7 Things You Need To Know Before Investing in Artificial Intelligence

Guest Post | Oct 13, 2020

AI before you invest - 7 Things You Need To Know Before Investing in Artificial IntelligenceAI is the future and a lot of us want to invest in it. Here are 7 essential facts you must know before investing in AI.

We cannot fathom how deeply Artificial Intelligence (or AI for short) is involved in our day-to-day tasks – from simple chatbots helping us in online shopping to taking the help of Robo-Advisors to make investment-related decisions. Almost every leading company is utilizing AI tech, an industry that is speculated to be worth around $390 billion by 2025.

As easy as it sounds, AI is still a dynamic category of technology, and it can be exhausting to keep up with its countless subsets. However, if you are considering investing in AI-driven companies, it is salient to gather vast knowledge about the types of investments that are available and knowing which type of AI is trending the most.

Now that more companies are starting to rely successfully on AI with tremendous profits, stocks for AI companies are becoming highly attractive to potential investors. Companies that have shaped the future of AI are Amazon, Alibaba, IBM, to name a few.

Even though their success stories are very lucrative for investors, there are always some risks involved with any kind of investment. Therefore, before diving into AI investments, you need to consider the following 7 aspects to determine if the said AI-company is worth your investment. Keep reading to find out.

1) Educate yourself

The first step in AI-investing is to start reading free insights from legitimate fintech research publications. Try to follow them daily to get accurate stock information about the company’s finances. If you are confused or unable to choose a reliable source for such publications, this article on Jeff Brown's new research service will help you make an informed decision.

2) Observe The Stock Chart Religiously

Learn to read the simple cues of stock charts like moving averages, prices, volumes to gauge the price movements. Additionally, compare and consider these values to hypothetical market and economical changes and whether it will have any significant impact on the stock prices.

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The Motley Fool has created a table consisting of the best AI stocks to watch, which can be used as a yardstick to determine whether your potential investments have the required credentials.

3) Calculate The Risks

By simply calculating the company’s beta, you can find out how much risk the company’s stock is involved in compared to the rest of the market. This will not only help you to determine whether you want to invest in the company but also help you in the long run if you want to create an investment portfolio

4) Avoid Anything Controversial

IBM’s Watson For Oncology failed to deliver what they had promised – reliable treatment recommendations curated by AI algorithms. This investment that exceeded around $60 billion, failed notoriously, and eventually had to be canceled. The reason? The AI had been trained on a small number of hypothetical cancer patients rather than real ones, giving dangerous and unreliable cancer treatment advice.

Since this is a relatively new field under AI technology, it is not foolproof and can fail at any time. Thus, avoid investing in AI-technologies that are questionable and have not existed in the market for sufficient time. As always, the more reliable the tech, the better chances of it succeeding.

5) More Dividends, More Preference

If you have invested in other stocks before, you will know which stocks pay the most dividends. Look out for the financial news, articles, and websites to compare and contrast between several AI-driven companies you want to invest in.

Some startups based on AI research are also generating decent dividends. However, they are not traded publicly. If you have cryptocurrency to invest in, firms like SeedInvest & WeFunder can get you associated with such startups.

6) Conduct Thorough Researches

When looking at the company’s business plan, read their guidelines, processes, growth plans carefully. Scrutinize their success streak records.

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Even the locations of their operations matter – find out where their headquarters and manufacturing factories are located and whether the location and ownership of those buildings are legitimate.

7) Look at Its Price to Earnings Ratio

A situation may occur that you have liked a company so much that your gut feeling is telling you to give in right away because of the lucrative business plans and their success stories. If you are smart enough, you will know where and when to not let those emotions give the benefit of the doubt. Their profits may not tell you everything.

When we think of Tesla and look at its profits and overvalued price to earnings ratio, we are easily charmed. Recently, its launch of Tesla Insurance for its cars has its stockholder’s hopes up high. But, its negative Earnings Per Share tells another story.

Unless you invest in companies with deep pockets that might have the scope of sustainability in the long run, there is a negative possibility that you may not get the desired dividends if problems in the company’s financial analysis exist.

Final Thoughts

There is no doubt that AI will change the way we see the future significantly, but it remains to be seen. A revolutionary technology that emulates the human mind is still a wonder and not every company has succeeded in doing so, but with the constant developments, investing sensibly in AI could be worth the risk.

 


NCFA Jan 2018 resize - 7 Things You Need To Know Before Investing in Artificial Intelligence The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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