Investing in artificial intelligence

Considering the potential benefits and risks of the latest tech revolution. 

It’s no surprise that the role of artificial intelligence (AI) is on the rise. According to McKinsey’s “The State of AI” report, 78% of respondents say their organizations use AI in at least one business function, up from 55% a year earlier.

AI is being adopted across multiple industries, from manufacturing and logistics to banking and healthcare. It’s not just a product of technology companies anymore.

Given its increasing adoption, there’s a chance your portfolio already contains investments related to AI. So, what does that mean for you? Does it all point to opportunity, or should you proceed with caution?

Evaluating the potential benefits

As with any transformative technology, companies leading AI development or adoption may experience faster growth than those that don’t. They sit at the forefront of innovation, where growth may follow. Including AI-driven companies in your portfolio may provide exposure to high-growth potential. And the opportunity is expected to be significant: A United Nations Trade and Development report projects AI could become a $4.8 trillion market by 2033, up from $189 billion in 2023.

Investing in AI doesn’t necessarily mean having a tech-heavy portfolio. Because AI is being adopted in many sectors, these investments can be diversified by nature. In healthcare, AI is being used for diagnostics and drug discovery. In manufacturing, robotics and maintenance. In retail, personalization and supply chain optimization. Companies leveraging AI within their industries may have a competitive edge worth considering.

Recognizing the risks

One of the most highly publicized risks of AI is misinformation. Generative AI can produce content that sounds authoritative but isn’t always accurate. Because it learns from past information, AI can pick up and reinforce biases hidden in the historical. If companies fail to manage these risks, they may face consequences like loss of credibility and diminished customer trust, which can affect market performance.

Privacy is another major concern as governments tighten AI regulations. Future compliance requirements may require companies to invest in auditing and safety measures. That can slow the pace of AI adoption and increase compliance costs, which can put pressure on profit margins.

Finding balance

Backed by the most widely held AI stocks, the Morningstar Global Artificial Intelligence & Big Data Consensus Index outperformed the broader Morningstar Global Target Market Exposure Index by 35% from November 2022 to May 2025.* However, this outperformance came with higher volatility and steeper declines, reflecting the risk of investing in emerging, high-growth technologies.

There are multiple vehicles through which you can invest in AI. One approach is to potentially reduce your risk by investing in exchange-traded funds or mutual funds that offer broader exposure to AI. This approach relies less on picking a winner and more on investing in AI’s overall potential across industries. You may also want to consider your personal values, to ensure you’re comfortable with where your money is invested.

As with any investment, it’s important to consider the benefits and risks in alignment with  your big-picture financial situation and goals. AI may be an exciting investment prospect, but it deserves the same careful considerations as any other investment in a well-diversified portfolio.

*This article is for informational purposes only and is not a recommendation. There is no assurance the trends mentioned will continue or that the forecasts discussed will be realized. Past performance may not be indicative of future results. The market value of securities fluctuates and you may incur a profit or a loss. This analysis does not include transaction costs which would reduce an investor's return. The Morningstar Global Artificial Intelligence & Big Data Consensus Index is a thematic equity index designed to provide exposure to companies that are widely held by funds targeting the Artificial Intelligence (AI) and Big Data investment themes. The Morningstar Global Target Market Exposure Index is a broad equity benchmark designed to represent the performance of large- and mid-cap stocks across both developed and emerging markets. There is no assurance any investment strategy will be successful. Investing involves risk and investors may incur a profit or a loss. The companies engaged in the technology industry are subject to fierce competition and their products and services may be subject to rapid obsolescence. Diversification does not ensure a profit or protect against a loss.

Sources: McKinsey.com; Morningstar.com; UNCTAD.org