The idea of artificial intelligence (AI) is nothing new. British mathematician Alan Turing was discussing the concept of machine intelligence in 1950. But what’s new is the subcategory of generative AI, whose rapid growth shows no sign of slowing. And believe it or not, some FTSE 100 shares give exposure to the trend.
According to Bloomberg Intelligence, generative AI is poised to become a $1.3trn market by 2032 as it boosts sales for hardware, software, and services.
So, let’s take a look at three different ways I could invest in this revolutionary technology via the FTSE 100.
Data companies
Large language models (LLMs), such as ChatGPT and Google’s Gemini, require vast amounts of data for both training and inference. This is essential for LLMs to understand language and generate responses.
The quality and quantity of the data significantly impact the performance and capabilities of LLMs.
In other words, companies that already have huge amounts of proprietary data are ahead of the curve when it comes to generative AI models.
Fortunately, there’s a cohort of exceptional FTSE 100 data companies to choose from. These include London Stock Exchange Group, credit bureau Experian, software firm Sage, and data analytics giant RELX.
Experian holds credit data on 1.4bn individuals and 191m firms across the world. Its CEO says it has more opportunities than it knows what to do with in terms of creating new services from this data.
All four firms are investing heavily in AI products. Perhaps unsurprisingly, none of the stocks are cheap today, which adds risk. But all look set to benefit from the generative AI boom.
Picks and shovels
A second but less direct way of investing in AI could be through Ashtead Group (LSE: AHT).
This is the second largest equipment rental firm in the US. So we’re talking diggers, generators, scaffolding, cranes, and tools. But what on earth has that got to do with AI?
Well, the technology requires a lot of advanced chips. And the US is experiencing a resurgence in domestic chip manufacturing with new state-of-the-art semiconductor plants (or fabs) being built.
Taiwan Semiconductor was just awarded $6.6bn from the US government towards a third fab in Arizona. This will produce the most advanced semiconductors in the US, bringing the chipmaker’s total investment in Arizona to over $65bn.
Meanwhile, Intel is building multiple fabs and Samsung has just received a government grant of up to $6.4bn, taking the South Korean’s tech giant’s investment in Texas above $40bn.
While this construction bonanza is a huge opportunity for Ashtead, the stock could take a hit if the US entered a recession, even though federal spending is already guaranteed.
I bought more Ashtead shares last month.
Ready-made portfolio
Finally, investors could consider Scottish Mortgage Investment Trust. This is one of my largest holdings and gives me substantial AI exposure through top holdings like Nvidia, Amazon and ASML.
It also holds TikTok parent ByteDance, a private company. One of its subsidiaries owns Gauth AI, a wildly popular app that uses generative AI to help schoolchildren do their homework. It’s now the second-most downloaded education app in the US behind Duolingo.
Scottish Mortgage shares can be volatile, but the trust’s portfolio contains the crème de la crème of AI-related stocks.
