How to invest in ChatGPT and AI? Stocks and ETFs [Guide]

Chat GPT has been all the rage in recent months. The debut of this popular chatbot took place on November 30, 2022. In just 5 days, ChatGPT had a million users. In comparison, Instagram needed 2,5 months to acquire a similar number of users. In turn, Facebook needed "as much as" 10 months to dial a similar number. So we can say that it is a global phenomenon. In today's article, we will briefly characterize the chatbot and answer the question how to invest in ChatGPT and artificial intelligence.

What is and how ChatGPT works

ChatGPT uses machine learning called RLHF (reinforcement learning form human feedback). The chatbot, thanks to the use of RLHF, is able to conduct a conversation close to the natural form with a human. ChatGPT learned languages ​​through texts published on the Internet (online encyclopedias, books, scientific periodicals, blogs). Based on this data, the chatbot can answer questions. There is a downside to this solution here. ChatGPT may therefore make mistakes for now, which will be the reason for generating memes about the chatbot. Based on the success of ChatGPT, GPT-4 is currently being developed and is expected to be ready in 2023. The creator of ChatGPT is OpenAI.

OpenAI was founded in 2015 by Sam Altman. In addition, the project has been invested by real tycoons of the world of business and modern technologies: Elon Musk, Peter Thiel did the co-founder of LinkedIn: Reid Hoffman. In 2018, Elon Musk left the Board of Directors in 2018 to focus on growing the company Tesla. Despite this, Elon Musk admires the achievements of ChatGPT, as can be seen in the comment below:

source: twitter.com

Since 2019, Microsoft has invested $3 billion in OpenAI. However, at the end of January 2023, Microsoft announced that it wanted to invest another $10 billion in the project. Therefore, one of the largest technology companies in the world sees great potential in this technology. For the time being, OpenAI needs a constant "supply" of cash to finance the huge expenses related to the operation of the chatbot. Currently generated revenues do not cover expenses. For this reason, the "salvation" for OpenAi is Microsoft and its deep pockets. The creator of Windows is the largest shareholder (nearly half of the shares) and has a privileged share of profits through OpenAI.

Although ChatGPT is not a perfect solution, the potential of this solution is very large. Google, which earns a fortune from the advertising business on the Internet, felt threatened. Chat allows you to conduct conversations with the user. You can also ask him questions or ask him to prepare ready-made solutions to the questions asked. ChatGPT also allows you to write code in some programming languages, compose music, cartoons or essays. The potential of this solution is very large. At the end of January 2023, ChatGPT passed the MBA exam at Wharton University in Pennsylvania.

ChatGPT - Google killer?

Many commentators believe that the OpenAI solution may be the "killer" of Alphabet's business model. Search engines have been the main source of obtaining knowledge from the Internet for many years. People use search engines to find the information they are looking for. This may be data needed to prepare an analysis or searching for the latest news from the world. By entering a given phrase into the search engine, Google tries to send the most qualitative links, which are then selected by the user. Advertising is the main revenue generator for Alphabet. Thanks to the acquired traffic, it is able to target customers well and place more relevant ads than the competition. Google's algorithms increase the effectiveness of advertising, which allows you to maintain high shares in the online advertising market. This Google business model can be severely undermined.

Using ChatGPT, the user asks a question and then receives a ready-made answer. Thanks to this, he does not have to browse through many links and read, analyze and process data. It will do everything for the Chat user. Of course, this is not a perfect solution yet. The Internet is currently flooded with information as ChatGPT is unable to generate correct data. However, in the future, the chatbot may be much more perfect. Thanks to learning from interactions with chat users, he will improve and provide content of ever higher quality. It is possible that some users will prefer to use a chatbot rather than search for information on the Internet on their own.

For now, ChatGPT is completely free for most. However, there are plans to monetize this solution. For now, the company expects to reach $200 million in revenue in 2023 and around $1 billion in 2024. In addition to this, ChatGPT is now being used by some software companies for software development. OpenAI charges you for the words it generates. Brad Smith himself believes that the progress made by AI is faster than many expected. According to him, the solutions that will appear in 2023 were not expected in the current decade. We'll see how prophetic his words will be. OpenAI's current valuation exceeds $20 billion, but if the company takes some of Google's advertising market, its value could be much higher.

OpenAI is not a “toy company”. Currently, he works with really serious companies. An example is CarMaxthat uses OpenAi to summarize thousands of customer reviews to improve marketing services.

For now, ChatGPT is a testing tool that collects "free" tests from users. Thanks to this, the final product should be even better. Of course, the question of how the project is to make money remains open. For now, despite interesting solutions, ChatGPT is still a fledgling solution. However, keep in mind that any new technology is inefficient at first. Let's take the Internet as an example, which was a slow solution in the initial phase. Nowadays it is hard to imagine life without the Internet.

