Best AI Stocks UK To Watch
Artificial intelligence is one of the most important technologies shaping the future of how we live and work. Automation and other AI-related processes have already begun to transform businesses and open up new technologies. Take, for example, voice assistants.
Given how important AI is expected to become, many investors are wondering how they can invest in this technology today. In this guide, we’ll review 10 popular AI stocks in the UK in 2021 and show you how to invest in these stocks as well.
10 AI Stocks 2021
Every company likes to say that it’s working with artificial intelligence. The phrase brings with it more investor attention and industry clout. But not every company is approaching AI in the same way or using it to the same degree.
With that in mind, here are 10 companies that are using AI to power growth:
- Kainos Group
- Palo Alto Networks
- Ocado Group
- Sensyne Health PLC
Popular AI Stocks UK Reviewed
Amazon is known for a lot of things, but AI isn’t typically one of them. To be fair, Amazon isn’t spending its massive amounts of cash on developing new or better artificial intelligence algorithms. But what the company is doing is investing heavily in Amazon Web Services, which provides the computing power for a vast number of the biggest AI companies.
Amazon Web Services is in fact crucial to the spread of AI because it allows these algorithms to be accessed from any business, anywhere in the world. Amazon currently dominates the cloud computing market, with a 32% market share (Microsoft Azure is in second place, with a 19% market share that pales in comparison). Amazon has also been testing out more advanced computing systems, such as quantum computers, that could open the doors to ever more powerful AI platforms.
Of course, AWS isn’t the only thing driving Amazon’s share price. This company’s value will rise and fall more based on the future of eCommerce than the future of AI.
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2. Kainos Group
Northern Ireland-based Kainos Group offers consulting, software, and IT services to businesses. It has a broad portfolio that spans from cybersecurity to data analytics, and the company leverages AI to make all of its products better. Kainos Group’s range also insulates the company somewhat from a drop in any specific niche.
The company’s share price has gained more than 500% in the past 5 years. The company continually beats analysts’ forecasts and it saw a 16% increase in digital revenue over its past half-year reporting period. It’s also seen strong growth in its Workday software, which is a widely used HR platform for businesses of all stripes.
The stock is currently trading with a P/E of 55. It pays a dividend, but the yield is a paltry 0.005%.
DocuSign shares exploded last year thanks to the COVID-19 pandemic. As everything moved online, the company’s virtual contract signing service became vital to the continuing functioning of the legal system in the US and abroad. Shares started 2020 at just $75 apiece, but nearly tripled in value to over $220 apiece by July.
The company’s numbers justify its rapid jump in valuation. DocuSign added 166,000 new customers in the first half of the year and has grown its total customer base by 75% in the past two years. On top of that, the company has been steadily increasing revenue at 35-45% year-over-year.
Despite the company’s sensational growth, DocuSign isn’t yet profitable and doesn’t have an estimate on when it will be.
4. Palo Alto Networks
Palo Alto Networks is one of those tech stocks that hasn’t been able to catch a break in recent years. The share price bobbed up and down for years on end, with investors unclear on whether the company was making headway in the cybersecurity niche.
That is, until recently. Palo Alto Networks stock surged over 50% at the end of 2020 as the company’s investments finally started to pay off. One of the biggest investments it has made has been in AI, which it’s leveraging to help keep intruders out of enterprise-scale networks.
The company is planning for a major acceleration in sales in 2021, which bodes well for the stock. At the same time, the SolarWinds hack in the US is a loud signal to companies that they need to invest more in cybersecurity.
5. Ocado Group
Ocado Group has been one of the more popular UK tech stocks this last year. The company’s shares more than doubled in response to the coronavirus pandemic, as consumers switched from buying groceries in-store to relying on curbside pickup and delivery.
While Ocado is known in the UK for its delivery partnership with Marks & Spencer, the company also has a presence in the US. It’s partnered with grocery chain Kroger to build 20 automated warehouses.
Adobe is, simply put, one of the biggest stocks on the NASDAQ exchange. This company produces a professional creative suite that no other company even attempts to compete with. As a result, Adobe brings in a gross margin of over 90% on its primary product line.
It has used cash from that business to invest heavily in AI and to fuel its enterprise marketing war with Salesforce, another giant player in the software space. Adobe isn’t yet winning this war, but the company is seeing significant growth in its enterprise market products. T
Despite growing its share price by 440% in the past five years, Adobe shares still only carry a P/E ratio of 44. Adobe stock doesn’t pay a dividend as of yet.
