By Cara Siera
In a few short years, artificial intelligence (AI) has taken the world by storm. AI has pivoted from a sci-fi fantasy to a real-world tool, shaking up sectors as diverse as healthcare, entertainment, travel, and information technology (IT).
The growth of AI technology and AI-powered companies is tantalizing to investors, but what do you need to know about the risks and opportunities? Consider the following guide to the risks and opportunities of investing in AI.
Two Categories of AI Companies
Broadly speaking, AI investment opportunities fall into two categories: AI creators and AI-enabled product companies.
Companies That Make AI
Core technology companies like OpenAI, Anthropic, Nvidia, and Google DeepMind are responsible for the development and subsequent advancement of AI, including the models, platforms, algorithms, and infrastructure.
For example, OpenAI, Google, and Anthropic develop foundational models (like ChatGPT), large language models (like Claude), and models designed for science and research. Nvidia, on the other hand, creates graphics processing units (GPUs) that are optimized for running and training these models.
Companies That Use AI
The second category is companies that harness the power of AI to build end-user products. They are known as AI adopters and include companies like Duolingo, Grammarly, Spotify, and Salesforce.
Through these companies, customers can access personalized skill-building, music recommendations, writing suggestions, task automation, or even the best AI cover letter generator.
Selecting the Right Investments for Your Goals
Why does the above distinction matter? Investment in both types of AI companies can be profitable, but the best fit for you depends on your investment goals. How so?
AI adopters may be more suitable for short-term investment. Because they are using existing tools (rather than developing them independently) to address a problem or pain point, they are able to scale quickly and keep costs low. Over time, they may shift to niche uses.
AI creators are better suited to long-term investment. Their research and development costs are high, and it may be some time before growth is evident. However, the potential for moat-building power—establishing and maintaining a competitive advantage—is heightened.
AI Investment Outlook
In a 2025 Global Survey report, McKinsey & Company highlighted the growth potential of AI. Seventy-eight percent of companies now report using AI functions, up from 72 percent in early 2024 and 55 percent in 2023. Ninety-two percent of companies plan to increase their AI use within the next three years.
Interestingly, the largest companies seem the most poised to adopt and benefit from AI. McKinsey reports that “companies with at least $500 million in annual revenue” were the most likely to make the switch. Only one percent of companies label their AI rollout as “mature,” indicating plenty of room for AI growth.
What, specifically, of your investments? NASDAQ has identified Nvidia, Broadcom, and CoreWeave as companies to watch. Despite its recent setbacks, Nvidia reported a 69 percent year-over-year increase, with stock trades at nearly 32 times forward earnings. Interestingly, Nvidia stocks have increased by more than 87,000 percent since 2005, according to The Motley Fool.
Broadcom’s AI chips are rumored to be used by massive players like Alphabet, Meta, and ByteDance. Their stock trades at nearly 38 times forward earnings.
Coreweave has a strategic partnership with Nvidia and, unlike other cloud infrastructures (think Amazon AWS or Microsoft Azure), Coreweave was designed with AI in mind. Its stock is trading at 37.5 times sales.
Knowing the Risks
While AI use continues to grow, it is important to consider the potential risks of investing in AI development or product-centered companies.
Market volatility is one such risk. For example, in early 2025, Nvidia lost 31 percent of its year-to-date value. While the company and its stocks recovered, it well illustrates the potential for rapid and substantial loss in this sector.
The technology sector as a whole has been characterized by its sensitivity to macroeconomic factors, such as inflation, interest rates, and economic downturns. Additionally, many AI adopters are small startups with a high risk of failure. According to LLC.org, ten percent of all startups fail during their first year, and 90 percent within 5 years.
Finally, changes in technology can also affect your investments. The meteoric rise of AI may not be the only massive technological shift this decade. New technologies could replace AI, or issues with the technology could reduce its future use. Government regulations may change as well.
The bottom line is that while AI companies offer the promise of rapid growth and large returns, the potential for failure and loss cannot be ignored.
Key Takeaways
AI companies—both those who create AI technology and those who integrate it into products for consumer use—provide investors with ripe opportunities. Statistics indicate that AI growth is not poised to slow anytime soon. However, investors should consider the historic volatility of the tech sector, potential government regulations, and the unknowns of rapidly evolving technologies prior to investing.
Additional resources: https://www.nasdaq.com/articles/3-top-ai-stocks-buy-june-2025
