How to trade AI stocks

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What are AI stocks and why do they matter

AI stocks are shares in companies that develop artificial intelligence technologies or integrate AI into their main business operations. These firms use computer systems to carry out tasks that would normally require human intelligence, such as visual recognition, speech processing and complex decision-making.

The global AI market was valued at about $279bn in 2024 and is projected to exceed $1.8tn by 2030, with a compound annual growth rate of 35.9%. AI-related firms now account for 49.4% of the S&P 500’s market capitalisation, despite making up only 7.55% of index constituents (Grand View Research, February 2025).

Types of AI companies

The AI sector can be broadly divided into two categories:

• Tech giants with AI integration – established firms such as Microsoft, Alphabet, Amazon, Apple, and Meta that have embedded AI into their business models. These companies often provide greater stability while still offering exposure to AI growth.

• Pure-play AI companies – businesses that generate more than 50% of their revenue from AI-related products or services, including Nvidia, C3.ai, and SoundHound AI. These firms provide direct exposure to AI innovation but typically show higher volatility.

Discover the best AI stocks for CFD traders in 2025.

Key AI price drivers

Understanding what moves AI stock prices is crucial for informed trading decisions. Several factors may influence valuations across the sector:

Technology developments and breakthroughs

AI stocks can react to technological milestones, product launches, and research advances. Companies announcing significant model upgrades or new applications can experience immediate price movements.

Earnings and revenue growth

Quarterly results are closely monitored for evidence of AI monetisation. Firms showing that AI investments support revenue growth may perform more strongly. In contrast, sector-wide declines could occur during periods of weaker economic outlook.

Market sentiment and adoption rates

AI stocks remain sensitive to overall sentiment around artificial intelligence. Uncertainty over adoption timelines, regulatory shifts, or expected returns can drive sector-wide volatility.

Economic conditions

Interest rate changes can have a significant impact, as many AI stocks trade at premium valuations based on future growth expectations.

AI stock CFD trading strategies

Trading AI stocks with contracts for difference (CFDs) requires strategies that reflect the sector’s distinct features and volatility patterns.

Past performance is not a reliable indicator of future results.

*Stop loss orders are not guaranteed. Guaranteed stop loss orders (GSLOs) incur a fee if activated.

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Common pitfalls to avoid

Awareness of common mistakes can help traders approach AI shares CFDs more effectively:

• Overconfidence in growth projections – although AI has long-term potential, avoid assuming continuous growth. Market sentiment can shift quickly, and valuations may diverge from fundamentals.

• Ignoring broader market context – AI stocks do not trade in isolation. Macroeconomic factors such as interest rates and wider market sentiment strongly affect performance.

• Chasing performance – avoid buying into recent winners without caution. AI stocks can reverse sharply, and entering at peaks often results in losses.

• Neglecting risk management – high volatility makes sound risk management essential. Maintain diversification and avoid committing more than you can afford to lose.

• Misuse of leverage – leverage can magnify both gains and losses. Keep leverage ratios consistent with your strategy and risk tolerance.

Getting started with AI stock trading

If you’re looking to begin trading AI stocks, consider these practical steps:

• Step 1: Build your knowledge baseDevelop a clear understanding of the AI sector, leading companies and the main market drivers. Keep up to date with technological advances and industry developments.
• Step 2: Choose your trading approachDecide whether to focus on established technology firms with AI exposure or pure-play AI companies. Align your choices with your risk tolerance and preferred trading horizon.
• Step 3: Select a suitable platformChoose an FCA-regulated CFD broker that provides competitive spreads, broad market access and integrated risk management tools. Use a demo account to practise before trading with real funds.
• Step 4: Start small and scale graduallyBegin with modest positions to see how AI stocks react in different market conditions. Increase exposure gradually as you build experience.

CFD trading carries significant risk. Never trade with more than you can afford to lose. Past performance is not a reliable indicator of future results, and the high volatility of AI stocks means gains and losses are both possible.

How to choose an AI trading platform

Selecting a CFD trading platform is essential for trading AI stocks. Look for brokers that combine robust functionality with user-friendly features to help manage exposure in a volatile sector.

Common platform features:

• Security and regulation: locally-regulated providers that use two-factor authentication and maintain transparent operational records.

• AI-enhanced tools: platforms that incorporate AI-powered insights or automation, such as AI-driven trade signals, AI-focused analytics, or personalised feeds.

• Demo account and mobile access: choose a platform with a free demo account and a fully featured mobile app for trading on the move.

• Market coverage: ensure access to major AI stocks across multiple exchanges, including both large technology firms and smaller pure-play AI companies.

• Cost structure: review commission models, spreads and non-trading charges such as overnight financing, inactivity, and withdrawal fees.

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