Nvidia’s graphics processing units (GPUs) are the physical engines that drive AI. While there are other chipmakers, almost none have the same clout as Nvidia when it comes to the kind of high-end performance and multi-process threading that AI applications demand. Nvidia also acquired competitor ARM in September, giving them more control over the design of chips that companies like Apple use.
It’s worth noting that Nvidia currently gets nearly half of its revenue from chips made for video gaming.
Currently Nvidia has a pricey 87.5 P/E ratio or meager 0.12% dividend yield. Nvidia shares grew 120% last year.
Fortinet is a cybersecurity stock that is growing fast and strong financially. It had a 34% free cash flow margin at the start of the year and has grown its revenue by 10-20% every quarter for the last several years.
This financial stability is important because Fortinet is going to need to spend money if it wants to incorporate AI into its products. The company has a huge tailwind behind it thanks to the shift to remote work and events like the SolarWinds hack in the US.
Fortinet isn’t cheap, with a P/E ratio of over 56 at the time of writing. It also doesn’t pay a dividend.
9. Sensyne Health PLC
AIM-listed Sensyne Health PLC works with the NIH to improve patient outcomes. The company has access to a trove of anonymized patient data, which it’s used to train its algorithm and which can suggest ways to make healthcare work better for patients.
The company’s approach is gaining traction. It recently entered into an analytical partnership with biotech company Roche. Shares have been climbing since the Conservative election victory last year, which removed a lot of uncertainty for Sensyne Health PLC. Still, the share price is just 147p, and investment firm Peel Hunt has a price target of 195p – a gain of 33%.
Sensyne Health isn’t currently profitable as of yet.
IBM was one of the biggest US tech companies for decades, but it’s largely been left out of the tech boom in recent years. That all seems set to change now, as the company recently announced a major shift towards cloud computing and AI. Cloud computing has been one of the few bright spots for IBM in recent years, and the new CEO comes from the cloud and AI divisions of the company.
It also doesn’t hurt that the company is trading with a P/E of just 19.4, or that it sports a dividend yield of 5.4%.
Are AI Stocks a Valuable Investment?
AI impacts everything from cybersecurity to pharmaceutical development to daily office tasks. The basic concept is that an algorithm is able to learn from data over time, and then make decisions automatically going forward. So, it’s possible for an AI system to find new drugs, spot suspicious activity inside a business network, or automate a company’s HR or accounting departments.
AI is forecast to be one of the most disruptive technologies in human history, however, this does not mean that the success of AI is definitive.
Depending on your research, you should be able to decide whether or not you wish to invest in the future of AI stocks.
AI Stock Features to Look At
While picking AI stocks, users may want to focus on a variety of features while analysing the stocks and companies. Here are a few of them:
AI Pure-play vs. AI-adjacent Stocks
One thing you’ll notice about our AI stock picks is that very few of them are pure AI companies – that is, companies whose business models revolve solely around building or deploying an AI algorithm.
While such companies do exist, most in that category are private startups. AI technology still has a long way to go. That said, the share prices of these AI-adjacent companies depends on a lot more than AI development. In the case of Amazon, for example, eCommerce and non-AI-related cloud computing drives the bottom line more than the company’s AI efforts.
Tech stocks in general, and AI stocks in particular, can have soaring valuations. To some extent, this is justified – AI services are expected to change the way the world does business and open up new product lines.
Before you invest in a pricey stock, however, be sure to think carefully about how the company is using AI and what it can do with it. If it’s using AI simply to make an existing product better, then a massive valuation might not be fully worthwhile. On the other hand, if the company is developing an entirely new category of products or services with its AI technology, then a huge valuation makes more sense.
Growth Stocks vs. Blue Chip Stocks
Within the world of AI stocks, there are two types of players: growth stocks and blue chip stocks.
Growth stocks, such as Ocado Group and DocuSign, are relatively new companies with a tiny market share.
Blue chip stocks, such as IBM and Amazon, are more mature companies that already have a dominant market position.
Growth stocks and blue chips stocks offer very different risk profiles for investing in AI. With growth stocks, there’s much more risk that the company doesn’t realize its potential, but more reward to be collected in case the investment works out.
