Shares of SoundHound AI, C3.ai, and Upstart Plummeted by More Than 70%. Here's a Safer Way to Invest In Artificial Intelligence (AI) Stocks.

Core Viewpoint - Artificial intelligence (AI) is generating significant value, but not all AI companies will succeed, as evidenced by the contrasting performance of Nvidia and other AI firms [1][3]. Group 1: Nvidia's Performance - Nvidia's stock increased by 239% last year and an additional 158% in 2024, adding $2.7 trillion to its market capitalization, making it the second-most valuable company globally [1][2]. - The company is a leader in designing powerful graphics processing units (GPUs) for data centers, crucial for AI model development, and is unable to meet the high demand [2]. Group 2: Challenges in the AI Sector - Many AI companies are struggling to deliver financial results that match their innovations, leading to significant declines in stock prices, with SoundHound AI down 74%, C3.ai down 85%, and Upstart Holdings down 89% from their all-time highs [3][4]. - The unpredictability of the AI landscape makes it difficult for investors to identify potential winners and losers [4]. Group 3: Investment Strategies - Exchange-traded funds (ETFs) can provide a diversified approach to investing in AI, reducing the risk of catastrophic losses from individual stock failures [5]. - The iShares Expanded Tech Sector ETF, established in 2001, offers exposure to a wide range of technology stocks, including those involved in AI [6][7]. Group 4: iShares ETF Holdings - The iShares ETF holds 279 stocks, with its top 10 holdings accounting for 53.9% of the total portfolio value, including major players like Meta Platforms, Nvidia, Apple, and Microsoft, all of which are leveraging AI technologies [8][9][10]. - Nvidia's flagship H100 GPU has set benchmarks for AI development, and the company is set to release a new generation of chips that could enhance performance by up to 30 times [11]. Group 5: ETF Performance - The iShares ETF has delivered a compound annual return of 10.8% since its inception, outperforming the S&P 500's 8.2% average annual return [13]. - Over the last 10 years, the ETF achieved a compound annual return of 20%, significantly exceeding the S&P 500's 13.2% return, highlighting the potential of technology stocks in the AI sector [14][15]. Group 6: Future Outlook - AI is projected to add substantial value to the global economy, with estimates of $7 trillion by Goldman Sachs and up to $200 trillion by Cathie Wood's Ark Investment Management by 2030 [15]. - The iShares ETF is positioned as a viable option for investors looking to capitalize on the growth of AI while mitigating risks associated with individual stock selection [16].