When thinking about ChatGPT, don't miss the whole AI market

Algorithms are more widespread than you might think. The increase in computing power of computers and the expansion of the Data Center offer, which enable calculations "in the cloud", help. Algorithms not only match ads so as to interest the user to “click” on it. Algorithms also include matching suggestions for displaying videos on Youtube or short videos on to TikTok. Advanced algorithms are also used by Uber to optimize arrival time and travel cost.

The dynamic development of algorithms allows you to replace human work with the use of lines of code. On the one hand, it increases productivity in the economy, on the other hand, it puts pressure on the labor market. Less skilled workers will have to retrain. The current wave of automation will be increasingly concerned "white collars". Some simple office work will be replaced by algorithms.

related market "artificial intelligence" is developing very dynamically. Forecasts indicate a very dynamic growth in this segment of the economy. According to the Precedence Research analysis, the AI ​​market will grow at an average rate of 2030% per year until 38. Its value will exceed $ 1 billion by 500. Of course, this does not mean that the current companies operating in this segment will grow so fast. However, there will certainly be companies on the stock exchange that have achieved a spectacular increase in value. An investor can therefore think about creating an exposure to this “hot” segment of the stock market.

How to invest in ChatGPT and AI?

The development of artificial intelligence will mean that many professions will have to adapt to the new rules of games. On the other hand, many simple, repetitive activities can be replaced by communication with devices as good or even better than ChatGPT. This will increase the productivity of the economy. For investors, this is an opportunity to join the trend that will be the “internet” of our time. Just like during dotcom bubblescompanies that will want to take advantage of the growing popularity of AI solutions will spring up like mushrooms after the rain. Some of them, apart from catchy slogans, will not offer real products. Others will be disruptors in some areas of the economy.

We may be on the verge of another revolution. It is worth considering how you can invest in ChatGPT. For the time being, the company is not listed on the public market. However, that doesn't mean you can't have ChatGPT in your wallet. The easiest way is to buy Microsoft shares. Another idea is to invest in companies operating in the artificial intelligence segment. This is possible both in individual companies and ETFs exposure to this market.

Companies - a whole range of possibilities

Currently, more and more companies operating in the AI ​​industry are emerging. Many of them have no problem with obtaining really large financing. An example can be Cohere, which raised $125 million in funding from Tiger Global, and Adept, which raised $65 million last year. Another example is AI stability, which raised over $100 million in August 2022. Many of the more mature companies in the AI ​​industry are also looking for capital on the stock market. Below we present selected companies dealing at least in part with activities related to artificial intelligence. However, this is not a recommendation, but an attempt to show how different the business models of companies in this industry can be.

Microsoft

It is one of the largest players in the cloud market in the world. Except that, Microsoft owns 49% of OpenAI (creators of ChatGPT). MSFT is also entitled to 75% of OpenAI's profits until Microsoft recoups its investment. By the end of March 2023, Microsoft plans to power the Bing search engine with the engine used by ChatGPT. In addition, Microsoft has an offer of operating systems and applications used by business and individual customers (Windows, Office, Skype, Outlook or Microsoft Teams operating systems). The company also has a segment related to databases (Microsoft SQL Server). A side activity is LinkedIn or GitHub. It is also worth looking at the gaming segment, which includes Xbox consoles and the Xbox Game Pass subscription segment.

Microsoft chart, interval W1. Source: xNUMX XTB.

Amazon

Amazon is one of the companies that allocates significant resources to the development of artificial intelligence. The company also has a fund that invests in AI and robotics solutions that can improve the efficiency of warehouse management. In addition, the algorithms developed by Amazon try to offer better recommendations based on customer behavior on the website. What's more, Alexa is a source of data acquisition in the field of communication with the user and improving the functioning of home automation. Of course, you can't forget about AWS, which offers cloud solutions. Although most of the company's activities are related to e-commerce, the company tries to diversify its activities also in the area of ​​advanced algorithms and automation. In addition, the company offers an Amazon Prime subscription, which allows for cheaper and faster delivery and additional services (e.g. streaming offer).

Amazon chart, W1 interval. Source: xNUMX XTB.

MetaPlatforms

The development of artificial intelligence will be helped by large data sets that contain human interactions with the environment or with other people. Social platforms have one of the largest collections of data. Number one in this field "in the West" is MetaPlatforms. It has the Facebook, Instagram and WhatsApp platforms. What's more, they invest heavily in the Metaverse (both software and hardware). The company also has a Meta AI lab, where artificial intelligence solutions are developed.

Meta chart, W1 interval. Source: xNUMX XTB.

