In 2018, it was cannabis. In 2019, it was 5G. And yet, before either of those trends, artificial intelligence (or AI) was growing relentlessly and undeniably.
Artificial intelligence stems from the simple fact that computers are getting smarter. And they are being designed to process information faster. The words “machine learning” are being used to summarize the creation of algorithms, freed from human programmers, which train themselves on massive data sets. This year, two separate artificial intelligence “machines” demonstrated the ability to “read” Wikipedia entries and answer questions better than humans did.
But AI is more than a parlor trick. Chances are, at some point today, you’ve experienced the benefit of artificial intelligence. You may have gotten to this page because of an internet search. You may have asked Alexa or your Google Assistant to perform a command. You may have voice-activated your Roomba vacuum. You may have used an AI-powered GPS to get to wherever you’re reading this.
In the future, you may be hailing an autonomous car. A virtual assistant will be able to place calls for you to make appointments. But instead of sounding like a robot, the assistant will sound human, with an understanding of context and nuance.
And those are just two applications. There will be more because the possibilities of artificial intelligence are expansive. But they can also be somewhat chilling. Many of the functions that are performed by humans today may be made obsolete by AI. But that’s a subject for another day.
Right now, you want to know how you can profit from this emerging trend.
You’ve come to the right place. In this special presentation, we will look at 8 stocks that can help you profit from the artificial intelligence trend.
Quick Links
- Alphabet
- Amazon
- Microsoft
- Nvidia
- Advanced Micro Devices
- Salesforce
- The Trade Desk
- Netflix
#1 - Alphabet (NASDAQ:GOOGL)
Alphabet (GOOGL)
We’ll start with the biggest fish in the AI pond, Alphabet (NASDAQ: GOOGL). In fact, you can say that Alphabet is betting its entire existence on artificial intelligence. Shares of the tech giant are only up about 8% in 2020. But much of that sluggish performance is from their ad business.
However, even with this “sluggish” performance, GOOGL stock is only about 3% away from surpassing its all-time high. Does anyone doubt that they won’t quickly surpass that mark? Maybe that will have happened by the time you’re reading this.
But AI is at the core of just about everything the company does. Giving you relevant search results, speech recognition, and more are all rooted in artificial intelligence.
Beyond its leadership in AI, there are over one trillion reasons I’m putting Alphabet on the top of this list. That’s my tongue-in-cheek way of saying that Alphabet has a market cap of over one trillion dollars. That gives it the resources and the staying power to absorb competitors in a field that some analysts see as being ripe for consolidation.
About Alphabet
Alphabet Inc offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
Read More - Current Price
- $175.98
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 35 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $205.90 (17.0% Upside)
#2 - Amazon (NASDAQ:AMZN)
Another of the FAANG stocks that would be impossible to ignore is Amazon (NASDAQ: AMZN). While many consumers are well aware of Amazon’s reputation as an e-commerce giant, the company is also one of the leaders in artificial intelligence. The company uses AI as an offering in its high-margin Amazon Web Services (AWS) division.
Using AI, business customers can perform image and video analysis in addition to using virtual assistants and forecasting. In late 2019, the company introduced Amazon Kendra – an enterprise search service that is powered by machine learning. According to Amazon, the service was “generally available” to all AWS customers.
The company is also using AI to help with its core e-commerce business. Applications include planning routes for the company’s hundreds of warehouse robots.
Unlike Alphabet, Amazon is easily outperforming the market. AMZN stock is up an amazing 53% for the year. And there’s no reason to believe the stock won’t continue to outperform.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $202.88
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 41 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $235.77 (16.2% Upside)
#3 - Microsoft (NASDAQ:MSFT)
While not one of the FAANG stocks, Microsoft (NASDAQ: MSFT) has been doing a lot of the heavy lifting for the tech sector. And it’s not just because of its ubiquitous Windows platform. The company has introduced its Microsoft Azure platform which is helping to fulfill the vision of CEO Satya Nadella.
Azure is Microsoft’s cloud platform that allows customers to add AI capabilities to their apps even without machine learning expertise. Beyond Azure, Microsoft also uses AI to power its Microsoft 365 productivity suite, as well as its Bing search engine and the company’s voice assistant, Cortana.
Microsoft has also invested billions of dollars into Elon Musk’s AI venture, OpenAI. And in May, the companies announced a collaborative effort that has created one of the five publicly disclosed supercomputers in the world.
MSFT stock is up nearly 30% in 2020 and unlike Alphabet or Amazon, investors can actually collect a dividend for holding shares of the company. Although the stock currently exceeds its 12-month price target, the company is nearly a unanimous buy among the 36 analysts that cover the stock.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $415.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $503.03 (21.1% Upside)
#4 - Nvidia (NASDAQ:NVDA)
If you haven’t been paying attention, you may have missed that Nvidia (NASDAQ: NVDA) is not the same company that you think it is. Many investors think of Nvidia as the company that makes the graphic processing units (GPUs) that power personal computers. And that makes those computers useful for gamers.
But the same high-powered graphics cards the company is known for are also helping the company move into AI and deep learning applications. In fact, Nvidia posted over $1 billion in revenue from its data center division in the first quarter of 2020. That was a year-over-year gain of over 80%.
Beyond data centers, the company is also partnering with automakers to claim a piece of the autonomous vehicle market.
NVDA stock is up over 60% in 2020 and that is despite the steep selloff that all tech stock suffered in March. The stock is outpacing its current 12-month price target. But with 30 buy ratings and 5 hold ratings out of 39 analysts that offer an opinion on the stock, you shouldn’t be afraid to get in NVDA stock.
