How to Invest in AI: A Strategic Guide to Stocks, Industries, and ETFs

Over the past few years, artificial intelligence has evolved from an abstract idea into an unignorable force shaping daily life across multiple industries—and it’s shaking up the way we think about investments. Today, AI and big data funds have grown to over $38 billion globally, with US funds alone hitting a record $5.5 billion by May 2025.

This fast-moving shift brings both opportunity and risk.

Our analysts assessed the fundamentals behind AI stocks and thematic mutual and exchange-traded funds. Here's where research analysts see investment opportunities with AI exposure.

Investors can directly buy shares of individual companies across the AI value chain, from software companies integrating AI into their products to the makers of semiconductors and other hardware.

However, this approach may come with significant risks.

• Buying one or two stocks exposes you to risks unique to those companies, which may have little to do with the broader theme.
• Winner-take-all dynamics often appear in technology themes driven by scale.
• AI is an emerging, high-growth technology. The companies leading today may not dominate tomorrow.

If investors ask about a specific AI company, advisors can assess their appetite for risk and discuss how putting dollars toward these stocks affects overall portfolio volatility.

AI remains on track to be the core driver of semiconductor industry growth. Memory semis, which store information rather than processing it, are in focus given booming demand and higher prices.

Semiconductors are still the key force behind the artificial intelligence buildout. The chip industry has reported strong growth in 2025, based on statistics from the US Semiconductor Industry Association. Chip industry billings (akin to revenue) rose 33% in October 2025, thanks to the AI boom for both memory and processors.

The chart below shows how semiconductor revenue has recovered thanks to AI, higher memory spending, and a bounceback in PC and smartphone demand.

Here are our top semiconductor stock picks:

• Nvidia NVDA’s stock price has felt the effects of AI bubble concerns recently, but we think these fears are overblown. The bulk of AI runs on Nvidia today, and Nvidia still offers best-of-breed performance and flexibility in the fast-moving AI space.
• Broadcom AVGO is a major AI winner, in our view, with the second-largest AI processor business trailing only Nvidia. We expect Broadcom to take share as large customers use greater proportions of custom accelerators alongside GPUs.
• Marvell Technology MRVL, one of our favorites in networking semis, could be a long-term winner in AI infrastructure, both via its custom accelerator chip designs and optical connectivity chips. In our view, this strong exposure stems from moaty intangible assets in chip design and should fuel strong growth in the long term.

As AI drives demand for semiconductors, we see strong growth across the value chain, including the companies that produce the consumable chemicals required to make each chip.

The shift to more advanced chips with smaller nodes is a significant driver of revenue growth for semiconductor chemicals. These smaller nodes require greater volumes of higher-priced products for fabricators to achieve acceptable yields. Each step down in node size can increase the need for materials by 10% to 25%, creating a strong tailwind for chemical producers.

Source: Morningstar, Gartner, company filings.

Here are our best stock picks in the chemical sector:

• Entegris ENTG is a leading producer of semiconductor chemicals, materials, and filtration, with nearly 95% of its revenue derived from semiconductors.
• Qnity Electronics Q is a leading producer of chemicals and materials for semiconductor fabrication and electronics manufacturing that spun off from DuPont in late 2025.

For a deeper look at the factors driving this industry, download the full semiconductor chemicals and materials report.

As the number and sophistication of AI cyberattacks increases, we think innovative cybersecurity platform vendors will emerge as winners.

Although the AI security market is small right now, we expect rapid growth as the use of applications proliferates. Our recent cybersecurity report suggests that the cost of a data breach is almost 50% higher for companies not using AI security compared with those that leverage these tools.

We size the AI security opportunity at $15-18 billion by 2028, increasing the estimated market size by over 5%.

We think these cybersecurity companies are the best-positioned in our coverage:

• CrowdStrike Holdings CRWD is a leader in endpoint security with products ranging across the security stack.
• Palo Alto Networks PANW’s sticky platforms, combined with the broad range of its cybersecurity solutions, have helped the firm build a wide economic moat around its business in our view.
• Zscaler ZS is a pioneer in zero-trust security solutions, an area of cybersecurity primed for growth.
• Fortinet FTNT offers solutions ranging from network security firewalls to security operations. In our view, the firm's established customer switching costs and increasingly potent network effect support a wide economic moat.

New AI data centers require more power and more complex infrastructure, which we think will drive the continued growth of electrical equipment supplier stocks in the capital goods sector.

Data center construction has soared since the launch of ChatGPT, with spending reaching a record seasonally adjusted rate of $40 billion in June 2025. Data centers now account for 40% of US office construction, up from just 15% in 2021, reflecting both the rapid expansion of AI infrastructure and declines in other commercial segments.

This boom has driven the growth of electrical equipment suppliers to between two and four times their long-term average, far outpacing the roughly 4% historical growth rate seen since 1982.

Our top stock picks in the capital goods sector include:

• Schneider Electric SE SU leads the pack with approximately ;$9.5 billion in data center revenue, which is more than 50% higher than its nearest competitor.
• Vertiv Holdings Co VRT is the closest to a pure-play data center supplier, with more than three-quarters of its revenue coming from this market.

For a deeper look at how AI investment is reshaping the capital goods landscape, download the full Powering Artificial Intelligence report.

Artificial intelligence and big data funds can invest across the AI value chain and aim to capture structural alpha as the market evolves without relying on picking individual winners.

Thematic funds can offer a more diversified approach than individual stocks. However, these funds differ widely in how they define and track the AI theme, resulting in varying performance outcomes.

The Magnificent Seven dominate the most frequently held stocks among these funds, which means advisors should evaluate overlapping holdings when integrating them into broader investment portfolios.

The Morningstar Medalist Rating is a forward-looking assessment of a fund’s ability to outperform its peers over a full market cycle. These AI ETFs and mutual funds have earned a Morningstar Medalist Rating of Bronze:

• Defiance Quantum ETF QTUM
• First Trust Bloomberg Artificial Intelligence ETF FAI
• Global X Artificial Intelligence & Technology ETF AIQ
• KraneShares Artificial Intelligence and Technology ETF AGIX
• Pacer Data and Digital Revolution ETF TRFK
• Robo Global® Artificial Intelligence ETF THNQ
• Themes Generative Artificial Intelligence ETF WISE
• Xtrackers Artificial Intelligence and Big Data ETF XAIX
• WisdomTree Artificial Intelligence and Innovation Fund WTAI

Navigating the complexities of the AI investment landscape requires robust data and sophisticated tools. Direct Advisory Suite offers financial advisors comprehensive resources for deeper investment data and portfolio analysis.

Empower your practice with the insights needed to identify opportunities and build resilient client portfolios in this evolving market.