What is the state of the AI market in 2023?

What’s on this page?

1. AI market: what are the latest insights?
2. Best AI stocks to watch
3. Best AI ETFs to watch
4. How to trade AI shares and ETFs

AI market: what are the latest insights?

The fast-growing artificial intelligence (AI) market, which was already valued at US$428 billion globally in 2022, is expected to grow to US$515.31 billion in 2023, and to a whopping US$2,025 billion by 2030¹, Fortune Business Insights found.

The adoption of AI technology spiked up during the Covid-19 pandemic, as companies were forced to operate remotely and utilise smart working solutions. According to a September 2020 Gartner survey, 66% of organisations said they will increase or maintain their AI investments after the pandemic².

This has led to the emergence of AI firms like OpenAI, parent company of AI-powered conversation tool, ChatGPT. The chatbot has been hailed as the next big thing on the internet and big tech world for its ability to eventually reproduce human-level intelligence and perform human tasks.

While we might still be years away from a complete disruption, the impact is already being felt in a major way on the trading front. Stocks and companies with exposure to and a big focus on AI outperformed the tech-heavy Nasdaq-100 index at the start of the year.

We take a look at some of those stocks in this article. They include Microsoft, Alphabet (Google), Tesla, Baidu, Nvidia, and C3.AI. We also review a couple of AI-centric exchange-traded funds (ETFs) that have proven popular among investors.

Best AI stocks to watch

Microsoft

Microsoft set out on an AI transformation and journey in 2017 with the goal of designing, developing, and deploying AI in ‘safe, secure, and transparent ways’ across ‘every corner’ of the organisation.

Since then, the tech giant has turned its own internal learnings into solutions for its customers through the publishing of research papers and the creation of programmes like the AI Assurance Program, all with the aim of helping other companies to implement their own AI systems responsibly and effectively.

The company, which recently relaunched its Bing search and Edge browser with AI-assisted features, also made major investments into other AI-centric startups like OpenAI and Builder.AI in 2023.

Alphabet (Google)

Alphabet, the parent company of Google, began pivoting away from its core search engine business towards AI research and AI-based innovations as early as 2018.

This was what the company stated in a 10k filing in 2018: ‘Across the company, machine learning and artificial intelligence (AI) are increasingly driving many of our latest innovations, from YouTube recommendations to driverless cars to healthcare diagnostics.’

Through its Google Cloud AI solution, Google has been disrupting healthcare, automobile, US government departments like the US Air Force, and more.

Now, Alphabet is looking to take its AI ventures further, beginning with Google Quantum AI, which it claims to be ‘advancing’ quantum computing for it to ‘operate beyond classical capabilities’.

Although there is some doubt around whether Quantum AI will be as profitable as the company’s search engine business, Alphabet has already unveiled a couple of quantum AI tools, such as the CIRQ programming framework.

Tesla

Tesla first started using AI and big data in its cars in 2016 through the Autopilot feature. Autopilot uses cameras, ultrasonic sensors, and radar to perceive the environment around the vehicle. This is said to help drivers be more aware of their surroundings, which then helps them to steer, accelerate, and brake more quickly.

The company followed that up with its first full self-driving beta system test for a small group of Tesla customers in 2020. Progress on this front appears to be taking longer than expected, with the company recalling around 360,000 cars fitted with the beta system after it was found that the software was ineffective at navigating intersections and preventing crashes.

Nevertheless, the electric vehicle (EV) maker remains committed to its long-term full autonomous driving goals, with plans for a robotaxi even on the horizon.

Baidu

Baidu took its AI focus to the next level in May this year, when it launched a venture capital fund of 1 billion yuan (US$145 million) targeted at start-ups focused on content generated by AI applications.

The Chinese search engine firm also introduced a competition for developers to build applications off its own large-language model (LLM) called Ernie Bot (similar to ChatGPT) – unveiled in March 2023 – and potentially be integrated its existing products.

Baidu’s AI immersion began in late-2017 with the introduction of AI technology in its smartphones via its deep learning platform. Shortly after, it kicked off its first ever World Technology Conference themed “Bring AI to Life”.

That exploration has also led the company to form intelligence-based EV company, Jidu Auto, with Chinese carmaker Geely. In December 2022, Jidu Auto unveiled its first robot car with Level 4 autonomous driving (fully self-driving) capabilities.

Nvidia

Nvidia was founded in 1993, with its focus on designing graphics processing units (GPU) and application programming interfaces for high-performance computing.

In the last decade or so, the company started to become more AI-centric, by developing a series of products – from deep learning training interventions to autonomous transport solutions – all leveraging AI.

Two years ago, at the height of the pandemic, the company widened its AI offerings, introducing a new GPU computing architecture, Ampere, along with a suite of new AI-powered solutions, such as cloud services and robot kits.

Nvidia’s success in AI has largely been attributed to the company’s willingness to adopt the technology when it emerged as a viable tool.

With AI chip shipments expected to grow in the coming years, the focus is now on whether the company can continue to maintain its commanding market share.

C3.AI

C3.ai might be the smallest company on this list in terms of market cap, but its stock has experienced the biggest increase this year.

The US-based AI company was founded in 2009 and went public in 2020. Its main focus is on providing end-to-end AI solutions to enterprises in the area of digital transformation chiefly through its various software products.

Over the years, the C3.ai has seen an increasing demand for turnkey enterprise AI applications, as against that for development tools. 83% of the company’s bookings in FY2023 were driven by applications sales, versus 17% of bookings that were development-based.

C3.ai’s biggest customers include Shell, Bank of America, the US Air Force, and Engie.

*As of 13 July 2023 (Source: Yahoo! Finance)

Best AI ETFs to watch

Invesco QQQ Trust

Although Invesco QQQ Trust is not a strictly AI or ML-only exchange-traded fund (ETF), it counts many AI-centric or AI-focused tech companies among its holdings, including Alphabet, Nvidia, Microsoft, Tesla and Meta.

QQQ, which tracks the Nasdaq 100 Index, is one of the most popular tech ETFs today. It is often looked at as an indication of how technology stocks are doing, being that it is heavily comprised of large-cap tech holdings.

Due to its passive management, QQQ is described as having low fees, which rewards investors with total returns if the Nasdaq 100 Index gains. However, due to the tech sector’s volatility and high-risk factors, investors often suffer huge losses during a bear market.

As of July 2023, QQQ had assets under management amounting to U$200 billion. QQQ pays out quarterly dividends.

Global X Robotics & Artificial Intelligence ETF

The Global X Robotics & Artificial Intelligence ETF (BOTZ) was launched in 2016 by US-based provider of ETFs, Global X ETFs.

BOTZ seeks to invest in companies that potentially stand to benefit from increased adoption and utilisation of robotics and AI, including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.

The fund’s top sectors are information technology (43.9%), industrials (36.5%) and healthcare (16.5%). Its top five holdings, which account for roughly 40% of total assets, include Intuitive Surgical, Keyence, ABB, Nvidia and Fanuc.

BOTZ has net assets of $2.5 billion as of July 2023. The fund pays out dividends two times a year, with its latest 30-day SEC yield at 0.04%.

*As of 12 July 2023 (Source: public market data)

How to trade AI shares and ETFs

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Footnotes

¹ Fortune Business Insights Market Research Report, April 2023
² Gartner, Inc. Poll, September 2020