Don’t you really understand microchips? Take advantage of AI trends through these other top titles. | The motley fool

Artificial intelligence (AI) is all the rage right now and it’s everywhere, including the stock market. NvidiaAND C3.aifor example, whose businesses are both focused on artificial intelligence, are up nearly 200% this year.

It’s hard to know how much of this is hype and how much of this is the result of far-reaching potential. One obvious thing is that both trade at high valuations. Nvidia stock is trading at 213 times 12-month earnings and 40 times 12-month sales, while C3.ai is trading at 14 times 12-month sales and is unprofitable.

It can be very tempting to hop on the AI ​​bandwagon, or any bandwagon that is creating the latest buzz, as prices go up and everyone around you says it’s going to be the next big thing. But if you’re one of the many people who don’t really understand what Nvidia does or how its GPUs work, it might be best to stay away. Believe it or not, you can find winners in every industry that can ultimately provide the same long-term potential as whatever hot tech stock is making the headlines today. And you can also take advantage of AI trends by finding big stocks that you know and understand are using AI technology to improve their game.

Why not jump on the AI ​​train?

It’s never a good idea to invest in companies you don’t really know, because if you don’t understand what it does, you’re unlikely to be able to assess whether it’s a good investment. Today, there are so many resources for both novice and seasoned investors, and investors who can do their due diligence themselves can make successful investment decisions without having to shell out hefty fees to investment planners and advisers (even if there are times for those, too). Gone are the days where you had to trust everything your broker recommended without having a clue what the company did or why it was a good investment.

If microchips or technology are your thing, or you’re willing to put the time and effort into really getting to know a high-tech or AI company, go ahead and do it. For average investors who don’t have that time, or don’t think they can get to a point of understanding reasonably well enough to see what its potential is, I guarantee you can find something else you can feel more confident buying.

How to do it responsibly

You can also benefit from artificial intelligence by buying shares in companies you know. The new era of generative AI is what is catching a lot of attention right now. But many of the companies that make services you use and products you consume have been using AI for decades.

One of the best examples is Amazonia (AMZN 1.92%). If you’re a satisfied Prime customer or have ordered from Amazon in the past, you’ve seen firsthand how Amazon offers a wider selection and faster shipping than probably anyone else in the U.S. It uses AI to speed up delivery times and offer you a targeted shopping experience.

It is also developing Generative AI solutions for Amazon Web Services, and you can take advantage of this by buying Amazon through its e-commerce business.

Image source: Getty Images.

Another example is the coffee giant Starbucks (SBUX 0.39%). If you frequent your local Starbucks coffee shop and enjoy the experience, that’s already a reason to consider it an investment. You may not realize that Starbucks has invested heavily in AI to predict which drinks will be popular and to deliver a personalized digital experience on its app.

Amazon and Starbucks have also both beaten the market over time. There’s a place in a portfolio for high-growth stocks and technology stocks, but more often than not, it’s the companies you know and love that offer the best income opportunities.