFs, the fund seeks long-term capital gains by investing in global technology companies.
The current net asset value is USD 477 million as of Sep 15, 2023, with an expense ratio of 0.47%. The current number of holdings is 113.
- Global X Artificial Intelligence & Technology ETF(AIQ): AIQ is a passively managed exchange-traded fund tracking the Indxx Artificial Intelligence and Big Data Index. The ETF seeks to profit from investing in companies developing and utilizing artificial intelligence technology in their products and services and companies providing products facilitating big data analysis using AI.
The ETF’s current net asset value is USD 571 million as of Sep 15, 2023, with an expense ratio of 0.68%. The current investment holdings are 87.
- First Trust Nasdaq Artificial Intelligence and Robotics ETF(ROBT): Like other passively managed ETFs, ROBT invests in Nasdaq CTA Artificial Intelligence and Robotics Index components. Some notable names from these global companies include Palo Alto Networks, Gentex Corp, Trimble Inc., and Pros Holdings Inc.,
The fund primarily invests in more than 50% in the Technology sector, 20% in the industries, and 10% in Consumer Cyclicals. The top 3 invested regions are the United States, Japan, and the Eurozone.
The fund’s current net asset value is USD 428 million as of Aug 31, 2023, with an expense ratio of 0.65%. The current holdings are 112.
- iShares Exponential Technologies ETF(XT): The passively managed ETF tracks the Morningstar Exponential Technologies Index and seeks to gain via exposure to firms from developed and emerging markets. The information technology equity is the primary investment target for XT. Some notable firms include Meta Platforms Inc., Nvidia Corp, and Palantir Technologies Inc.
XT’s current net asset value is USD 3.2 billion as of Sep 15, 2023, with an expense ratio of 0.46%. The current holdings are 196.
How to Buy AI Stocks and ETFs?
You can invest in AI stocks or ETFs in Singapore. Here are a few ways to offer investors venues for participating in the game:
- Stocks: You may invest in the stock of an individual company like Meta Platform Inc. or Nvidia Inc. and gain from dividends and capital growth. One benefit of stock investing is lower transaction and management costs.
An account with a stock brokerage or a bank is necessary to begin trading with your stock picks. You can use your SRS or CPF account to buy stocks.
Investors can trade stocks with brokerage or bank apps like Interactive Brokers and MooMoo. However, you should do your own research and base it on your personal finance in making proper investments, as stock investment involves very high risks.
- Investment funds: ETFs and mutual funds are the most popular investment venues for investors as, unlike stocks, they can diversify investment risks through geolocations, industries, and large numbers of holdings.
Like stock investing, you can buy the funds through stock brokerages like EndowUs and Saxo or banks like DBS and HSBC to buy ETFs or mutual funds. Besides, the SRS and CPF are also available for buying funds.
Like other risky investments, you should not rest assured that future performance resonates with the past. A thorough financial analysis plays a pretext to any subsequent investing.
- Advised portfolio: It is a portfolio of investment funds designed by brokerages to meet investors’ appetites. Typical advised portfolios range from the lowest risks to the highest, though AI funds usually rank the riskiest.
Alternative Investment: Cash Management Account
AI investments involve high risks of huge losses. Not all investors can tolerate the downside of falling prices. Now, investors can have options of earning a reasonable return by investing in cash management accounts offered by brokerages.
Like a bank’s savings account, a cash management account invests in low-risk and highly liquid money market funds or short-term bonds. They offer another popular alternative to bank deposits in Singapore. Noteworthy brokerages offering the product include FSMOne, EndowUS, Syfe, and MoneyOwl.
Artificial Intelligence increases an enterprise’s productivity and increases a company’s profit. You can enhance your portfolio’s return but run your risk of loss by investing in AI. Research and analysis are a must before investing in any type of AI.
- Buying AI stocks like Google, Meta, and Nvidia provide a low-cost way of investing.
- Investment funds, such as ETFs and mutual funds, offer the most diversified way of reducing risks.
- Advised portfolios, offered by brokerages, are tailor-made portfolios to meet an investor’s risk appetite.
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