How To Invest In ChatGPT – Forbes Advisor UK – Forbes
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Published: Aug 14, 2023, 12:40pm
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ChatGPT is an artificial intelligence (AI) chatbot that aims to mimic natural dialogue, using billions of datasets to provide answers to specific questions.
Developed by OpenAI in partnership with Microsoft, ChatGPT launched to great fanfare in late 2022, setting a new record as the fastest-growing app to reach 100 million users. In response, Google accelerated the roll-out of its rival chatbot Bard to a rather more muted reception.
Since then, ChatGPT has gone from strength to strength among individuals and companies alike. It’s estimated that the chatbot attracts 1.8 billion visitors a month and early adopters include Coca-Cola, Slack Technologies and Shopify.
The transformational potential of ChatGPT, and AI in general, has also attracted the attention of investors looking to capitalise on the high-growth market. However, it can be challenging to pick the likely winners of the AI chatbot race, not least as there are few publicly traded AI-only companies.
To help investors navigate the options on offer, we asked our panel of experts for their views on how to invest in ChatGPT.
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ChatGPT is a language-based model developed by privately-owned developer OpenAI. It’s designed to generate conversational, human-like responses to questions or prompts.
ChatGPT ‘scrapes’ various sources of data on the internet to provide the required information, including books, articles, websites and other text. However, it does not provide real-time information as the latest cut-off for its source data was in 2021.
Some of the primary uses of ChatGPT include:
ChatGPT is free for private and commercial use, with users having the option to upgrade to paid-for premium plans to access additional features and functionality.
The market for generative AI – that which can produce text, imagery and other forms of media such as voice – is forecast to hit more than £1 trillion by 2032, according to Bloomberg Intelligence. ChatGPT, along with other chatbots, is at the heart of this AI revolution.
According to consultants McKinsey, the adoption of language-based AI tools has soared over the last few years to become the third-most used AI capability by companies. Businesses have been attracted by the potential of chatbots to streamline productivity, cut costs and provide round-the-clock support and engagement with customers.
Indeed, a recent survey by research firm iResearch revealed that 70% of US and UK business leaders believe ChatGPT will be as revolutionary to companies as Microsoft Excel.
As a result, the vast potential of ChatGPT and other chatbots has fuelled considerable interest from investors.
Hyun Ho Sohn, manager of the Fidelity Global Technology Fund, says: “AI is not new and has been used in many areas for some time. However, ChatGPT and other large language models are new and an important breakthrough.
“More importantly, this has made people believe in an inflexion in AI technology and a massive investment opportunity ahead, similar in some respects to the sentiment around the then emerging internet in the 1990s.”
John Moore, investment manager at RBC Brewin Dolphin, adds: “With plentiful headlines and initial enthusiasm for AI, it is little wonder that Microsoft, Alphabet and NVIDIA form part of the ‘Super 8’ that has been driving the S&P 500 in the year to date.”
One of the main drawbacks of investing in ChatGPT is the lack of publicly traded, pure play companies in this sphere. OpenAI, the architect of ChatGPT, is privately-owned and the only direct play is through its partnership with Microsoft.
Investor interest in AI has also driven up share prices, with companies such as Microsoft and Alphabet benefitting from a significant uptick in valuations this year. But there is a risk that investor hype creates asset ‘bubbles’ as share prices rise above their core fundamentals.
Fidelity’s Mr Sohn says: “It is important to remain cautious – or perhaps realistic. Every technology company seems to be pitching an AI angle.
“While some stand to make tangible near term gains from AI, most firms seem to be trying to promote AI-related products, with limited and likely near-term customer traction. For now, companies are having to spend to support AI rollout.”
There are a number of ways to invest in ChatGPT, both directly and indirectly.
Shareholder returns are sourced from Morningstar Direct based on cumulative total returns in pounds sterling. Fund returns are sourced from the fund manager and Trustnet.
Microsoft offers the only means of investing directly in ChatGPT, through its multi-billion dollar partnership with developer OpenAI.
Beyond this partnership, Microsoft has a significant presence in natural language processing and AI, incorporating conversational capabilities into various applications.
These include the Azure Bot Service, which allows businesses to create intelligent chatbots using Microsoft technologies, and Azure Cognitive Services to assist developers of natural language processing and translation tools.
Brewin Dolphin’s Mr Moore says: “Microsoft has what many view as ‘first mover’ advantage and indeed, in the early discussions about ChatGPT, the theory was that this might displace the position that Google, part of Alphabet, had in search functions and wider.”
