Whether we like to admit it or not, AI is the talk of the hour lately. However, though artificial intelligence has made a more ostensible buzz in the past couple of months, the traction surrounding it is more recent.
AI has been around for a couple of years and was even mentioned in popular blockbuster movies from the late 90s and early 2000s like The Matrix among others. Nonetheless, despite being around for quite a while, AI made the headlines more recently in light of OpenAI’s popular chatbot, ChatGPT which drew with it the attention of many tech giants like Microsoft and Alphabet.
So what is AI exactly, what does trading AI stocks mean, and what are some of the AI terms that should be kept in mind? Here’s what you need to know about the AI field and about AI stock trading:
What Is Artificial Intelligence (AI)?
AI or Artificial Intelligence is, in simple words, machines acting like humans. Or, to elaborate, it is essentially the simulation of human intelligence in machines. This means that machines can think and perform human tasks or tasks requiring human cognition. These tasks include learning, creating, correcting, and reasoning.
The History of Artificial Intelligence
It might be surprising to learn that AI has a rich and long-standing history and that it’s not as modern as one might think. Its roots even hail back to the 1950s whereby Hungarian-American mathematician, John Von Neumann and English mathematician, Alan Turing founded the basis of contemporary computers that included AI activities. Turing also published an article in 1950 titled “Computing Machinery and Intelligence,” and in it, he provided an example that resonates with modern AI. The example was called a “game of limitation” in which a human has to determine whether he is talking to another human or a machine through a teletype dialogue (a printing device used to send and receive telephone signals).
However, whereas AI and the understanding of machines can be attributed to many people, it is believed that it was coined in 1956 by computer scientist, John MacCarthy.
In 1997, a supercomputer called “Deep Blue” was created by IBM (IBM) and the computer was able to defeat the world chess champion. This astounded many and popularized AI. However the development of AI certainly did not stop there and nowadays we have AI speech recognition systems, smart homes, and other fascinating AI developments.
Examples of AI
Beyond ChatGPT, it’s safe to assume that one way or another we’ve been exposed to AI on a daily basis. Some daily uses of AI include maps and navigation applications like Google Maps or Waze, the facial recognition feature used to open our smartphones, the autocorrect feature that corrects your typos, and social media filters among other things.
Artificial Intelligence Companies: What Are AI Stocks?
While AI on its own cannot be traded, traders and investors who like to gain exposure to AI through their trading can do so through AI stocks. An AI stock refers to the shares of the companies involved in AI whether through their products or their investments.
Why Are AI Stocks Popular Among Traders?
One might wonder why AI stocks have made their way into many investors' and traders’ portfolios more recently if the concept has been around for over 70s years. This could be because many companies have hopped onto the AI bandwagon and have competed on who can advance it best.
Accordingly, since this seems to be the traction for many big companies that can affect the overall market, traders may find themselves attracted to companies involved in AI as well. Nonetheless, it is crucial to keep in mind that the future of AI technology is yet unclear, and, as such, traders should study this field well and understand its development before making any drastic decisions. Additionally, it seems that many big tech companies' growth or descent lately have been attributed to their involvement or lack thereof in AI. (Source:Yahoo Finance)
What Are the Biggest AI Companies?
There are many companies associated with the development of AI, yet some of which are more popular than others. When talking about the biggest names in the AI field, here are some of the top AI companies:
NVIDIA is an American tech giant company famous and celebrated for its GPUs. It is considered by many including JP Morgan analysts to be a leader in AI advancement through its supercomputers, software, and cloud services.
Meta is a social media networking company based in Silicon Valley. The company has invested greatly in AI, especially through its Large Language Models (LLMs).
Microsoft is an American multinational tech company known for its software products. Microsoft not only invests in AI through its products but has also partnered with OpenAI’s ChatGPT by investing $10b in the Chatbot’s developments.
