Just as the internet has transformed the world over the past 30 years, artificial intelligence (AI) is set to do something similar in the decades ahead. That makes it an exciting megatrend to back in my Self-Invested Personal Pension (SIPP) and Stocks and Shares ISA.
Here’s how I’m hoping my portfolio grows in value as the AI era advances.
Broad-based exposure
Over the past few years, I have built up a lot of different AI investments. For a start, I hold a Nasdaq 100 exchange-traded fund (ETF). This gives me broad exposure to all the leading tech giants, including Microsoft, Amazon, and Alphabet.
These companies are investing heavily in building out AI infrastructure and services.
I also have a long-standing position in Scottish Mortgage Investment Trust. As well as Amazon, Meta, and ASML (NASDAQ: ASML), the trust also gives my portfolio exposure to unlisted AI-powered companies like Stripe, Databricks, and ByteDance.
Three AI layers
Turning to individual shares, I divide my AI holdings up into three camps: infrastructure, enablers, and consumer applications.
The first refers to companies that build the hardware or infrastructure that powers AI models. For example, Nvidia supplies the GPUs that train and run most cutting-edge AI models, while Taiwan Semiconductor Manufacturing Company (TSMC) builds the chips for Nvidia and dozens of other tech firms. These are foundational names in the AI hardware supply chain.
Next, there’s Cloudflare, whose global data centre network offers ‘AI at the edge’ services. These help apps run AI models faster and closer to users.
As for enablers, these firms embed AI into their platforms to make users more productive or secure. For example, Salesforce is utilising AI to help its enterprise customers make decisions and deploy AI agents (intelligent software that automates various tasks, boosting efficiency).
Meanwhile, CrowdStrike uses AI to detect and thwart billions of cyber threats a day. And Shopify has rolled out powerful AI products for its online merchants, helping them create product descriptions and gain customer data insights.
Thirdly, I’m invested in companies that are using AI to improve the user experience. One is Duolingo, which uses AI to power its language learning lessons, including real-time conversations with an avatar.
Now, I’m certainly not saying investors should copy this list. I bought some of these shares at much cheaper prices, and each one carries its own risks. It’s just to show the myriad ways one can invest in the AI revolution.
A potential opportunity
Finally, I want to finish by highlighting a high-quality AI stock, which is ASML. The company is at the heart of the AI revolution because it builds the EUV (extreme ultraviolet) lithography machines that make the world’s most advanced computer chips.
I should mention that I sold this stock last year because I was worried that export restrictions on its machines to China might limit near-term growth. This fear has largely come true, and adds uncertainty here.
However, the stock has fallen 32% in the past year. And based on forecasts, it’s now trading at 25 times forward earnings, falling to just 20 by 2027.
That strikes me as good value for a firm with a monopoly-like position in a critical part of the semiconductor supply chain. As such, I reckon it’s worth considering for an AI portfolio.
