Artificial intelligence (AI) has entered the public consciousness almost as fast as ChatGPT can rattle off a Shakespearean sonnet. Its disruptive potential is clear for all to see. But which FTSE 100 stocks could benefit if AI really is about to change the world?
The immense opportunity
Before turning to stocks, I’m going to consider a couple of opinions in order to gain a sense of the potential here.
First, Alphabet CEO Sundar Pichai has said that he thinks AI is “the most profound technology humanity is working on. More profound than fire, electricity, or anything that we have done in the past“.
This is a view echoed by many other tech leaders, including Nvidia‘s CEO Jensen Huang. He’s predicting that the world is entering a “new computing era”.
Meanwhile, AI could contribute up to $15.7trn to the global economy by 2030, according to PwC. If so, that would be more than the current output of China and India combined.
While it’s too early to tell how all this plays out, it seems to me that AI is emerging as the defining technology of our age. Indeed, some smart investors even think Google’s search empire could be under threat.
FTSE 100 stocks to benefit?
Many people understandably associate AI with the likes of Nvidia, Microsoft, and Alphabet — all listed on the Nasdaq. But there are a handful of FTSE 100 companies that are already harnessing the technology.
One example is credit report giant Experian, which uses AI analytics to automate data analysis. It parses the information to identify patterns and provide optimal decisions. These AI analytics solutions already serve many industries, including healthcare, mortgage, and telecommunications.
The company has developed a wide economic moat through the vast quantity of data it possesses. More powerful AI could further cement this competitive advantage, though its pricey stock valuation seems to reflect this possiblity.
Another company that leverages AI is online grocer Ocado. As the firm notes: “We use AI to make possible in seconds what even many thousands of humans working together can’t“.
For instance, its automated warehouses have armies of robots directed by an AI-powered system that makes hundreds of decisions a second on where to send the bots. A 50-item order can be picked in five minutes compared to over an hour in a physical store.
Ocado hopes to one day use this cost advantage to lower grocery prices and gain market share for its partners. However, it remains loss-making and there’s a risk it may never turn a regular profit.
Safety in numbers
One way to gain broad exposure to companies at the forefront of AI is through Scottish Mortgage Investment Trust. Here are some of its investments in the space.
| Stock | Business |
| ASML | Dominant provider of lithography machines needed to print advanced microchips |
| Tesla | Harnessing AI to develop self-driving vehicles |
| Nvidia | Designs graphics processing units (GPUs) needed for generative AI |
| Tempus Labs | Uses AI to help healthcare professionals better diagnose and treat cancer and other diseases |
| Recursion Pharmaceuticals | AI-powered drug discovery |
Of course, many of these stocks backed by Scottish Mortgage could ultimately fail to deliver on their promise. That’s why I think building a diversified portfolio (with both individual stocks and funds) remains as important as ever.