A

Even though Google is mentioned as one of the "victims" of ChatGPT, it invests a lot in artificial intelligence solutions itself. Over the years, the company has been collecting data on people's online behavior to teach its algorithms to present more relevant ads. In addition, the search engine is constantly optimized to display more relevant pages. You can't forget about YouTube, which also analyzes user behavior. What's more, the company invests in a software development project for autonomous cars, which in the future may result in the creation of another business branch. The company also invests in projects related to artificial intelligence. An example is the purchase of shares in the startup Anthropic for $ 300 million. Anthropic was founded in 2021 when Dario Amodei left OpenAI due to differences in world views. Anthropic is developing its own chatbot called Claude, which is intended to rival ChatGPT.  In addition, Google is developing its own answer to ChatGPT - Bard AI. It is also worth remembering that Alphabet is the owner of DeepMind, a company that develops in the field of artificial intelligence.

Alphabet chart, interval W1. Source: xNUMX XTB.

C3ai.

It is a company operating in the artificial intelligence segment. Founded in 2009, the company offers its clients a platform that helps in the design, creation and development of AI-based applications. C3 AI also offers solutions to help improve operational efficiency. For example, C3 AI Customer Churn Management monitors customer satisfaction and is designed to prevent customers from leaving the competition. In turn, C3 AI Data Vision helps in visualization and understanding the relationships between individual data sets. The offer also includes software for optimizing supply chain management (C3 AI Supply Network Risk). In a nutshell, the company's activity is the use of advanced algorithms to increase the operational efficiency of its clients.

Chart C3ai., interval W1. Source: xNUMX XTB.

IBM

Although IBM is rather associated with a technological company "two eras ago", it is one of the companies constantly developing in the field of AI. IBM is the creator of the Watson supercomputer, which allows you to solve advanced problems. At the same time, the company's solutions in the field of AI allow for the optimization of the activities of companies from the healthcare sector or financial companies. It is worth mentioning, however, that not all projects were successful. In 2022, IBM stopped using the Watson computer to solve some healthcare problems. The reason was the disappointing "optimization" results. Despite this, over the next 10 years, the company wants to spend 20 billion on the development of supercomputers, AI software. Projects in the field of quantum computers are also to be developed.

IBM chart, interval W1. Source: xNUMX XTB.

Palantir Technologies

This is a company that presents itself as a company that analyzes data using artificial intelligence. A large part of the company's revenue comes from government contracts. The contractors are government units responsible for intelligence and defense of the country. Palantir also uses advanced algorithms to predict material demand, which allows it to optimize supply chains (e.g. for the army). Palantir also assists in anti-terrorism investigations. The company also offers plantir foundry, a platform that allows you to organize, manage and create a central system for managing distributed data. Additionally Palantir offers Apollo, i.e. software that allows customers to develop their own software.

Palantir Technologies chart, W1 interval. Source: xNUMX XTB.

Dynatrace Inc.

It is a company that monitors cloud infrastructure. The company's software analyzes over 368 billion events every second. He can quickly find problems in the client's digital ecosystem. The system is powered by advanced algorithms that increase the efficiency and reliability of the client's IT systems. Except that, the company scans the client's IT system in terms of application security. In addition to the sale of software, the company also deals with the implementation, consulting and training of the client's employees. Dynatrace sells its products directly or through business partners (e.g. resellers and system integrators).

Dynatrace Inc. chart, W1 interval. Source: xNUMX XTB.

ETFs - a shortcut

Of course, it is not possible to invest in ChatGPT through a specialized ETF. However, you can invest in an index fund that focuses on the artificial intelligence market. If an investor does not want to delve into the world of AI to pick out the “best companies”, he can buy an ETF that gives exposure to this market. The largest of them include:

• Global Robotics Artificial Intelligence ETF,
• ARK Autonomous Technology & Robotics ETF,
• iShares Robotics and Artificial Intelligence Multisector ETF.

Global Robotics Artificial Intelligence ETF

According to the assumption, the ETF invests in enterprises operating in the robotization and artificial intelligence sectors. The companies in which the fund invests are ultimately to be the beneficiaries of the progressing automation of both production processes and operating activities of non-production enterprises. According to data provided by Global X ETF, the fund has $1,5 billion in assets under management. The ETF itself was founded in 2016 and currently has 43 companies in its portfolio.  ETFs are not the cheapest. The annual management cost is currently 0,68% (TER). Costs that are too high for ETFs do not translate into rates of return. At the end of 2022, the average annual rate of return since the creation of the fund was 5,8%. Thus, it was a rate of return much lower than the broad market index and the benchmark, which is the Indxx Global Robotics & Artificial Intelligence Thematic Index (+6,3% CAGR). The biggest positions in this ETF are:

• Keyence Corp - 9,5%
• Nvidia Corp - 9,4%
• ABB Ltd - 9,1%
• Intuitive Surgical - 8,8%
• Fanuc Corp - 8,1%