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $145.89
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $154.63 (6.0% Upside)
#5 - Advanced Micro Devices (NASDAQ:AMD)
Although it may not be as well-known as Nvidia, Advanced Micro Devices (NASDAQ: AMD) deserves consideration in any AI portfolio. The company has noticeably moved into a solid number two position in both the graphic processing unit (GPU) market as well as the central processing unit (CPU) market.
To paraphrase an old advertising slogan, perhaps being number two AMD tries harder. Whatever they’re doing, it seems to work. The company does not have a dedicated AI chip, but they are still a presence in deep learning. The chipmaker is also the exclusive builder on two of the three fastest supercomputing systems that are used by the U.S. government.
Like Alphabet, AMD stock is not getting a lot of love from investors. It’s up just over 6% for the year as of this writing. But that shouldn’t dissuade you. The company continues to make solid gains on its competition and is showing increasing strength in the data center category.
About Advanced Micro Devices
Advanced Micro Devices, Inc operates as a semiconductor company worldwide. It operates through Data Center, Client, Gaming, and Embedded segments. The company offers x86 microprocessors and graphics processing units (GPUs) as an accelerated processing unit, chipsets, data center, and professional GPUs; and embedded processors, and semi-custom system-on-chip (SoC) products, microprocessor and SoC development services and technology, data processing unites, field programmable gate arrays (FPGA), and adaptive SoC products.
Read More - Current Price
- $137.60
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 29 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $192.79 (40.1% Upside)
#6 - Salesforce (NYSE:CRM)
Salesforce (NYSE: CRM) is best known for its customer relationship management software. The company recently introduced Salesforce Einstein, an AI-powered software that uses data to produce actionable results including identifying previously unseen business patterns, generate sales leads, and to perform predictive analysis on marketing copy.
Salesforce is far from a pure-play AI stock. In fact, the company gets its AI credentials through its acquisitions that help it improve its software-as-a-service (SaaS) products. Recently the company acquired Bonobo AI. This company uses AI to analyze customer phone calls, texts and chats to deliver actionable insights.
CRM stock has shaken off its March selloff and is now up over 16% for the year. Although the stock is within 5% of its 12-month price target, the stock has a consensus buy rating with 38 buy ratings and 2 strong buy ratings among the 44 analysts that issue an opinion on the stock.
About Salesforce
Salesforce, Inc provides Customer Relationship Management (CRM) technology that brings companies and customers together worldwide. The company's service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and artificial intelligence, and deliver quotes, contracts, and invoices; and service that enables companies to deliver trusted and highly personalized customer support at scale.
Read More - Current Price
- $325.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 31 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $326.19 (0.2% Upside)
#7 - The Trade Desk (NASDAQ:TTD)
The Trade Desk (NASDAQ: TTD) is on the leading edge of what is known as programmatic advertising. Marketers target content providers to attract their ideal consumers and fine-tune their ad spending and measure their return on investment (ROI). It’s a way of measuring ad effectiveness that advertisers have always dreamt of. And it’s powered by the company’s AI engine named Koa.
Without getting too technical, programmatic advertising changes the way an ad is delivered. A company opens up its web page for providers like The Trade Desk to bid on that ad space in real time. Koa analyzes internet data and generates real-time recommendations.
Some analysts are concerned the TTD stock may be a little overheated right now with the stock currently up over 60% after last year’s 120% gain. It is well above its 12-month price target and analysts have a consensus opinion of hold. However, the company is a leader in what is sure to be the future of advertising. It may not be a home run right now, but a few solid doubles never hurt a portfolio.
About Trade Desk
The Trade Desk, Inc operates as a technology company in the United States and internationally. The company offers a self-service cloud-based platform that allows buyers to plan, manage, optimize, and measure data-driven digital advertising campaigns across various ad formats and channels, including video, display, audio, digital-out-of-home, native, and social on various devices, such as computers, mobile devices, televisions, and streaming devices.
Read More - Current Price
- $123.90
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 25 Buy Ratings, 3 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $122.65 (1.0% Downside)
#8 - Netflix (NASDAQ:NFLX)
Netflix (NASDAQ: NFLX) may seem like an odd entry into this category. But the company has been a coronavirus winner and with many customers now breathlessly waiting for Season 4 of Ozark, it appears rumors of the company’s demise were unfounded.
And of course the company uses AI to make those oh-so-targeted “suggestions” of what to watch next. Its personalized content that provides the curated experience that is extremely popular to its core audience.
But the company is using AI for more than just a parlor trick. They are also using their learnings to decide on where to shoot a movie. This is extremely important for a company like Netflix which has always relied on its original content, but will become even more reliant on it as other companies enter the streaming wars.
NFLX stock is up nearly 45% for the year. While the stock is slightly above its consensus price target, the company just received a higher price target from Canaccord Genuity of $550.
About Netflix
Netflix, Inc provides entertainment services. It offers TV series, documentaries, feature films, and games across various genres and languages. The company also provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, TV set-top boxes, and mobile devices.
Read More - Current Price
- $883.85
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 24 Buy Ratings, 9 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $758.76 (14.2% Downside)
As you’ve noticed, there are very few pure-play artificial intelligence companies. And you have to be careful. Like the cannabis boom of the 1980s, some companies are much more involved with artificial intelligence than others.
Artificial intelligence is not science fiction. It's proven science that is propelling many businesses forward. But the opportunity for investors is only beginning. As much as it may seem, AI has become a ubiquitous part of our life. It’s really only in the early innings.
And just as AI applications will continue to expand, so will the profit potential for this sector. In fact, analysts from Omdia/Tractica project the total market for AI stocks to grow from $10.1 billion in 2018 to $126 billion by 2025.
Just like cannabis stocks, there is bound to be some consolidation in this sector. Investors will be wise to stick with quality stocks like the ones in this presentation. These are the companies that are likely to be around to be part of the present and the future of this exciting and expanding industry.
More Investing Slideshows:
