It’s now widely expected that artificial intelligence (AI) will transform the world. Indeed, tech experts and executives are meeting in the UK today (1 November) for a two-day AI summit to discuss the safety implications. Here, I’ll highlight three UK stocks for me to buy today to invest in this revolutionary technology.
Broad-based exposure
First, we have Polar Capital Technology Trust (LSE: PCT). This is a tech-focused investment trust on the FTSE 250 that has all the biggest AI names in its portfolio.
These include Microsoft (part-owner of OpenAI, the maker of ChatGPT), Meta Platforms and Apple. Another top holding is Alphabet, a true tech pioneer and owner of Google DeepMind, a British-American AI research laboratory.
I also like that semiconductor stocks are a prevalent theme in the portfolio. That’s because the amount of data processed and stored by AI applications is massive and growing exponentially.
This means that more and more powerful chips will be needed, benefiting the likes of Nvidia, AMD and Taiwan Semiconductor Manufacturing. All three stocks are presently in the top 10 holdings.
Therefore, the trust gives investors wide-ranging exposure to the growth and development of the AI industry.
Now, one risk I’d spotlight is that some of these stocks (particularly Nvidia) are quite pricey. If there is a Big Tech market correction, this could temporarily knock the Polar Capital share price.
That said, the trust is currently trading at a 14% discount to the value of its assets. So this could prove to be a great entry point a few years down the line. That’s why I plan to pick up some shares in November.
Unlisted exposure
Next, I’m going to highlight Scottish Mortgage Investment Trust (LSE: SMT).
The share price has struggled badly the last couple of years as investors have sold off riskier stocks. This has included those invested in private companies, which make up nearly 30% of the growth trust’s portfolio.
There’s a risk this bearishness could continue for a while longer.
Yet it should be noted that most of Scottish Mortgage’s private holdings are very large and already benefiting from AI.
For example, Stripe is a digital payments processor which was recently valued at $94bn. Its billing and checkout solutions power ChatGPT Plus, the subscription version of the generative AI chatbot.
Meanwhile, another large holding is ByteDance. This Chinese firm owns TikTok, which is using AI to identify items in popular videos and recommend them on TikTok Shop, its e-commerce marketplace.
Some investors see TikTok Shop as a major threat to Amazon, another portfolio holding.
I recently bought more Scottish Mortgage shares due to the ongoing share price weakness.
Clean databases
Finally, I’m going with FTSE 100 data analytics giant RELX, whose shares are on my buy list.
AI systems need large databases to learn from and the amount of high-quality data RELX owns is massive. This should give it a durable competitive advantage, to my mind.
One of its new products is Lexis+ AI, a tool for lawyers which automatically generates drafts of legal documents when prompted (more reliably than ChatGPT).
Again though, this is a richly valued stock trading on a price-to-earnings multiple of 31. If market sentiment sours, RELX shares could suffer.
However, long term, generative AI looks poised to further enhance the value of the firm’s datasets for its customers.