Microsoft has delivered a five-year return of almost 220%, together with a one-year return of 12% after its share price dipped in 2022.
Read More: How to buy Microsoft shares
Alphabet, parent of the Google products, has also invested heavily in its rival chatbot product, Bard. Unfortunately its initial product demonstration had a mixed reception after Bard answered a question incorrectly, wiping $100 billion off the value of the company.
Despite its slow start, Bard’s popularity has grown, with the chatbot now boasting more than 140 million visits a month. Competition with ChatGPT is also hotting up, after Alphabet rolled out Bard to European users last month.
Alex Campbell, head of communications at Freetrade, comments: “Alphabet has been at the cutting edge of AI research and development since its acquisition of British start-up DeepMind in 2014.
“The company and its so-called ‘moonshot’ unit, X, have transformed areas of AI including computer vision, deep learning, image and speech recognition. With the recent hype turning to AI developments at competitors, it’s likely that we’re going to see more to come from the search behemoth.”
Brewin Dolphin’s Mr Moore adds: “It now seems that Alphabet has a suite of AI tools with deep knowledge of data which make it arguably as well-placed as Microsoft.”
Shareholders in Alphabet have enjoyed a five-year total return of just over 110%, although it’s delivered a more muted return of 7% over the last year.
Read More: How to buy Alphabet/Google shares
Semiconductor manufacturer NVIDIA is an indirect play, making the graphic processing units (GPUs) that power ChatGPT and other AI tools. It’s been reported that a ‘mere’ 10,000 NVIDIA chips were used to train the ChatGPT chatbot.
Mr Moore says: “Nvidia is seen as the ‘picks and shovels’ play on AI given its position in graphic processing units.
“Apple has shown the power of its operating system in excluding other operators from data analytics in recent times and NVIDIA offers a platform that is so deeply rooted in many people’s daily lives, it too seems well-placed.”
Freetrade’s Dr Campbell adds: “Less known is NVIDIA’s work in designing specialist products and technologies aimed at accelerating AI and machine learning.
“These include a parallel computing platform that gives developers access to NVIDIA GPUs and a collection of tools and libraries that help developers build and deploy deep learning models.
NVIDIA has rewarded shareholders with some stellar gains, delivering a five-year return of more than 600% and a return of 140% in the last year alone.
Read More: How to buy NVIDIA shares
This investment trust provides investors with a diversified global portfolio of technology companies, focusing mainly on large-cap, US stocks.
Around a quarter of the fund is invested in Microsoft, Alphabet and NVIDIA, making it a proxy play on language-based tools such as ChatGPT.
Mr Moore says: “Ben Rogoff is one of the most experienced technology managers in the city, and the Polar Cap Technology trust blends large technology ‘winners’ (such as the names mentioned above) with smaller innovative operators and newer entrants.”
It’s achieved a five-year total return of 75%, including a return of 19% in the last year. It’s currently trading at a discount of over 10% to its net asset value and has an annual charge of 0.84%.
This fund invests in companies engaged in AI, either through research and development, service provision or adoption. It can invest globally and holds a concentrated portfolio of around 40 companies.
The fund provides indirect exposure to language-based AI tools, with the top three holdings being NVIDIA, Microsoft and Alphabet. Although two-thirds of the fund is invested in the US, it also has significant holdings in Japan and China.
Mr Moore says: “This AI fund that not only considers the tech side of things but the wider beneficiaries; Deere’s ability to bring meaningful improvements to farming and RELX’s deep legal database which may offer more efficient delivery and better decision-making options for legal and medical practitioners.”
The fund has delivered a five-year return of almost 100%, including a 15% return in the last year, and has a competitive annual charge figure of 0.50%.
Given that mega-cap Microsoft, Alphabet and NVIDIA dominate US stock market indices such as the S&P 500 and Nasdaq 100, another low-cost option is to invest via an index-tracking fund.
To help with this, we’ve created a guide to our pick of the best S&P 500 index funds.
In terms of the broader AI market, we’ve also produced guides on how to invest in AI funds and our pick of the best AI stocks and shares. However, because of the nature of the stock market and investing in general, investment in AI companies should only form a small part of a diversified investment portfolio.
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Having worked in investment banking for over 20 years, I have turned my skills and experience to writing about all areas of personal finance. My aim is to help people develop the confidence and knowledge to take control of their own finances.
I am the UK editor for Forbes Advisor. I have been writing about all aspects of household finance for over 30 years, aiming to provide information that will help readers make good choices with their money. The financial world can be complex and challenging, so I’m always striving to make it as accessible, manageable and rewarding as possible.
