It's been hard to ignore that artificial intelligence is a hot topic the last few months.
The generative engine ChatGPT opened in November and has quickly caught the imagination of the public.
There is even talk that Microsoft Corp (NASDAQ: MSFT), which is a major investor in the startup behind ChatGPT, could challenge Alphabet Inc (NASDAQ: GOOGL)'s two-decade domination of internet searches by injecting AI into Bing.
Already "a veritable rainforest of new AI startups is being freshly funded", according to Frazis Capital Partners portfolio manager Michael Frazis.
"While it won't be clear for some time which will win and which will fall…, one thing is certain: they will all [need] immense amounts of computing power," he said in a memo to clients.
"Power that, absent this revolution, may not have been required for many years."
As such, some investors are looking to gain exposure to companies involved in manufacturing computer chips or, their key ingredient, semiconductors.
The best semiconductor stocks in the world
Shaw and Partners portfolio manager James Gerrish was recently asked which are the best ASX shares of businesses involved in the semiconductor industry.
"When I think semiconductors, my first thoughts are international companies such as Qualcomm Inc (NASDAQ: QCOM), NVIDIA Corporation (NASDAQ: NVDA), Texas Instruments Incorporated (NASDAQ: TXN), Broadcom Inc (NASDAQ: AVGO), Intel Corporation (NASDAQ: INTC), Taiwan Semiconductors Mfg Co Ltd (NYSE: TSM), Samsung Electronics Co Ltd (KRX: 005930), etc," he said in a Market Matters Q&A.
"Unfortunately there are no companies of this magnitude on the ASX."
So Gerrish suggested the next best option could be exchange-traded funds. But again, they are overseas shares.
"Two of our preferred ETFs to gain exposure to the semiconductor markets are the iShares Semiconductor ETF (NASDAQ: SOXX) and the VanEck Semiconductors ETF (NASDAQ: SMH)," he said.
"Locally, at this stage, there aren't any companies on the Market Matters radar."
Frazis took the example of Nvidia to demonstrate how critical computer chips are to power an AI-driven future.
"Nvidia is partnering with Mercedes Benz Group AG (ETR: MBG) to power their next generation of cars from 2024, including level 4 autonomy, over-the-air updates, and best-in-class safety and convenience applications," he said.
"Nvidia is a small position for us, bought at lower prices, but their 81% market share in AI processing is now more relevant than ever."
