Lately, a lot of people have been asking me about artificial intelligence stocks and whether they make sense in a self-directed IRA. With AI tools popping up in nearly every industry, it’s no surprise investors are trying to figure out how to get in early — especially in tax-advantaged accounts.

Here’s how I think about it:

Why AI Is Getting Retirement Investors’ Attention

AI is no longer just a Silicon Valley buzzword. From healthcare to finance to logistics, companies are either building AI tools or figuring out how to integrate them. And the market has noticed. In 2023 and early 2024, AI-related ETFs and individual tech stocks have seen big gains.

If you’re using a self-directed IRA, this could be a smart place to explore longer-term growth plays. Unlike a traditional IRA that’s limited to mutual funds and public stocks, a Checkbook IRA or Solo 401(k) lets you invest in things like:

• Pre-IPO tech startups
• Private AI venture funds
• AI-focused real estate automation tools
• Cryptocurrency projects using machine learning

The ability to diversify beyond Wall Street is exactly what makes these accounts so powerful.

The Case for Holding AI in a Tax-Advantaged Account

AI investing comes with high upside potential — and potentially high taxes if you’re not careful. That’s why putting it in a tax-deferred or tax-free account can make a huge difference. Here’s why:

• Capital Gains Protection: If you invest in an AI startup or ETF and it takes off, you can defer (or avoid) capital gains by keeping it in your IRA.
• No Annual Tax on Dividends or Interest: AI companies that generate dividends or partner distributions won’t trigger yearly tax events in the IRA.
• Compounding Growth: AI is a long play. Tax-free compounding inside a Roth IRA can significantly multiply gains over a decade or more.

Just make sure you’re not investing in something that creates Unrelated Business Taxable Income (UBTI) without planning for it. That can get complicated fast.

What to Watch Out For

Not all AI investments are created equal, and not all are IRS-safe. Here are a few landmines to avoid:

• Self-Dealing: Don’t invest in a company you or close family members have a stake in.
• Valuation Problems: If you’re buying into a startup or fund, make sure you get a third-party valuation if needed. The IRS may want documentation later.
• Liquidity: Many AI companies are private and illiquid. Be sure your IRA won’t need quick access to that cash.

Wrapping It Up

If you’re using a self-directed IRA to invest for the long term, AI deserves a serious look. The key is staying compliant and choosing investments with true upside—not just hype.

And like anything else in a self-directed account, make sure you’re documenting everything and talking to a pro if you’re unsure.

AI could be this decade’s internet or smartphone moment. And having your retirement dollars riding that wave, tax-deferred or tax-free, might turn out to be one of the smartest bets you make.