Investing in AI-Related Stocks: Tips, Challenges, and Strategies
If you're interested in learning about and potentially investing in artificial intelligence (AI), the company OpenAI, may be familiar name to you for this sector. As a leading company in AI research and development, OpenAI is making significant strides in areas like natural language processing and machine learning.
For the technology sector, investing in it has its potential pros and cons. On the pro side there's high growth potential, market demand (there's always demand for technology in a variety of industries), and diversification opportunities-- to name a few--but on the risk side, there's market volatility, rapid technological change, regulatory risks, competition and more in this sector.
Whether you're new to investing or AI, this guide will provide essential insights into this sector. We'll begin by using the company OpenAI as an example and then explore it more generally with additional AI-related stocks.
What is OpenAI
OpenAI, was founded in 2015 by a group of prominent tech figures, including Elon Musk, Sam Altman, Greg Brockman, Ilya Sutskever, John Schulman, and Wojciech Zaremba. It is an artificial intelligence research organization that focuses on developing and promoting AI technologies in a safe and beneficial manner for humanity.
OpenAI's mission is to ensure that artificial general intelligence (AGI) benefits all of humanity. The organization originally started as a non-profit but later transitioned to a "capped-profit" model to attract the capital necessary for its ambitious goals.
Is OpenAI publicly traded
No, OpenAI is not publicly traded. Under its "capped-profit" model, OpenAI is structured as a hybrid organization with both non-profit and for-profit entities. The for-profit arm, OpenAI LP, is where investors can put money, but it has a unique structure: the returns to investors are capped at 100x their initial investment, after which any additional profits are reinvested into the mission of the organization. Because of this, there is no OpenAI stock price.
Who owns OpenAI
The way the company is structured, the board controls the direction of the company. The board includes Bret Taylor (Chair of the board), Larry Summers (Board member) and Adam D'Angelo (Board member).
Potentially investing in AI-related stocks
As noted above, investors can't buy OpenAI stock; however, different technology companies can indirectly invest in the growth of AI and also offer possible opportunities for investors. The following companies have either have a relationship or are involved with OpenAI; some are also developing and using AI. Take a look.
Microsoft
Microsoft has invested heavily in OpenAI, and the two companies have a close partnership. Microsoft has exclusive access to OpenAI's technology, which is integrated into products like Microsoft Word and Azure.
NVIDIA
These two companies are closely connected in the context of AI research and development due to their complementary roles in the AI ecosystem.
OpenAI relies heavily on Nvidia’s GPUs for training its large language models, such as GPT-4. Nvidia’s hardware has been a cornerstone of AI research due to its performance in processing large datasets and handling complex computations required by deep learning models.
IBM
IBM and OpenAI are both influential in the AI space. IBM focuses more on enterprise AI solutions and cloud-based applications, while OpenAI is known for pushing the boundaries of general-purpose AI, particularly in natural language processing and large-scale generative models. They both contribute to the AI ecosystem, but they operate with different goals and strategies.
Alphabet
OpenAI and Alphabet (Google) are major AI players but operate differently. OpenAI focuses on general-purpose AI, like GPT models, while Alphabet uses AI across a range of products and research areas, including healthcare and scientific discovery. They compete in many areas but share a goal of advancing AI.
Meta Platforms
OpenAI and Meta Platforms both play key roles in AI research. While both focus on advancing AI, OpenAI develops general-purpose AI for various industries, whereas Meta targets AI for social media and the metaverse. Their work shapes the future of AI, though with different strategic goals.
Infosys
OpenAI and Infosys have areas of overlap in the AI space where the two could potentially interact. OpenAI focuses on developing cutting-edge AI models, while Infosys applies AI to solve business challenges for enterprises. Infosys could potentially leverage OpenAI’s models to enhance its AI-powered services, but the two organizations have different goals, business models, and approaches to AI.
Stock Investing for Beginners
Step 1: Have you opened a brokerage account? If you're trying to decide where to obtain one you can assess whether the firm provides products and services to meet your needs (e.g. educational resources). Other considerations can include evaluating the ease of navigating the brokerage platform, especially if you intend to use a mobile device.
Step 2: What stocks do you want to buy? Will you embrace a long-term approach with a buy-and-hold strategy or seek portfolio diversification by spreading your investments across multiple stocks?
Step 3: How many shares will you buy? One way to decide is to first practice investing through paper trading, a stock market simulator to help with the initial experience.
Step 4: What type of order will you use to buy stocks to help meet your investment goals? You may consider market orders, limit orders, and stop orders.
Step 5: Are you ready to place the stock order with your brokerage? Keep in mind the order type, share quantity, and any relevant parameters (e.g., order duration). You should review and confirm the order details, then its order execution status.
Step 6: Ready to build and optimize your portfolio? If so, you may want to define your financial goals, risk tolerance, and investment horizon; spread investments across various asset classes, including stocks, bonds, and potentially alternative investments, based on your risk tolerance.
Step 7: When will you sell your stocks? Keep in mind both short-term market fluctuations and long-term goals. Consider selling if there are negative changes in the company's fundamentals, such as declining earnings or shifts in industry trends. Reassess your position if the stock hits your profit target or if the original investment thesis no longer applies.
FAQs about AI-related companies through OpenAI
Is OpenAI expected to launch an Initial Public Offering (IPO)?
As of now, OpenAI has not announced any plans to launch an IPO. However, there have been ongoing discussions and speculation regarding the possibility of an IPO in the future.
Is OpenAI profitable?/Does OpenAI make a profit?
OpenAI is not yet profitable but it has revenue sources, including from its chatbot. Its profitability remains uncertain, but it has significant funding.
Can I buy ChatGPT stock?
No, OpenAI is not a publicly-traded company and it is not listed on any stock exchange. You cannot buy OpenAI stock; its shares are not publicly available for trading.
