Where are all the UK’s AI shares?
Given the speculation about the impact of artificial intelligence (AI), Iâve been looking for UK shares likely to benefit from the anticipated fourth industrial revolution. And to be honest, itâs been a bit of a struggle.
Of course, all businesses are likely to be impacted in some way. But Iâm seeking companies that are heavily engaged in using the technology to increase their revenue and earnings.
My starting point was specialist AI investment funds.
More of the same
All of the ones that I came across had positions in some very familiar names. Itâs almost as if thereâs an unwritten law that requires fund managers to include the Magnificent 7 in their portfolios.
Worryingly, another common theme is an absence of UK stocks. In my opinion, this will have to change if the countryâs going to overcome its underlying poor productivity issue.
Understandably, given the amount being spent by the tech giants, US stocks dominate. But there are other European and Asian companies that have attracted the interest of these funds. However, I could only find one with a significant holding in a British stock.
This is the Polar Capital Artificial Intelligence Fund that has RELX (LSE:REL), the FTSE 100 provider of information-based analytics and decision tools, as its seventh-biggest holding.
Data’s the new oil
RELX has four divisions, the largest of which helps companies manage risk. The detection and prevention of online fraud is one element. Personally, I believe the groupâs well positioned to provide the high-quality information thatâs essential for large language models and other aspects of AI to perform effectively.
But there are challenges. It could be vulnerable to a disruptive cyber attack and there are privacy issues associated with the data it holds.
At 26.9, its forward (2025) price-to-earnings ratio is on the high side. But itâs not that expensive for a high-margin technology stock thatâs growing. Compared to the same period in 2024, its first-half results for the year showed a 7% increase in revenue and a 9% rise in underlying operating profit. The group also increased its interim dividend by 7%.
For these reasons, those who believe we are on the verge of another technological revolution could consider adding RELX to their portfolios.
More searches
To try and find more domestic AI shares, I looked at some of the stock market indexes tracking the sector.
The THNQ/ROBO Global Artificial Intelligence Index comprises stocks that represent the âglobal value chain of AI technologiesâ. But it only includes one British company â Raspberry Pi, the FTSE 250 manufacturer of single board computers, accessories and semiconductors.
The STOXX Global AI Adopters and Applications Index âis designed to reflect the performance of a set of companies that are benefiting from the advancement of Artificial Intelligenceâ. The solitary UK stock included was — much to my surprise — Barclays. Although not an obvious technology stock, the bank sees AI as a âstrategic augmenterâ and a way of creating âtangible benefitsâ for its customers and staff.
Disappointingly, other than these three stocks, I didnât find any that appear to be embracing AI in a truly meaningful way. More precisely, I only found three listed British companies that have convinced fund managers or administrators of stock market indexes that AI’s significantly going to boost their earnings. Â
The post Where are all the UK’s AI shares? appeared first on The Motley Fool UK.
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James Beard has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc, Polar Capital Plc, RELX, and Raspberry Pi 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.
