Updated 27.6.2023 19:17
AI is the Field of Computer Science That Focuses on Creating Software or Machines That Exhibit Human Intelligence
For investors looking to gain exposure to the artificial intelligence sector, here are five tech stocks poised to benefit from the AI boom.
A basic objective of Artificial Intelligence (AI) is to enable computers to perform tasks that usually require human intelligence, such as interpreting natural language, recognizing patterns, solving problems, and making decisions.
AI can be classified into two types:
- Narrow AI: These are systems designed to perform a narrow task, like recommending songs on Spotify or answering questions on Siri, and they can only operate under a limited set of constraints. Most of the AI that we see in our day-to-day lives falls into this category.
- General AI: These are systems that possess the capability to perform any intellectual task that a human can do. They can understand, learn, adapt, and implement knowledge from different domains. As of my knowledge cutoff in 2021, this type of AI remains theoretical mainly, with no practical examples in use.
AI works by combining large amounts of data with fast, iterative processing and intelligent algorithms. This allows the software to learn automatically from patterns or features in the data. A common type of AI is machine learning, where algorithms are used to parse data, learn from it, and then make determinations or predictions about new data.
How Companies Are Using AI:
Companies across various sectors are using AI in numerous ways to improve their operations, products, and services. Here are some examples:
- Customer Service: AI chatbots and virtual assistants help companies provide 24/7 customer service, answer common questions, and route more complex inquiries to human agents.
- Data Analysis: Companies use AI to analyze large amounts of data to uncover patterns and insights that can help them make better business decisions.
- Personalized Recommendations: Companies like Amazon and Netflix use AI algorithms to recommend products or movies based on a user’s past behavior.
- Automation of Routine Tasks: AI is used to automate routine tasks, such as email filtering in Gmail or expense approvals in financial departments.
- Fraud Detection: In finance, AI is used to detect unusual patterns or anomalies that might indicate fraudulent activity.
- Healthcare: AI is used in diagnostic procedures, drug discovery, personalized medicine, and patient monitoring.
- Autonomous Vehicles: Companies like Tesla and Waymo use AI for their self-driving technologies.
- Supply Chain and Inventory Management: AI can help companies predict inventory needs, optimize logistics and routes, and even forecast sales.
Source: CNBC Television YouTube
5 Stocks Poised to Benefit From the AI Boom
When it comes to AI stocks, these companies fall into one of the two following categories:
- Blue-chip tech stocks with significant AI investments or partnerships with AI developers.
- Small startup companies solely focused on the development of AI.
Investing in small AI developers might seem like the best option for those looking for exposure to the sector. However, according to FBB Capital Partners AI research analyst Michael Brenner, “they’re not necessarily the best AI investments.”
Brenner explained, stating:
Because of this, these small AI companies only have the resources to develop their technology to a certain point before they have to partner with a larger tech company with the resources and infrastructure to develop their AI technology further.
When it comes to the AI investment portfolio at FBB Capital Partners, Brenner added:
That said, the following is our list of blue-chip tech stocks with substantial AI investments that should benefit significantly from the AI boom.
NVIDIA is a leading manufacturer of GPUs, which are critical for AI and machine learning. Its hardware powers many AI initiatives and has also branched out into AI software.
Shares of Nvidia closed trading today at $426.53 per share, down -0.8% on the day. YTD, NVDA stock is up +197.96%.
As the parent company of Google, Alphabet has been a pioneer in AI and machine learning. Google’s AI initiatives range from its core search engine to self-driving car technology (Waymo) to healthcare (Verily and DeepMind).
Shares of Alphabet closed the day at $125.09 per share, up +1.15% on the day. YTD, GOOGL stock is up +40.36%.
Microsoft has been integrating AI across its product range, from Azure AI services to Office 365 and LinkedIn. They also have a dedicated research group that focuses on AI development.
Shares of Microsoft last traded at $348.10 per share, up +3.19% on the day. YTD, MSFT stock is up +45.30%.
Amazon uses AI for its recommendation engine, for Amazon Web Services, and its voice assistant, Alexa. It’s also involved in a range of AI research and applications, including autonomous delivery drones and cashier-less stores.
Shares of Amazon closed today’s trading session at $127.11 per share, up +0.55% on the day. YTD, AMZN stock is up +48.11%.
IBM has been a significant player in AI for years, particularly with its Watson platform. IBM uses AI in various applications, including healthcare, weather forecasting, and business analytics.
Shares of IBM last traded at $138.40 per share, up +0.87% on the day. YTD, IBM stock is down -2.23%.
Disclaimer: Wealthy VC does not hold a long or short position in any of the stocks mentioned in this article.