How to invest in artificial intelligence from the UK: a step-by-step guide for mere mortals

Before we dive in, I want to impress on the reader that the stocks and products mentioned are highlighted for illustrative purposes. In other words, this is how I MIGHT construct an AI investment portfolio. THIS IS NOT INVESTMENT ADVICE.

If the AI boom were a concert, most of us would be queuing at the merch table wondering whether to buy the tour T-shirt or the limited-edition hoodie. Good news: you do not need backstage passes to take part. With a bog-standard Stocks & Shares ISA or SIPP and a handful of sensible building blocks, you can put AI to work in your portfolio without pretending to be a chip designer.

What follows is a practical, soup-to-nuts guide. We will build a simple plan, choose the right wrappers, pick the core funds, add “picks-and-shovels” exposure, then layer selective equities for extra oomph. We will also cover order mechanics, taxes and the boring but vital maintenance.

Step 1: Decide what kind of AI exposure you actually want

AI is not a single stock story. It is a stack: silicon at the bottom, data centres in the middle, and software and services on top. Your first job is to decide your mix of breadth versus bite.

• Breadth: a diversified exchange-traded fund (ETF) covering dozens of global companies building or deploying AI. Lower drama, fewer heroics.
• Bite: more concentrated bets on semiconductors, hyperscale platforms or UK names with AI revenues. Higher upside, higher volatility.

A decent starting point for the “average investor” is a core-and-satellites design: one broad AI ETF as the core, with a semiconductor sleeve and a couple of selective equities around it.

Step 2: Choose your tax wrapper before you choose your ticker

Put the admin first. Holding investments inside a Stocks & Shares ISA shelters gains and income from UK tax. A Self-Invested Personal Pension (SIPP) adds upfront tax relief but locks your money until pension age. If you plan to own any US shares (for example Microsoft or Nvidia), complete your broker’s W-8BEN form once so dividends are withheld at the reduced treaty rate. This is five minutes of paperwork that saves years of faff.

Step 3: Pick a core AI ETF you can hold for years

Your core needs three things: a clear AI mandate, sensible fees and decent liquidity on the London Stock Exchange.

Two popular starting points:

• L&G Artificial Intelligence UCITS ETF (GBP trading line). Rules-based exposure to companies that earn meaningful revenues from AI themes.
• iShares Automation & Robotics. A broader take that captures robotics and enabling tech alongside AI.

Either can sit at the heart of an ISA or SIPP and do the heavy lifting. If you like to keep things really simple, stop here, drip-feed monthly and rebalance once a year. Job done.

Position size clue: in a balanced portfolio, let the core take 40-50% of your AI sleeve.

Step 4: Add the “picks-and-shovels” with a semiconductor ETF

No AI without chips. Training and inference workloads gorge on graphics processors and the kit that makes them. Rather than guessing the next hero stock, buy the basket.

Look for a London-traded semiconductor ETF such as VanEck Semiconductor (GBP line) or iShares MSCI Global Semiconductors. These funds hold the chip designers, foundries and equipment makers that benefit from a rising tide across the cycle.

Position size clue: allocate 20-30% of your AI sleeve here. It will be punchier than the core, so be honest about your risk tolerance.

Step 5: Add an active technology trust for manager skill

Investment trusts bring two things you cannot get from passive funds: a human in the cockpit and the potential to buy £1 of assets for, say, 92p when the trust trades at a discount to net asset value.

Two well-known options:

• Polar Capital Technology Trust (PCT)
• Allianz Technology Trust (ATT)

Both have long records in navigating tech cycles, with meaningful exposure to AI beneficiaries. Do remember that discounts can widen in rough markets. If you already own a broad global equity fund, keep this to a modest slice.

Position size clue: 10-15% of the AI sleeve.

Step 6: Choose a few satellites with a clear role

This is where you season to taste. You do not need many lines; you need clear reasons to own each.

• UK AI-exposed equities:
  • Darktrace for AI-driven cyber security.
  • Alphawave Semi for high-speed connectivity intellectual property used in data-centre silicon.
  • Ocado Group for robotics and optimisation in grocery fulfilment.
    These are volatile, contract-driven businesses. Position small and expect air pockets.
• Global platform stock:
  • Microsoft gives you Azure, Copilot and a leading position in enterprise AI.
  • Nvidia is the poster child of AI compute. Wonderful economics, wobbly ride.

