Investing in AI: Opportunities, risks and the market leaders at a glance!

Investing in AI: Opportunities, risks and the market leaders at a glance!

Artificial intelligence (AI) has established itself as a driving force in numerous industries in recent years and is therefore attracting many investors. The market for AI and big data funds has developed rapidly, with global assets of these funds already exceeding $30 billion by the end of the first quarter of 2023. This development was largely driven by the public debut of ChatGPT 3.5 at the end of 2022, which led to an increase in inflows into such funds, it was reported Morningstar.

Assets in US AI and big data funds currently stand at a record $5.5 billion, while Europe is the largest market in this area at $22.7 billion. Large companies such as Microsoft, Alphabet, Nvidia, Amazon and Tesla are not only prominent players, but also those who benefit significantly from advances in the AI ​​sector. These “Magnificent Seven” dominate the selection in AI and big data funds and play a crucial role in the development and application of AI technologies.

Growth and volatility in AI funds

Although interest in AI investments is growing, the funds also show high volatility. Last year, many AI funds suffered losses, some of which were significant, estimated at up to 38%. This particularly affects 3-year returns, which have been severely affected by such declines. Nevertheless, there are also positive developments: many stocks in the AI ​​sector have increased in value since the beginning of the year, reports HerMoney.

Most investors tend to invest in funds to spread their risk and benefit from a diversified portfolio. The various funds available include Allianz Gl Artificial Intelligence, DWS Invest Artificial Intelligence and Echiquier Artificial Intelligence. In addition, some ETFs offer cheaper but equally volatile alternatives that track AI indices.

Strategies for investors

Investments in AI offer high growth potential, but are also accompanied by increased risks and a certain degree of uncertainty. Fund managers face the challenge of taking into account the dominance of large companies in their portfolios without diluting the uniqueness and risk of the funds. However, the Morningstar Global Artificial Intelligence & Big Data Consensus Portfolio has managed to outperform the Morningstar Global Target Market Exposure Index by 35% since November 2022.

Investors should be aware of the risks and only invest the amounts they can afford to lose. Investing in AI is therefore not only an opportunity, but also a potential risk for inexperienced investors. A conscious and informed approach is required to be successful in this dynamic and rapidly evolving market.