How AI stocks are reshaping the way Australians invest this year
AI stocks are a hot topic for investors at the moment – find out more about how they can affect your own approach to investing.
The launch of ChatGPT in November 2022 wasn't just a leap forward in AI technology. It was a leap forward in the way the Australian public perceived AI in general.
Traditionally, AI has been stuck in the twin domains of sci-fi media and ultra-techy types. But tools like ChatGPT have opened up the conversation around AI and its applications to a far wider audience.
AI has also become a hot topic in the investing sphere, too. Cutting-edge tech innovations have long proven a fertile breeding ground for investors, and AI looks to follow that trend.
"Given how many conversations there have been about the capabilities of AI, it's no surprise investors have been keen to allocate capital to this fascinating theme," says Josh Gilbert, marketing analyst at eToro.
Products like eToro's AI-Revolution Smart Portfolio have started to emerge on the market, providing investors with a straightforward means to start investing themselves.
"AI is also likely to be a long-term theme," says Gilbert. "Plenty of tech giants are positioning themselves for this huge trend, and a long-term mindset will be key for investors to see rewards."
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Read more…Breaking down what "AI stocks" are
"AI stocks" generally refer to investments in tech-based companies that use AI as part of their delivery of service.
This can cover a huge range of different applications and toolsets. In the public eye, the focus has tended to be on AI tools that produce written content (e.g. Jasper, ChatGPT) or images (e.g. Midjourney, DALL-E). However, there is a huge range of companies and products that incorporate AI to some degree – from business software to video game creation tools.
It's unfamiliar – but exciting – territory for many Australian investors.
Gilbert is quick to stress that hi-tech investments still need an old-school mentality. He recommends that investors need to first understand what they're investing in and research the business. Testing strategies with practice accounts can also help build valuable experience.
"Australian investors should treat AI stocks as they treat any other investment," says Gilbert. "Familiarise yourself with the different types of AI, such as machine learning, natural language processing, and computer vision, as well as their potential uses in various industries."
How AI stocks offer value to investors
Long-term growth is the name of the game when it comes to AI stocks, according to Gilbert. It's an emerging technology – at least for the general public – and its full capabilities still haven't been realised.
"As it's a rapidly growing industry, there's potential for huge growth," says Gilbert.
However, he also cautions against seeing it as a be-all and end-all when it comes to tech investing.
"Plenty of big tech names like Microsoft and Amazon have exposure to AI elements," explains Gilbert. "So as an investor, you should do your research to ensure that you're not over-exposing yourself to the industry."
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So, who's currently buying AI stocks?
Given the relative newness of the tech, it wouldn't be unreasonable to assume that it's primarily a young, tech-savvy crowd investing in AI stocks.
Yet this isn't necessarily the case. eToro has seen a significant upswing in their over-55s users opening positions in AI stocks during Q1 of 2023.
There was a 60% uptick in over-55s purchasing in Q1 2023 in comparison to Q4 2022. So the message is clear – you don't need to be young in order to get excited about new technology.
Although the 18-45 crowd is definitely still buying within this space, it's clearly not on the same scale. For comparison, buyers aged 18-34 only saw a 41% rise during the same period, along with a 54% rise for those aged 35-44 years.
The evolving market of tech investment for FY23/24
AI doesn't exist in a vacuum. It's the product of – and in the future will likely contribute to – a range of other technologies.
The same goes for Australian interest in AI investment.
Gilbert notes that although lots of investors are primarily interested in its potential for financial outcomes, there are just as many others looking to apply the tech to investing itself.
"AI has the potential to play a huge role in retail investor strategy," says Gilbert. "AI harnesses the ability for retail investors to analyse vast amounts of data, generate new investment ideas, and overcome human biases."
In practical terms, this means AI has the potential to tilt the scales toward retail investors and provide them with the tools to make better-informed investment decisions.
"In the most recent earnings season, all the big tech giants mentioned AI," he says. "Realistically, this means we'll continue to see heavy investments from tech firms into this growing technology."
How to get started investing in AI stocks
If you're looking to get started with investing in AI stocks, the process is quite similar to investing in any type of stock. You can use a trading platform like eToro, go through a broker or use a number of other options.
You can also decide whether to opt for individual stocks, or whether you want to get started with a pre-made portfolio. Both have their own advantages; individual stock selection allows you to pick and choose, while a portfolio provides you with a balanced range of options to serve as a jumping-off point.
Gilbert points to eToro's AI-Revolution Smart Portfolio as one example of a starting portfolio.
"Microsoft's ChatGPT has led the conversation, but we wanted to give investors a diversified approach to this growing theme," says Gilbert. "With eToro's AI-Revolution Smart Portfolio, investors can gain access to companies that are developing cutting-edge technologies that provide the infrastructure of AI applications, as well as leading companies using AI as part of their business strategy."
To learn more about AI stocks, visit eToro today
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