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I reckon artificial intelligence (AI) is a 10-year investment theme at a minimum. Realistically, this technology – which is still in its infancy – is going to disrupt just about every industry in the world, from investing to plumbing. Now as a long-term investor, I want to capitalise on this megatrend. With that in mind, here’s how I’m positioning my Self-Invested Personal Pension (SIPP) for the AI era.
Diversified exposure to the theme
Within my SIPP today, I have quite a few different AI investments. Funds provide me with diversified exposure to the industry while individual stocks give me more targeted exposure.
In terms of funds, I’ve got a decent-sized holding in the Sanlam Global Artificial intelligence fund. A ‘pure play’ on AI, this aims to invest in both companies offering related solutions and businesses that are likely to benefit from the technology. Top holdings currently include Nvidia, Microsoft, Amazon, and Meta Platforms. These are all major players in the AI revolution.
I’ve also got a solid position in the Scottish Mortgage Investment Trust. This is an investment trust with a disruptive growth focus and it offers exposure to quite a lot of AI-related businesses. Currently, top holdings include Amazon, Meta, and Taiwan Semiconductor Manufacturing Co (TSMC). This trust also gives me exposure to some private companies in the space such as Databricks and Bytedance.
Additionally, I’ve got an investment in the Blue Whale Growth fund. This is a broader growth fund but it still provides plenty of exposure to the theme. For example, at the end of June, top holdings included Nvidia, Broadcom, and TSMCi. I’m confident that if AI continues to offer opportunities, Blue Whale will be well positioned to capitalise on them.
My AI stocks
Zooming in on my individual stocks, I’ve mainly invested in mega-cap AI stocks within my SIPP. My logic here is that these are a bit less risky than smaller tech companies (I don’t want to blow up my retirement portfolio).
Microsoft is one key position for me. As one of the world’s largest cloud computing companies, I think it’s well positioned to spearhead the AI revolution.
Nvidia is another. Its high-powered computer chips are what are powering the AI boom today.
I’ve also got a chunky position in Alphabet (NASDAQ: GOOG). The owner of Google, it’s a diversified tech company with a substantial cloud division.
A lot of people believe that this company will be disrupted by AI. And I tend to agree – the way we are searching for information is changing rapidly.
However, I think that Alphabet has the ability to navigate the changing search landscape and prosper in the long run. Not only does it have its own generative AI technology (Gemini) but it also has AI mode on Google, AI services across its cloud division, self-driving taxis, and more.
Meanwhile, I don’t expect Google search to die instantly. There will be plenty of people who continue to use this to get around the web and shop online in the years ahead.
It’s worth noting that this stock trades at an attractive valuation today. Currently, the forward-looking price-to-earnings (P/E) ratio is only 19.
I think it’s worth considering at that valuation. Business model disruption is a risk, as I said, but all things considered, I see a lot of investment potential.