ARK Autonomous Technology & Robotics ETF

According to the information contained on the ETF website, the fund focuses on investing in the autonomization of transport, robotics, automation of company operations, 3D printing, energy storage and space exploration. As you can see, this ETF does not only give exposure to companies specializing in the AI ​​sector. Instead, you get exposure to "fashionable and innovative" industries. At the end of 2022, the fund had approximately $800 million in assets under management. The ETF tries to actively manage its market position. As a result, the share of companies varies between 30 and 50. It is also not a cheap fund. The ETF charges an annual fee of 0,75%. ARK Autonomous Technology & Robotics ETF started operations on September 30, 2014. The average annual rate of return achieved by the ETF by the end of 2022 was 10,0%. At the same time S&P 500 index generated an average annual rate of return of 10,4%. The biggest positions in this ETF are:

• Tesla - 14,2%
• Trimble - 7,8%
• Kratos Defense & Security - 7,1%
• UiPath - 6,9%
• Iridium Communications - 6,7%

ARK Autonomous Technology & Robotics ETF chart, W1 interval. Source: xNUMX XTB.

iShares Robotics and Artificial Intelligence Multisector ETF

The aforementioned ETF also invests in companies from developed and developing markets that have a chance to take advantage of the trend of developing technologies related to robotics and artificial intelligence. As of February 12, 2023, the fund had $278 million in assets under management. The ETF has a very diversified portfolio of companies. The fund has exposure to 118 companies. The benchmark for the ETF is the NYSE FactSet Global Robotics and Artificial Intelligence Index. The fund itself charges an annual management fee of 0,47% (TER). The aforementioned ETF was established at the end of June 2018. Since its foundation, it has achieved an average annual rate of return of 2,67%. The biggest positions in this ETF are:

• IQIYI Ads Representing Inc,
• Meitu Inc,
• Hello Group ADR,
• Spotify Technology S.A.,
• Sumo Logic Inc.

Forex brokers offering ETFs and stocks

How to invest in ChatGPT or AI? Of course, the simplest option is to buy shares only, but for people who want to diversify and balance their portfolio well, investing whole ETFs will be a better choice. An increasing number of forex brokers have quite a wide range of stocks, ETFs and CFDs on these instruments. For example on XTB Today, we can find over 3500 companies and 400 ETFs, a Saxo Bank as many as 19 shares and approximately 000 ETFs.

Broker
End	Poland	Denmark	Cyprus
Number of exchanges on offer	16 exchanges	37 exchanges	21 exchanges
Number of shares in the offer	approx. 3500 - shares approx. 2000 - CFDs on stocks	19 - shares 8 - CFDs on stocks	3 - shares
The amount of ETF on offer	approx. 400 - ETF approx. 170 - CFDs on ETFs	3000 - ETF 675 - ETF CFDs	323 - ETF
Commission	0% commission up to EUR 100 turnover / month	according to the price list	0% commission*
Min. Deposit	PLN 0 (recommended min. PLN 2000 or USD 500, EUR)	PLN 0 / EUR 0 / USD 0	100 USD
Platform	xStation	SaxoTrader Pro Saxo Trader Go	EToro platform
	REVIEW	REVIEW	REVIEW
	CREATE AN ACCOUNT	CREATE AN ACCOUNT	CREATE AN ACCOUNT

*Zero commission means no brokerage/transaction fee was charged during the activity. However, they may still incur general fees, such as currency conversion fees for deposits and effects in non-USD currencies, fees for fees, and (if applicable) inactivity fees. Market spread also applies, although this is not a "fee" charged by eToro.

76% of retail investor accounts lose money when trading CFDs with this provider. Consider whether you can afford the high risk of losing your money.

Summation

ChatGPT is undoubtedly an interesting solution that shows the great possibilities of the (still fledgling!) "artificial intelligence"". Advanced algorithms can already do a lot and the potential lies in AI. Of course, most investors do not have enough knowledge to "predict" which company will be able to take advantage of the trend of automating the mental work of people. So there are three possibilities:

• play it safe
• buy at random,
• buy ETFs.

By choosing a safe game, the investor focuses on buying the largest technology companies that also invest in this area. We are talking about Microsoft, Amazon, Alphabet, Meta and Apple. Another solution is to acquire companies “shovel sales during the gold rush”. An example can be manufacturers of modern integrated circuits (TSMC, Intel).

Buying companies on “hit or miss” consists in selecting a few of the most promising (in the eyes of the investor) small and medium-sized companies that have a chance to become the largest companies in the world. The problem is that it is very difficult to predict which company will be successful. This can be compared to trying to predict which of the local car manufacturers in the United States in the late XNUMXth century will become a global corporation.

A much simpler solution seems to be the purchase of ETFs that give exposure to the AI ​​market. Thus, a "basket" of companies is bought, some of which will not be successful in a decade and others will generate an above-average rate of return for shareholders. Buying an ETF will allow for greater diversification, which will translate into lower risk.