Pure AI is a game for very large players with potentially infinite financial resources. Therefore, there is no real scope for UK small-and-mid-caps to be considered true AI businesses. That said, there are two ways that smaller stocks can make money from the latest technological boom (or bubble if you are not a believer).
Companies can adapt a business model to generate economic value from AI, or sell products or services to the true AI businesses. The former are actually quite tangential to the AI trade, while the latter are considered ‘picks and shovels’ businesses, which we covered in a previous article here.
There are several areas where the UK’s mid-caps are profiting from AI by providing the tools, equipment or materials that build or manufacture systems. These are either supplied to the super-scalers or at any point in the pathway between the true AI businesses and the ultimate end user.
