Click here to get this post in PDF
For investors with a taste for technology, AI companies can be tempting. Artificial intelligence is a highly disruptive innovation, which means those developing the technology have the potential to deliver higher-than-average returns. However, AI stocks have also exhibited higher-than-average volatility in recent months, indicating that the sector has not yet matured to a point where it can be completely trusted as a sound investment.
Still, there are companies that seem to offer excellent opportunities. OpenAI, the private research laboratory behind the wildly popular ChatGPT, is one of those companies.
“No company can claim to have done as much to advance the field of AI as OpenAI,” says Robert Hodgins, Fund Manager at Sand Hill Road Technologies Fund. “Those who invest in OpenAI are backing a leader in cutting-edge AI technology and stand to benefit from the innovative advancements it brings to the marketplace. It’s definitely a top AI company to invest in.”
Hodgins’ keen eye for technological innovation has allowed him to help investors identify and nurture high-growth potential within the technology sector. His role at Sand Hill Road Technologies Fund involves overseeing late-stage investments, ensuring the fund’s portfolio is robust and poised for substantial returns. His strategic acumen has been instrumental in guiding the fund’s investment decisions, focusing on companies that are on the cusp of significant growth milestones.
“The business world is adopting AI-driven solutions at a rapid rate, with 83 percent of companies now saying AI is at the top of the list for their business plans,” Hodgins shares. “As AI adoption increases, OpenAI will be among the companies to see substantial revenue growth through the licensing of its technology and the introduction of more innovative solutions.”
What investors gain with OpenAI
The popularity of AI-driven tools makes it easy to forget that artificial intelligence is still in its infancy, especially when it comes to business applications. Investors looking for opportunities with AI innovators will find that many development companies are barely out of the chute.
Conversely, OpenAI already has a history of significant achievements. Its GPT-1 platform was launched in 2018, setting the stage for the natural language understanding that drives today’s AI-powered chatbots. GPT-2 followed in 2019 and GPT-3 in 2020, increasing the tool’s power by dramatically expanding the dataset used to train it.
In 2022, the ChatGPT platform appeared and attracted over 1 million users in five days. Today the platform has more than 180 million users and approximately 600 million visitors per month.
“OpenAI’s track record sets it apart among AI companies,” Hodgins says. “It’s a strong indicator that it has the ability to continue delivering impactful technologies with important applications.”
Strategic partnerships are one element that has helped OpenAI maintain its track record of successful development. In June 2024, for example, the company announced a strategic content partnership with TIME, which provides access to over 100 years worth of content from the iconic magazine.
“The type of partnerships OpenAI is able to establish due to its solid reputation can accelerate its development rate as well as provide new market opportunities,” Hodgins explains.
OpenAI’s growth potential is also heightened by the capacity for its products to be used across a wide range of industries.
“The solutions OpenAI is creating are being applied across a broad and diverse group of industries, from healthcare and education to finance and robotics,” Hodgins shares. “That type of diversification is always valuable to investors, offering high levels of stability and growth potential.”
The downsides of AI investing
While OpenAI’s history, success, and influence give it some advantages over other developers, it still has exposure to the general risks inherent in the AI market. For example, regulations affecting AI development and application are still emerging, which makes it challenging for developers to plan strategically. As a regulatory framework becomes more concrete, it could lead to increased development costs and new challenges for companies seeking to compete globally.
The ongoing AI talent war is another factor that adds an element of risk to AI investing. Every company depends on a limited and highly competitive talent market for its growth, regardless of how large or how well-developed it is. A recent report on recruiting AI talent that appeared in The Economist revealed that OpenAI is not immune to this challenge, having lost a dozen top researchers during the first half of 2024.
As AI’s place in the global business landscape continues to evolve, investors must make sure to identify companies capable of navigating market developments to achieve ongoing growth. OpenAI’s performance to date has shown it to be that type of company. As it continues to push the boundaries of AI with practical and powerful applications, it should continue to provide investors with healthy returns.
You may also like: Investing in Real Estate: The Pros and Cons of REITs
Disclaimer
The information contained above is provided for information purposes only. The contents of this article are not intended to amount to advice and you should not rely on any of the contents of this article. Professional advice should be obtained before taking or refraining from taking any action as a result of the contents of this article. Sandra Hinshelwood disclaims all liability and responsibility arising from any reliance placed on any of the contents of this article.
Image Source: https://www.freepik.com/free-ai-image/futuristic-robot-interacting-with-money_236280075.html
