2 FTSE 100 shares I’d buy for the artificial intelligence (AI) boom!
When it comes to the artificial intelligence (AI) revolution, US tech companies like Nvidia and Microsoft usually spring to mind before FTSE 100 stocks. This makes sense as the UK’s leading index is largely concentrated in legacy industries like commodities, insurance and utilities.
However, those who are quick to dismiss the entire UK stock market as an AI-free ‘dinosaur’ are missing a trick.
Here are two Footsie shares that investors should consider buying to take advantage of this rapidly rising market.
Experian
Unique proprietary databases are lucrative assets for firms looking to capitalise on AI and machine learning.
On this front, credit bureau Experian (LSE:EXPN) has plenty to offer. The company owns data on over 1.4bn consumers and 191m businesses. Such a vast quantity of high-quality credit information offers boundless opportunities to be leveraged commercially via data-hungry deep learning models.
Experian has been using AI across its product portfolio for some time. The technology has proved particularly useful for its fraud prevention solutions.
Last year, the group launched AiDRIAN, which combines an AI-driven machine learning model with device profiling data. The software allows businesses to automatically classify financial transactions with 99.9% accuracy, helping them boost revenues and combat cybercrime.
Encouragingly, Experian shares are a major holding for Finsbury Growth & Income Trust. Veteran fund manager Nick Train is focused on building a portfolio of ‘AI winners’. He’s described the company as “arguably the best-positioned credit bureau in the world“. High praise indeed!
Granted, the Experian share price isn’t cheap compared to many FTSE 100 stocks. The company has a price-to-earnings (P/E) ratio above 36 and there’s a risk this could limit future returns. However, if AI’s potential lives up to the hype, I think the rich valuation can be justified.
Sage Group
The next FTSE 100 share worth considering is tech stock Sage Group (LSE:SGE).
Having established its AI division five years ago, the accounting software provider’s quickly becoming a pioneer in the space. Earlier this year, it launched its first domain-specific Large Language Model (LLM) in collaboration with Amazon Web Services.
The LLM will inform Sage Copilot, the company’s AI-powered productivity assistant that helps businesses manage cash flow, forecasting, and payroll.
The timing of these two new product launches arguably couldn’t be better. A huge staffing crisis is emerging in America’s accounting industry. Around 75% of the country’s Certified Public Accountants are estimated to be at retirement age.
The US is Sage’s largest market, representing 40% of its revenue. Talent shortages stateside could fuel demand from its SME customers for the firm’s AI solutions, especially for more basic accounting work, such as preparing tax returns.
That said, competition from companies like Intuit (the owner of QuickBooks and TurboTax) could threaten Sage’s market share. After all, Intuit has invested heavily in its own AI financial assistant. Nonetheless, Sage seems to be holding its own for now in the technological arms race.
AI megatrend?
Some analysts predict AI will completely transform the way companies conduct business. Others are more sceptical, believing we’re in the middle of a bubble. Only time will tell.
Nevertheless, for British investors keen to buy AI stocks, there’s merit in looking beyond popular US names and closer to home.
The post 2 FTSE 100 shares I’d buy for the artificial intelligence (AI) boom! appeared first on The Motley Fool UK.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Charlie Carman has positions in Nvidia, Microsoft, and Amazon. The Motley Fool UK has recommended Amazon, Experian Plc, Finsbury Growth & Income Trust Plc, Microsoft, Nvidia, and Sage Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2024
