With the buzz surrounding Nvidia and Meta it can sometimes seem that artificial intelligence (AI) stocks are an American thing. But there are quite a few UK shares that offer investors exposure to AI in one way or another.
Here, I outline a couple of possible approaches an investor could adopt when hunting for shares.
Buying into the US indirectly
One approach would be to buy shares in UK investment trusts that hold stakes in US giants. As an example, Scottish Mortgage Investment Trust holds Nvidia shares.
In fact, the chipmaker was the trust’s fifth biggest holding at the end of last month, accounting for around 4% of its overall valuation. It also owns a sizeable stake in rival chipmaker ASML.
Scottish Mortgage’s tech focus means its holdings are not just limited to chip manufacturers. For example, it also has a stake in Tempus AI. That firm uses AI to help healthcare professionals diagnose and treat diseases including cancer.
I am a bit burnt on that score having had high hopes for a similar investment in a different firm that has turned out to be one of my worst investments in recent years.
If I had invested in Scottish Mortgage instead of buying individual UK shares that I felt had a good AI investment case, I could have benefitted from the trust’s expert managers and also a level of diversification it is hard for me to achieve as a private investor on a small budget.
FTSE 100 member Scottish Mortgage is only one of a number of London-listed investment trusts that own US AI shares. In the FTSE 250, for example, Polar Capital Technology Trust ended last year with Nvidia as its biggest holding.
Looking for individual UK shares
What about individual UK shares not investment trusts? Some may be AI-focused but there are others where the technology potentially offers cost savings as part of an existing business model, from pharma giants like AstraZeneca to digital information providers such as RELX.
The ins and outs of AI feel a bit beyond my own circle of competence as an investor. But I need not rule out any AI-related shares.
Take Computacenter (LSE: CCC) as an example. It provides IT equipment and services to a wide range of commercial clients across multiple markets. That sounds like a business set to benefit from AI spending, in my view.
In a trading update Tuesday (28 January), the company did not focus on AI, but did say: “Order intake during the second half, notably in North America, has been strong”. As it noted at the interim results point last September, “we are increasingly seeing a need for comprehensive advice on the use of AI in general and AI-related infrastructure”.
Computacenter faces some risks too. Yesterday’s statement revealed that sales revenues fell last year once exchange rate movements are taken into account. It also highlighted the risks to this year’s performance posed by “uncertain macroeconomic and political environments in some of the European countries in which we operate”.
Still, with a proven business model, large customer base and deep industry knowledge, I think the investment case has a lot of strengths. The price-to-earnings ratio of 15 looks reasonable. I think UK investors on the hunt for AI shares ought to consider Computacenter.
