Looking To Invest in Firms Like DeepSeek? Buy Early-Stage Market Disruptors via Investment Trusts

Identifying stock market disruptors is challenging. These companies emerge from nowhere and show promise to transform our lives.

The latest disruption in the global tech sector was caused by China's DeepSeek R1 AI model, supposedly developed for a fraction of the cost of building AI models like ChatGPT.

The DeepSeek launch challenged the narrative that vast amounts of money are needed to develop efficient AI models that can solve mathematical and coding problems with sufficient reasoning power. As a result, the small Chinese tech startup founded just two years ago wiped out over a trillion dollars worth of value from the US and European stock markets late last month.

While OpenAI is scrambling to advance its ChatGPT model with new features like "Deep Research" and forging global alliances, OpenAI CEO Sam Altman said his company doesn't know how to respond to DeepSeek yet.

How To Find And Invest In Market Disruptors?

AI companies like DeepSeek offer a very lucrative investment opportunity, and the technology is well-positioned to transform our everyday lives. Unfortunately, DeepSeek isn't listed on a stock exchange, and investors cannot buy shares through a brokerage.

However, many fund managers specialise in finding tech disruptors while they are still in their infancy, which they make available to investors via investment trusts. Furthermore, many disruptors in investment trusts trade at cheap valuations, offering a chance to buy these stocks at a huge discount.

While early investors can massively benefit from future gains and hedge risks through exposure via funds, it is important to know that many early-stage potential disruptors lose money or are surpassed by something better.

Investors seeking access to potential future UK disruptors can explore venture capital trusts (VCTs), which are companies listed on the London Stock Exchange that raise money to invest in innovative and often privately owned UK companies. Since disruptors are small and in their early stages, many experts consider them high-risk investments. However, the right ones usually return rich rewards.

Furthermore, the government wants these companies to grow and thus offers investors income tax relief of up to 30% to bet on their future potential.

Disruptive SpaceTech And AI Firms Available Through Trusts

Many tech disruptors are involved in space technology. For instance, the Seraphim Space Investment Trust invests in its Seraphim Space Ventures II venture fund, which holds diverse space tech companies.

One of the companies in the venture fund is called Hubble, which has developed equipment that enables Bluetooth connection from space. While Bluetooth allows data exchange between two devices in close proximity, Hubble's solution to facilitate Bluetooth connectivity over greater distances can create diverse new use cases.

"Some people use Airtags that use GPS technology so that they can track their luggage or to help them find their keys," Seraphim Space CEO Mark Boggett told the DailyMail. "But these are still relatively expensive – around £20-£30. But Bluetooth technology is much cheaper – closer to £1 – and easy to install...It could be put in parcels so that they don't get lost – especially useful when deliveries are made by drones...They could also be used to track cattle or freight."

Meanwhile, portfolio companies like AST SpaceMobile use patented technology to create and launch cell towers in space. These towers directly connect ordinary mobile phones to a space-based, low-latency cellular broadband satellite network, allowing connectivity from anywhere without requiring device modifications.

Furthermore, a UK-developed company called SatVu provides high-resolution thermal data of Earth from space that can tell about the operational status of an oil rig or if a water source is contaminated. "It can also show where heat is being lost from buildings, which can be used to improve energy efficiency," said Boggett.

Investors eyeing AI firms revolutionising public safety can explore the Abrdn Global Innovation Equity Fund. Axon Enterprise is a leading company in their portfolio. The firm is a weapons and surveillance technology developer popular for its stun guns, bodycams, and dashcams used by police departments, immigration personnel, and other government agencies. The company uses AI in its evidence management software to reduce report writing time, speed up licence plate scanning, and improve incident response times.

Elsewhere, the Strategic Equity Capital investment trust scouts for small UK firms with growth opportunities. Among the several companies in their portfolio, AI-driven Netcall has the potential to transform healthcare and financial services.

"Patient Hub, one of the company's notable applications, is a digital service that enables NHS patients to confirm or rearrange appointments," according to fund manager Ken Wotton. "It reduces missed appointments by monitoring appointment data in real-time," thus minimising waiting lists and helping staff prioritise other critical work.

Investment manager at VCT broker Wealth Club, Nicholas Hyett, highlighted that Albion Technology is VCT that holds an emerging cybersecurity firm called Quantexa, which enhances the quality of customer data held by financial services firms to significantly lower risks of financial fraud and money laundering.

Many investment trusts back companies with ideas that could change the world. However, these long-term bets might not always translate to massive returns in the future. While these trusts offer a way for investors to own shares of emerging or privately owned companies, investors are likely to succeed if they partner with a financial adviser specialising in tech and AI investments.

Disclaimer: Our digital media content is for informational purposes only and not investment advice. Please conduct your own analysis or seek professional advice before investing. Remember, investments are subject to market risks and past performance doesn't indicate future returns.