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3 ASX shares for exposure to the artificial intelligence industry

Kate O'Brien
PCB circuit technology

According to market research, the artificial intelligence (AI) market was valued at US$16.06 billion in 2017 and is expected to reach US$190.61 billion by 2025, with a compound annual growth rate of 36.6%.

Investing in AI is a form of thematic investing; that is, gaining exposure to a niche that is expected to grow significantly over time.

What is artificial intelligence? 

AI refers to intelligence demonstrated by machines. It is a wide-ranging branch of computer science focused on building smart machines capable of performing tasks that have typically required human intelligence. AI makes it possible for machines to learn from experience, adjust to new inputs, and perform tasks that previously required human input. 

How is artificial intelligence used? 

Advances in machine learning, deep learning, and natural language processing have enabled rapid advances in AI over the last decade. Examples include smart assistants such as Siri and Alexa, song and TV show recommendations from Spotify and Netflix, and spam filters on email. AI is also used to provide 24/7 customer service via chatbots, to write news stories, and in self-driving cars.

Here are 3 ASX shares involved in the AI sector. 

Appen Ltd (ASX: APX)

Appen provides data for use in machine learning and AI. It collects and labels images, text, speech, audio, and video data used to build and improve artificial intelligence systems at some of the world’s biggest tech companies. 

Appen listed on the ASX in 2015 and has grown exponentially since then. Total profit for the year ended 31 December 2014 was $1.615 million. Total profit for the year ended 31 December 2018 was $49 million. Appen’s share price has increased from 56 cents in early 2015 to more than $24 currently. 

Brainchip Holdings Ltd (ASX: BRN)

Brainchip is a provider of neuromorphic computing solutions, a type of AI inspired by the biology of the human neuron. In 2018, Brainchip announced the release of the Akida Neuromorphic System-On-Chip. The Akida is small, low cost, and low power, making it well suited for applications such as autonomous vehicles, drones, and machine vision systems. 

The Akida IP was released for sale as a license in mid 2019 and has received a positive response from customers. Brainchip has some revenues, however these are currently not sufficient to cover its expenses for R&D, marketing, etcetera. The company ended the September 2019 quarter with US$9.5 million in cash. Significant reductions in planned expenses in 2020 have been initiated. 

ETF Securities Global Robotics and Automation ETF (ASX: ROBO) 

This ETF tracks the ROBO Global Robotics and Automation Index. The Index is made up of shares in companies in the global value chain of robotics, automation, and artificial intelligence. The ETF has provided returns of 29.50% in the year to 31 December. 

Management fees are 0.69% per annum and distributions are made annually. The ETF has 91 holdings spread across 13 countries with a weighted price-to-earnings ratio of 30.7. 

Foolish takeaway 

The AI industry will only grow over the coming years. Whether that means Brainchip and Appen will also grow remains to be seen. In my view, the least risky choice of the 3 is likely ROBO, given the diversification it provides. 

The post 3 ASX shares for exposure to the artificial intelligence industry appeared first on Motley Fool Australia.

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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2020