Alphabet, the parent company of Google, is also an American tech company that has invested heavily in AI. The company has also reported that it intends to advance OpenAI’s competitor, Anthropic.
Snowflake is a Montana-based, American cloud computing company. At its core, Snowflake is built to support AI data science apps and machine learning enterprises.
Furthermore, in addition to the aforementioned stocks, which can be accessed through Plus500’s Stock CFDs, traders who are interested in gaining exposure to AI-related stocks without having to trade each stock individually can do so through the AI Index (BAIGUI) CFDs on Plus500’s trading platform. The AI Index CFD tracks the trajectory of the companies that contribute to the advancement of AI.
AI Terms You Should Know
To understand AI better, it would also be helpful to learn this AI-related terminology:
Algorithm: AI algorithms are rules, instructions, or guidelines a machine has to abide by.
Chatbots: bots are an abbreviation for robots which means that a chatbot is a program that runs within a website or app to help users with simple tasks.
Machine Learning: Machine Learning or ML is a subcategory of artificial intelligence and it essentially means that machines can learn and emulate human intelligence.
Natural Language Processing (NLP): NLP is part of machine learning and it is the process of machines understanding and interpreting human language.
Deep Learning: the act of machines processing data as humans do.
Modeling: AI modeling mimics logical decision-making using machine learning algorithms that are trained and deployed.
Neural Networks: similar to neurons in a human’s brain, neural networks in AI, are a set of skills needed to interpret photos, analyze faces, and handwritings. This happens through the incorporation of Natural Language Processing (NLP) and Deep Learning.
Generative AI: a type of AI able to produce or “generate’ content ranging from text to images and audio. This is similar to how OpenAI’s ChatGPT functions.
Could We Be in an AI Bubble Right Now?
Due to the notable hype made by AI lately, some may be wondering whether this is a temporary trend or if this is here to stay. While there’s no black-or-white answer to this question, it would be helpful to first understand what a financial bubble is, and second, to hear the opinions of those involved in this field in order to determine one’s own perception of the situation.
In the world of economy and finance, a bubble is a rapid escalation of a certain asset’s value. Or, in other words, it's when a certain market, asset, or event balloons beyond its original value significantly. Generally speaking, a bubble inflates to a certain extent until a certain event causes it to deflate.
This is reminiscent of the mid-2000s US housing bubble until it burst in 2008 due to debt loads and mortgages.
Another example of an economic bubble is the Dot-com Bubble in the late 1990s whereby tech stock prices soared and the adoption of tech and the internet was more prevalent. Ultimately, since stock prices were high beyond control, that meant that they were overvalued, which then eventually led to the tech crash in 1999. The crash was followed by massive sell-offs and layoffs.
However, since the market is known for its volatility and uncertainty, whether or not AI would wind up on a similar trajectory to that of the 1990s and 2000s housing and tech markets is yet to be determined.
On the one hand, some analysts believe that “AI is a doomed bubble.” Those who believe that it’s a bubble seem to believe that traders and investors are hyped about AI but in essence they lack the fundamental understanding of how it works. Some experts postulate that while many believe that AI can replace humans, in actuality it cannot. This eventually would mean that AI is a bubble that will inevitably burst.
On the flip side, others contend that AI has influenced businesses remarkably and will continue to do so, and hence, it is not a bubble.
Even celebrities and public figures like Tesla (TSLA) CEO, Elon Musk, who is also one of the former founders of ChatGPT-maker, OpenAI, has also expressed his opinion regarding the technology. Musk has stated that there’s a need to increase regulations over AI as it can be “potentially more dangerous than nukes.” Despite this overzealous statement, Musk has recently decided to reembark on the AI venture again by creating a company that would compete with OpenAI.
In conclusion, AI continues to be the talk of the hour for now, and the answer to whether it will keep ballooning or burst soon is yet to be determined. It would be worth keeping track of the companies involved in its advancement to see if any new notable ventures are made and whether or not AI will continue to be invested.