You may want to go through these multiple factors to assess your investment decisions properly. Only invest in the sector after properly analysing and coming to a well-thought out investment strategy for the future.
Popular Stock Brokers in the UK
In order to purchase AI stocks in the UK, you’ll need to find a stock broker with a wide selection of shares. Since the tech sector has been so big in recent years, many UK brokers offer trading on top AI shares. So, you can look at other factors when choosing the right broker to purchase AI stocks.
In the sections below, we have reviewed a few of the popular brokers that allow users to trade AI stocks in the UK.
eToro is a 0% commission online broker that offers trading on more than 800 shares and over 450 ETFs from around the world. The company supports both CFD trading and share dealing, constantly adding new stocks, too, which bodes well for getting access to up-and-coming AI stocks.
One of the key features of eToro is its massive social trading network. You have the option to follow other traders interested in AI stocks, share trade ideas, or ask questions of more experienced investors. eToro also offers copy portfolios, which allows you to find an existing portfolio of AI stocks and mimic the positions with just a few clicks. Using copy portfolios also enables you to put your trading on auto-pilot.
eToro offers a very thorough research and analysis platform so you may dive deeper into companies you’re interested in trading. The charting software includes more than 100 technical studies and drawing tools. Each stock also comes with an analysis pane to allow users to see what professional stock market analysts think about the company.
eToro is regulated by the UK’s Financial Conduct Authority and all accounts are protected by the Financial Services Compensation Scheme. The broker offers 24/5 customer support, so help is always just a phone call away during trading hours.
Stock Broker Minimum Deposit Fractional Shares? Pricing System Cost of Buying Stocks Fees & Charges eToro $10 Yes – $10 minimum 0% commission on ALL real stocks, spreads for CFDs Market spread is not included when buying real stocks No Deposit fees, $5 withdrawal fee, $10 inactivity fee, no account management fees.
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2. Fineco Bank
Fineco Bank is an Italian bank with a large presence in the UK. This CFD broker and share dealing platform offers access to thousands of shares from the UK, US, and Europe. You may also trade a wide range of ETFs or access options for popular AI stocks. CFD trading is 100% commission-free, and the commission on share deals is just £2.95 per trade for UK stocks or $3.95 for US stocks.
In addition to offering a wide selection of shares, Fineco Bank gives you a suite of tools to help you find trading opportunities. The PowerDesk trading platform includes a news feed, economic calendar, and dozens of technical indicators. The only shortcoming is that the platform doesn’t include much in the way of analyst research.
Fineco Bank also offers an intuitive global stock screener. Share can be filtered from all of the markets that Fineco Bank offers by variables like market cap, market sector, and recent performance. This makes it straightforward to discover high-performing AI stocks, which you can then dive into in more detail in PowerDesk.
Fineco Bank is regulated by the UK’s Financial Conduct Authority and the Bank of Italy. It’s also publicly traded on the Milan Stock Exchange, which means the broker is relatively transparent about its financial well-being.
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How to Purchase AI Stocks in the UK
If you are keen on investing in AI stocks, you should do so with a reputable stock broker that can provide a range of features – such as low fees on trading, multiple stock options and low deposits.
After choosing your broker, here is how users can begin trading in 4 steps:
Step 1: Open a Brokerage Account
Head over to the homepage of your chosen broker and begin the account set-up process. You may be required to fill in your personal details – including your full name, email address and mobile number. Create a username and password for the platform to continue.
Step 2: Verification
Users may need to verify their accounts if they are trading with regulated brokers. To do this, simply upload proof of ID (a copy of your driver’s license or passport) and proof of address (a copy of a bank statement or utility bill). Once these documents have been uploaded, your broker should verify them in a couple of minutes.
Step 3: Deposit funds
The next step is to deposit funds into your trading account. Most brokers may support 1 or more of the following payment methods:
- Credit card
- Debit card
- Bank transfer
Choose your preferred payment option and deposit the funds into your account.
Step 4: Invest in AI Stocks
Once your account has been funded, you can search for your preferred AI stocks on the platform’s search bar. Enter the amount of money you wish to deposit into the stock and confirm your transaction.
AI and related technologies can be an exciting area for investors, with this new industry expected to take-off in the coming years. While there are tons of companies providing services in this sector, users should analyse and invest in their preferred stocks after conducting their own market research and analysis of the company.
Can I invest in AI stocks through an ETF?
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Do AI stocks pay dividends?