You only need one or two of these. Keep single-stock positions sized so you can sleep at night.

Position size clue: 10-20% combined across satellites.

Step 7: A ready-made template (so you can actually place orders)

For an ISA funded with £20,000, a balanced template might look like:

• 45% Core AI ETF (L&G AI or iShares Automation & Robotics) = £9,000
• 25% Semiconductor ETF (VanEck or iShares semis) = £5,000
• 15% Tech trust (PCT or ATT) = £3,000
• 10% UK AI names (split between two of Darktrace, Alphawave, Ocado) = £2,000
• 5% Global platform stock (Microsoft or Nvidia) = £1,000

Round to whole shares and expect a little cash left over. Use limit orders during market hours, especially for trusts and small caps where spreads can

Step 8: Understand the dealing costs and taxes

• Stamp Duty/SDRT: Most UK shares and investment trusts attract 0.5% stamp duty. ETFs are exempt.
• Ongoing charges: Check each fund’s ongoing charges figure (OCF). A slightly higher OCF can be acceptable if the strategy is differentiated and capacity-constrained.
• FX costs: Some brokers add a foreign-exchange mark-up when you buy US shares. If you want to avoid that entirely, stick to GBP-traded ETFs and trusts.

Keep a simple spreadsheet of position sizes, book costs and total fees. The admin pays for itself the first time markets wobble.

Step 9: Maintain the portfolio like a grown-up

A portfolio is a garden, not a statue. Set a maintenance routine:

• Rebalance to target weights once or twice a year, or when any sleeve drifts by more than 5%. Trim winners, top up laggards, and do it without emotion.
• Dividend policy: If your ETF offers accumulating and distributing share classes, the accumulating line can reduce dealing frequency. If you like cash income, pick distributing and reinvest on your timetable.
• Risk controls: For single stocks, write down a maximum loss threshold (for example 20% below cost) before you buy. If it hits, review the thesis, not your feelings.

Step 10: Know the risks you are actually taking

• Cycle risk: Semiconductors swing. AI demand is strong, but supply responses can catch you napping.
• Concentration risk: The AI narrative has clustered in a handful of mega-caps. Your ETFs will already own them. Doubling up elsewhere magnifies the same bet.
• Valuation risk: Great companies can be mediocre investments if you pay any price. A disciplined entry price, or drip-feeding monthly, helps.
• Policy risk: Data-centre build-outs depend on power availability and planning. Cyber and privacy rules evolve. Read the footnotes.

None of these are reasons not to invest. They are reasons to size sensibly and diversify.

Optional extras (only if they genuinely fit your brief)

• Data-centre and digital infrastructure: Listed plays such as SEGRO or specialist digital-infrastructure funds can give exposure to the physical backbone of AI. Different risk/return profile, more like property and utilities than tech.
• Venture Capital Trusts (VCTs): Early-stage exposure to UK tech with generous tax benefits, but higher risk and limited liquidity. Suit a specific tax situation, not a casual punt.
• Crypto-adjacent products: Some investors pair AI with crypto exchange-traded notes as a “digital rails” theme. Volatile, complex and not for everyone. If you do it, keep it small and understand the product structure.

Common mistakes to avoid

• Buying everything that says “AI” on the tin. You will create a closet index with higher costs. Pick a core and be choosy with satellites.
• All-or-nothing entries. If you are nervous about timing, split your purchases across three or four dates. You will hate yourself less, statistically and emotionally.
• Ignoring liquidity. Small caps and trusts can gap at the open. Use limits and avoid trading in the first and last 10 minutes where spreads are widest.

A final checklist you can print

1. Fund ISA or SIPP; complete W-8BEN if buying US shares.
2. Choose one core AI ETF and size it at 40-50% of your AI sleeve.
3. Add one semiconductor ETF at 20-30%.
4. Consider one active tech trust at 10-15%.
5. Pick one or two satellites (UK or global) for 10-20% total.
6. Place limit orders, note stamp duty on UK shares, and mind FX fees on US lines.
7. Rebalance on a set schedule; write risk rules in advance.
8. Keep a one-page rationale per position and review quarterly.

You do not need clairvoyance to invest in AI. You need a wrapper, a plan and a willingness to be slightly boring in a very exciting corner of the market. Build the core, add the shovels, sprinkle some spice, and let time do