Artificial Intelligence (“AI”) is an exciting new area of business development.  It involves both hardware (physical computers) and software (programming code) to run on computers, and new ideas about how they should be used.

But for an investor, are there AI stocks to consider buying?  Are there opportunities to get in on the ground floor?

It is arguable that the term “ground floor” is applicable just yet for the young Artificial Intelligence industry.  A better term might be that they are still building the foundation; they are not up to the ground floor just yet.

The programming of Artificial Intelligence techniques has been a small part of the Computer Science curriculum for more than fifty years.  But only recently has the application of AI techniques to real-world applications become feasible.  

One article reports that a student at Stanford University with a Ph.D. has a “test lab” for “training” AI “models”.  Stanford has always had one of the best Computer Science degree programs in the U.S.  

Even though that student only has an AI testing system for sale and not an AI system itself, just having a test lab has been enough for venture capitalists to back him – i.e., willing to provide the money to make it possible for him to develop, advertise, and promote his test lab.

If the terms sound rather vague and their meaning is not entirely clear, take that as a hint for you as an investor:  the field is still being defined.  

Venture capitalists can afford to buy in – to add a small company to their portfolio of investments, in exchange for a stake in the new company in hopes of a big payoff.  That investment mandates that they can (and will) financially advise the recipient – i.e., act as a major stockholder.  Their involvement includes far more control than you as an investor would have.  

Venture capitalists are involving themselves in the earliest phases of a company’s life.  The caveats for them are somewhat like those for an investor buying stock at the time of an Initial Public Offering (IPO).  See the Investors Column articles on IPOs in the September 2021 and January 2023 issues of the Sentinel (available on line).  However, that is balanced somewhat by the power and control their financial role gives them – something not available for those buying stock in an IPO.

Even so, most of the AI companies now being formed should be expected to be unsuccessful, and fall by the wayside.  Fifty years ago, Apple sold its first computer – a kit for hobbyists.  Microsoft would not appear until five years later, as a result of a contract between Bill Gates and IBM.  IBM at that time was still the megalith monster that dominated the computing industry.  The seismic changes that followed could never have been anticipated, and the future landscape of the AI industry is just as clouded.  

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