Investing for reliable, long-term passive income can be challenging. While some investors may be tempted by the allure of quick gains from popular AI stocks, the volatile nature of these investments can lead to sudden crashes. However, it is undeniable that AI is becoming increasingly integrated into our everyday lives. With this in mind, let’s explore two UK shares that have the potential to profit from AI technology in the long term.
1. RELX (LSE:REL) – Unlocking the Power of Data Analytics
RELX is a global data analytics firm that leverages AI to deliver informative insights to organizations. By processing over 40 petabytes of digital information, which includes public records, legal documents, news items, and scientific publications, RELX uses AI and machine learning to transform raw data into valuable statistical information. This enables businesses to make informed decisions and develop effective strategies.
Although the RELX share price has seen a remarkable 36% increase in the past year, some analysts believe that the stock may be overvalued by nearly 20%. Nonetheless, what sets RELX apart is its projected return on equity (ROE) in the next three years. With an estimated ROE of 63.4%, significantly higher than the industry average of 10%, RELX shows great potential for future growth.
If you are looking to add a promising addition to your passive income portfolio, considering RELX may be a wise choice.
2. London Stock Exchange Group (LSE:LSEG) – Combining Tradition with AI Innovation
While not typically recognized as an AI-focused stock, London Stock Exchange Group (LSEG) has surprised many by entering into a 10-year collaboration with Microsoft to develop generative AI tools. As the owner and manager of the London Stock Exchange, LSEG holds a prominent position in the capital markets industry. The integration of AI into its operations aims to optimize data utilization and expand services.
CEO David Schwimmer indicates that LSEG has already initiated discussions with customers regarding leveraging its vast data resources for new opportunities. The company’s balance sheet reveals a strong equity position, surpassing its debt, resulting in a low 35% debt-to-equity (D/E) ratio. Moreover, LSEG’s projected earnings and revenue growth of 21% and 5.5% per year, respectively, surpass industry averages.
While LSEG is poised to benefit from AI, it does not solely rely on this technology for profitability. Its diversified approach positions it as a stock that offers potential dividends from AI while remaining resilient to market fluctuations.
Investing in the Future: Managing Risks and Maximizing Gains
It is important to acknowledge that despite its promising developments, AI remains a nascent technology. Unforeseen issues could potentially arise at any moment, exposing investments to risks such as regulatory reforms, political disruptions, and evolving technologies. Ongoing global debates about the future of AI and its potential impact on humanity have raised concerns and calls for rigorous safety assessments.
While acknowledging these potential risks, it is crucial to recognize the substantial long-term potential for stocks related to AI. With continuous advancements and the increasing adoption of AI across various industries, companies like RELX and LSEG are well-positioned to thrive.
Frequently Asked Questions
1. What is the estimated return on equity (ROE) for RELX in three years?
The estimated return on equity for RELX in three years is projected to be 63.4%, significantly higher than the industry average of 10%.
2. How has LSEG diversified its operations beyond traditional stock exchange activities?
LSEG has diversified its operations by incorporating AI tools through a collaboration with Microsoft. This enables the organization to enhance data utilization and expand its range of services.
3. What potential risks should investors consider when investing in AI-related stocks?
Investors must recognize that AI is still a developing technology and may face unforeseen challenges. Risks include regulatory reforms, political disruptions, and evolving technologies. Debates regarding the ethical implications of AI continue to generate discussions and calls for safety assessments.
Sources:
RELX,
London Stock Exchange Group
1. What is the estimated return on equity (ROE) for RELX in three years?
The estimated return on equity for RELX in three years is projected to be 63.4%, significantly higher than the industry average of 10%.
2. How has LSEG diversified its operations beyond traditional stock exchange activities?
LSEG has diversified its operations by incorporating AI tools through a collaboration with Microsoft. This enables the organization to enhance data utilization and expand its range of services.
3. What potential risks should investors consider when investing in AI-related stocks?
Investors must recognize that AI is still a developing technology and may face unforeseen challenges. Risks include regulatory reforms, political disruptions, and evolving technologies. Debates regarding the ethical implications of AI continue to generate discussions and calls for safety assessments.
Key Terms and Definitions
1. AI (Artificial Intelligence): The simulation of human intelligence in machines that are programmed to think, reason, and learn.
2. Data analytics: The process of examining large data sets to uncover patterns, correlations, and insights that can be used for decision-making and strategic planning.
3. ROE (Return on Equity): A financial metric that measures the profitability of a company by calculating the percentage return on the shareholders’ equity.
4. Debt-to-equity (D/E) ratio: A financial ratio that measures the proportion of a company’s total liabilities (debt) to its shareholders’ equity. It indicates the extent to which a company is financed by debt.
Suggested Related Links
RELX – Official website of RELX
London Stock Exchange Group – Official website of London Stock Exchange Group
The source of the article is from the blog krama.net