What Is AI Investing?

Artificial intelligence (AI) with a trading graph.

(Image credit: Getty Images)

last updated 14 February 2025

AI investing has been the megatrend since 2023 – and for good reason. Goldman Sachs economists expect generative artificial intelligence to boost global labor productivity by 1 percentage point per year over the next decade.

Historically, they note, "Such periods of rapid productivity growth have been led by large investment cycles."

What's more, the economists from Goldman Sachs believe that "AI investment could grow rapidly in the next couple of years, approaching $100 billion in the U.S. and $200 billion globally in today's dollars by 2025."

From just $107.88 $24.99 for Kiplinger Personal Finance

Become a smarter, better informed investor. Subscribe from just ~~$107.88~~ $24.99, plus get up to 4 Special Issues

CLICK FOR FREE ISSUE

https://cdn.mos.cms.futurecdn.net/flexiimages/y99mlvgqmn1763972420.png

Sign up for Kiplinger’s Free Newsletters

Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.

Profit and prosper with the best of expert advice - straight to your e-mail.

A recent McKinsey report looks further out and sees something even bigger: Its low-end estimate for just AI software and services revenue by 2040 is $1.5 trillion. The high end is $4.6 trillion. And the broader economic impact is multiples of that.

This type of investment can fuel massive growth in companies focused on artificial intelligence, and, in turn, boost returns for AI stocks.

"We look at AI as a long-term theme and we're still in the very early innings of this multi-decade computational transformation," said Tejas Dessai, research analyst at Global X ETFs.

The proof that AI is the hottest corner of the market right now is in the pudding.

For instance, over the past five years, Global X's Artificial Intelligence & Technology ETF (AIQ) has averaged an annual return of 16.3%.

So far in 2025, the exchange-traded fund is up 9.1%, more than doubling the S&P 500's gain of just over 4%.

What Is AI?

OpenAI's ChatGPT has highlighted the power of artificial intelligence for millions of people. It can seemingly provide an answer on just about any topic.

As for the definition of AI, ChatGPT says it is "the simulation of human intelligence in machines that are programmed to think and act like humans."

This is a good overview of the topic, but it's important for those wondering what is AI investing to understand some of the core components.

The fuel for AI is data, an enormous amount of data. Sophisticated algorithms process data to come up with predictions and insights.

There are different types of models:

Machine learning uses advanced statistics to find patterns in data. This can help forecast the stock market or provide recommendations for specific names such as Netflix (NFLX) and/or Amazon.com (AMZN).
Deep learning is a more complex version of machine learning that mimics the human brain. This category of AI has experienced many breakthroughs during the past decade, including advances in image and voice recognition, diagnosis of diseases and interpretation of natural language.
Generative AI creates content, including text, images, audio or video. This technology is at the heart of ChatGPT. The systems are called large language models (LLMs) or foundation models. "They use an innovative technology called the transformer," said Muddu Sudhakar, CEO and co-founder of Aisera, a venture-backed generative AI company that focuses on larger enterprises. "Instead of processing one word at a time, it does it all at once. This has ushered in major improvements in performance."

What are the best AI stocks to invest in now?

Investors who want to know how to invest in AI will want to start with the best AI stocks.

There are only a handful of pure-play artificial intelligence companies out there right now, including C3.ai (AI), which sells a suite of software applications that allows for low-code and no-code use of AI. The platform also has generative AI capabilities.

However, when it comes to AI stocks, these are usually companies where a part of the business benefits from the technology.

Some of the top firms include:

Nvidia (NVDA) is the world's most valuable semiconductor company, with a market capitalization of $3.4 trillion. NVDA develops GPUs, or graphics processing units, that allow for parallel processing of data. This capability has become a must-have for developing AI applications and an overwhelming majority of them use Nvidia chips. The company also has its own software platform called Cuda. This has been another key differentiator for NVDA.
Accenture (ACN) is spending $3 billion on its AI efforts through 2026. Accenture's plan includes doubling its headcount for AI talent to 80,000. As companies scramble to implement AI, they need the help from data science experts. This has become a big growth area for Accenture.
Microsoft (MSFT) had the foresight to invest $1 billion in OpenAI in 2019. Now, the software company is on track to spend $80 billion on AI during its fiscal 2025. This has positioned Microsoft to benefit from the AI investing megatrend. The company has built a state-of-the-art supercomputer for applications like ChatGPT. And Microsoft is aggressively integrating AI across its product lines, such as Office, its GitHub developer tools and security offerings.

For those looking for more widespread exposure to artificial intelligence stocks, there are also the best AI ETFs.

How can I use AI for investing?

There are many web and mobile apps that leverage AI for investing. Even traditional financial services companies like Charles Schwab (SCHW) have standout features.

But let's take a look at some interesting startups that are using AI for investing:

PortfolioPilot from Global Predictions connects a user's entire net worth to a sophisticated engine that allows for personalized recommendations. The platform has over $5.8 billion in assets. "We use AI to make the kind of top-tier tools and insights often reserved for big banks and hedge funds accessible to everyday investors," says Alexander Harmsen, founder and CEO of Global Predictions. The company also has created a ChatGPT plugin for its app.
Follow is a social investing app that uses AI to make recommendations. The system helps structure thematic portfolios based on systems like ChatGPT. "The AI portfolios allow users to take a strategic amount of capital, put it behind a cause they support or an industry they are passionate about, and leave much of the research up to AI," says Miles Cole, CEO and co-founder of Follow.

Learn more about AI

TOPICS

Tom Taulli has been developing software since the 1980s when he was in high school. He sold his applications to a variety of publications. In college, he started his first company, which focused on the development of e-learning systems. He would go on to create other companies as well, including Hypermart.net that was sold to InfoSpace in 1996. Along the way, Tom has written columns for online publications such as Bloomberg, Forbes, Barron's and Kiplinger. He has also written a variety of books, including Artificial Intelligence Basics: A Non-Technical Introduction. He can be reached on Twitter at @ttaulli.