If you're looking for a broader approach to a generative AI ETF, the iShares Future AI & Tech ETF (NYSEMKT:ARTY) could be a good option. This ETF holds 48 stocks and is one of the largest ETFs focusing on AI.
Potential benefits and risks of investing in ChatGPT-related stocks
ChatGPT and OpenAI continue to be in the driver's seat of the AI boom, as OpenAI is now valued at $840 billion. Naturally, there are benefits and risks to investing in such a juggernaut.
Benefits
- ChatGPT remains the leading AI chatbot company, and OpenAI is the most influential AI start-up.
- ChatGPT is likely to continue improving and adding more users.
- OpenAI is innovating in other ways, including through a text-to-video platform, Sora.
- There is still a lot of room for growth in the chat platform.
Potential risks
- A bubble could be forming in AI.
- ChatGPT competitors innovating quicker and stealing market share.
- OpenAI is still unprofitable.
- The company is spending massive amounts on capital expenditures.
- It's unclear how much revenue ChatGPT and related products can generate.
Factors to consider before investing in ChatGPT-related stocks
If you're considering investing in ChatGPT-related stocks, there are some things you should consider first.
- The relationship: You should think about how the company you're investing in is working with OpenAI. Are their interests directly aligned, or is there a chance of them competing with each other? For example, there's been tension between OpenAI and Microsoft, even though the two companies remain partners and Microsoft owns 27% of OpenAI.
- Exposure: To what extent is the stock exposed to ChatGPT's growth? Some stocks, like Nvidia, are more closely connected to it than others. Nvidia benefits from the overall growth in AI, and OpenAI's success contributes to that.
- ChatGPT's strength: ChatGPT and OpenAI remain a juggernaut, but lately, the company has been losing market share to rival Anthropic, especially after OpenAI agreed to work with the Pentagon when Anthropic said it violated its rules. That's led to a surge in downloads for Anthropic, and its Claude chatbot has been getting attention for its Code and Cowork products. There are only a few major players in chatbots, but that doesn't guarantee that ChatGPT will be the long-term winner.
OpenAI criticisms and lawsuits
OpenAI has faced lawsuits and criticism related to how it trained ChatGPT, particularly around the use of copyrighted material. Major publishers, including The New York Times (NYT -1.71%), have accused OpenAI and Microsoft of using proprietary content without permission.
There are also concerns about:
- AI hallucinations and misinformation
- Energy usage and data center expansion
- Long-term societal and economic impacts
These issues could affect both OpenAI and the companies tied to its growth.
Should you invest in ChatGPT-related stocks?
While you can't invest in ChatGPT directly, the ideas below can help you determine whether you should invest in stocks that have exposure to it.
- ChatGPT is still less than three years old, and it has a lot of disruptive potential.
- Some AI stocks, like C3.ai (AI +0.36%), have flopped.
- Microsoft is one of the most stable ways to get exposure to ChatGPT.
- Nvidia should benefit from increased demand for computing power.
- Arm is also well-positioned due to its power-efficient CPUs.
- Investing in a group of stocks is a good way to get balanced exposure to ChatGPT.
- An AI ETF could be another good option.
- Any new technology comes with risk, but there's a lot of upside potential in generative AI.
