- Companies like Microsoft and Alphabet are already heavily invested in AI and are well-positioned to grow in tandem with the new technology
- Microchip producers and cybersecurity services will be more sought-after with the rise of AI, so investing in these companies early on could be a savvy choice
- Technology is evolving at a breakneck pace, and companies with little involvement in AI, blockchain technologies or the metaverse could become irrelevant over time
If you’ve followed the news over the last few months, you’ve probably heard about at least one artificial intelligence company. OpenAI’s release of ChatGPT and its pending incorporation into Bing have dominated headlines. Even if you somehow avoided that news, AI offerings are everywhere.
We’ll review some artificial intelligence companies well-positioned to magnify earnings in the coming years. If you’re a seasoned investor, you’ll likely have heard about most of these stocks, but we’ve also included some lesser-known options.
Plus, if you want to make investing in this field even more straightforward by actually using AI to build a portfolio, you can download Q.ai today to take the guesswork out of investing.
AI stocks and growth potential
It’s important to remember that investing always comes with potential risks, and the risk level grows when investing in a company involved in new technology. Just because a company uses AI doesn’t mean it’s a good investment.
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More established companies with alternative sources of revenue will be less risky investments. Consequently, if your goal is to get in on the ground floor and invest in a newer company with high growth potential, make sure you understand the risks of what you’re doing.
Microsoft Corp (MSFT)
This one’s a no-brainer since Microsoft recently confirmed its $10 billion investment in OpenAI, the company behind ChatGPT. The deal should be profitable for Microsoft, as it will get a 75% share of OpenAI’s profits until the AI company can pay back Microsoft’s investment. At that point, Microsoft will assume a 49% stake in the company.
Microsoft is planning to release a new version of Bing that will use OpenAI’s chatbot to answer questions written by users. The product could make Microsoft a more legitimate rival to Google in the search engine space.
Beyond that, Microsoft’s partnership with OpenAI has allowed it to integrate art generators like DALL•E 2 and language-to-code translators like Codex into preexisting products.
Some analysts predict the stock, which closed on February 23, 2023, at $254.77, will jump past $300 within the next 12 months.
Nvidia Corporation (NVDA)
Nvidia produces high-performance microchips that can run advanced AI applications. There’s currently a lot of demand for this service as Nvidia has partnered with companies like Meta and Oracle to integrate AI into their businesses.
Last September, the U.S. government ordered Nvidia to stop exporting two of its top computing chips, the A100 and H100, to China. While the ban hurt Nvidia’s business, it signified the high quality of its product and how essential these microchips will be to the future of AI.
Taiwan Semiconductor Mfg. Co. (TSM)
A company with a similar focus to Nvidia is TSMC, which does most of the manufacturing work for leading fabless semiconductor companies like Apple, Qualcomm and Nvidia. Despite being the world leader in this area at the moment, the stock recently made headlines after Berkshire Hathaway significantly reduced its stake in TSMC.
The reasons for the divestment are not wholly known, but experts suspect it’s because the semiconductor business is capital-intensive, and profits are rarely guaranteed. Though this might dissuade some investors from buying TSM stock, analysts remain optimistic, with some suggesting TSM could increase in price by over 500% in the next 12 months.
Alphabet Inc (GOOGL)
Alphabet already uses AI in most aspects of its business, from targeted ads on YouTube to spam filters on Gmail. British artificial intelligence company DeepMind was acquired by Alphabet (then Google) in 2014. Though DeepMind didn’t become profitable for the company until October 2021, Alphabet’s dedication to AI technology has placed it in a good position.
Alphabet reportedly issued a “code red” after Microsoft’s investment in ChatGPT was announced. Google recently launched a pilot version of its own AI chatbot, Bard. Though the launch of Bard went awry, Alphabet still has excellent potential.
Between a new chatbot and Google Cloud’s AI services, the company will hopefully be able to make good on analysts’ prediction of a 37% price increase this next year.
Most Americans know Alexa, Amazon’s popular virtual assistant, but they may not know about Amazon’s many other AI offerings. Amazon Web Services provides customers with various AI tools, including image analysis, the ability to identify missing product components, identifying operation bottlenecks and more.
Last November, Amazon introduced Sparrow, an intelligent robotic arm that helps streamline Amazon’s fulfillment process by moving individual products before they get packaged. Amazon has not fallen behind in integrating AI into its business, so we anticipate the company will see growth in future years.
Amazon stock is also undervalued for the time being, primarily because of a disappointing fourth-quarter earnings report, so buying in now might be a savvy choice for new investors. Analysts expect Amazon stock to grow roughly 40% over the next year.
Palantir Technologies (PLTR)
Palantir is a data analytics software company that initially worked with the U.S. Intelligence Community. Their client list has since expanded to include state and local governments and private companies. Palantir won an $85.1 million contract with the U.S. Army last October, and their collaborations with the defense sector are likely to continue.
Palantir’s stock dropped recently after the rise in long-term bond yields, and macroeconomic forces have harmed the company significantly over the last year. Analysts are mixed on predictions for Palantir as the company hopes to achieve a full year of GAAP profitability.
Nevertheless, the fact remains that data mining and storage capabilities will be essential for both governments and private companies in the coming years.
Cloudflare Inc (NET)
This global network and cybersecurity company offers clients increased website privacy and performance. Cloudflare uses machine learning for bot detection, identifying anomalies and customer support.
Cloudflare could be a good purchase for investors who believe their services will continue to grow in the coming years. Cloudflare has been able to reduce losses as it’s grown in recent years and saw a 42% increase in revenue for the fourth quarter of 2022. This comes amidst headlines of a partnership with Nvidia and leadership predicting $5 billion in annual revenue by the end of 2027.
Other artificial intelligence companies that might interest you
- Intuitive Surgical, Inc (ISRG): Intuitive sells visualization technology and robotic AI assistants for minimally invasive surgeries.
- Adobe Inc (ADBE): Adobe announced new machine learning capabilities for its Experience Cloud product last year, part of which were aimed at helping marketing teams optimize their campaigns.
- Micron Technology Inc (MU): Similar to Nvidia, Micron is a large-scale producer of high-performance computer chips.
If you’re an investor interested in the tech world but don’t want to track the headlines, consider downloading Q.ai. Q.ai harnesses the power of AI to help you diversify your portfolio while protecting your gains. The Emerging Tech Kit will let you invest in tech ETFs, tech companies and cryptocurrencies.
The bottom line
Artificial intelligence is spreading into most facets of our lives. Companies ahead of the curve and integrating AI technology into their businesses are looking to magnify their gains.
If you want to take advantage of the potential gains this industry may hold, consider investing in any of the companies listed above. While they do come with risks, the projections indicate they could be good investments moving forward.
Download Q.ai today for access to AI-powered investment strategies.