Although AI once occupied the “fascinating but far off” thematic market sector, the best artificial intelligence stocks to buy today use techniques such as machine learning and neural networks routinely as a core function of their business. Millions of consumers interact with AI directly or indirectly on a day-to-day basis via virtual assistants, facial-recognition technology, gaming platforms, chatbots, mapping applications and a host of other software. That said, this is just the early innings, and the area’s profit potential is hard to overstate. From the Big Tech players to new age software platforms and advanced chipmakers, here are 10 AI companies betting big on artificial intelligence.
Even if you’ve only casually followed the best ways to invest in artificial intelligence, you likely know Nvidia, the specialized semiconductor company whose technology plays a central role in many young, high-growth areas of tech. Central to Nvidia’s leadership is the company’s graphics processing unit (GPU), which powers autonomous vehicles, high-performance gaming, cloud computing and many other areas requiring deep learning. Sony (SNE) partnered with Nvidia to introduce a car prototype at the Consumer Electronics Show 2020. NVDA is marketing itself to automakers as the go-to solution for unified architecture across software, AV chips, data centers and more. NVDA’s first-mover advantage in high-performance GPUs has eroded with competition, but it remains a market leader in that high-end market and is one of the best AI stocks to buy in 2020.
Google parent Alphabet has a practically existential interest in investing heavily in artificial intelligence. Google uses AI and deep learning to automate many vital parts of its sprawling software business: relevant search results, speech recognition, self-driving technology, ad pricing, personal assistant software and much more. Much of Alphabet’s roughly $1 trillion valuation depends on maintaining and improving these services. With many observers believing AI could be a winner-take-all market, GOOG has the resources, motivation and experience to win, which would certainly make it one of the best artificial intelligence stocks to buy. In late 2019, Google announced it had achieved “quantum supremacy” with its Sycamore processor, solving a computation in 200 seconds that would take the world’s fastest supercomputer 10,000 years. Until proven otherwise, this may make GOOG the single most exciting AI company in the world.
Salesforce, the customer relationship management software giant, regularly acquires hot tech startups to improve its software-as-a-service (SaaS) offerings. In 2019, it acquired Bonobo AI, a firm using automated analysis of customer phone calls, texts and chats to deliver actionable insights. This fits perfectly with Salesforce Einstein, the company’s AI-powered software that uses data to identify previously unseen business patterns, deliver the hottest sales leads, predict what marketing copy will perform best and generally optimize how businesses operate and convert. It’s no coincidence that Salesforce and a handful of the other best AI companies in the world are also now large-cap growth stocks, routinely growing their own sales by more than 20% each year. Analysts expect profits to advance 18% annually for the next five years.
The Irvine, California-based Alteryx is a relative newcomer among the best artificial intelligence companies, and it certainly flies more under the radar compared with many of the megacap stocks on this list. But AYX’s software is an increasingly relevant tool for the mainstreaming of AI; its products allow data scientists and analytical professionals to collaborate with each other to discover data-based insights and deploy new machine learning code. An out-an-out growth stock, analysts expect revenue growth of around 20% in 2020 and 30% in 2021. Thankfully, the company is already profitable, and analysts expect the SaaS company to post robust compound earnings growth of more than 40% annually over the next five years.
The second company to ever reach a $1 trillion valuation, Amazon couldn’t have hit that mark if it weren’t all-in on artificial intelligence. Like Google, returning relevant search results is central to Amazon’s business, and AI also powers key capabilities like forecasting product demand, optimizing logistics and warehousing and improving the voice-powered Amazon Alexa virtual assistant. Amazon Web Services, the company’s cash cow, is also the leading cloud provider of machine learning services, making Amazon’s expertise here even more vital (and lucrative). With hundreds of jobs in AI and machine learning posted globally, the “e-tailer” is investing heavily to stay at the forefront of the fast-growing field; CEO Jeff Bezos has pointedly mentioned the long-term capital investments Amazon will make in the area in recent letters to shareholders.
The most valuable tech companies in the world, without exception, all invest in artificial intelligence. Microsoft’s cloud computing service, Azure, is home to AI-driven tools for medicine, language, robotics, medical imaging and many other areas. A 2019 $1 billion investment in Elon Musk-founded OpenAI aims to produce the Holy Grail of AI, artificial general intelligence (AGI) — the technology that can do anything human intelligence can. If successful, Microsoft becomes OpenAI’s preferred partner for commercialization. If AGI is feasible, it’ll likely take decades, but the profit potential is virtually unthinkable. Anyone who wants a slice should own the top AI companies today — and that means owning MSFT stock, the most notable Big Tech company not currently being targeted by U.S. regulators.
In U.S. News’ original write-up of the best AI stocks, circa early 2018, Twilio was worth less than $4 billion and was cited as having the greatest risk/reward of all 10 companies. Just years later, the cloud software business is worth about $27 billion. Twilio makes cloud-based application programming interfaces (APIs) allowing developers to build voice, video and messaging features into their apps — and remains a wildly popular, useful and fast-growing service. Like some others on this list, Twilio’s high growth means high multiples. While only investors comfortable with greater volatility should consider TWLO, it still deserves mention as a top artificial intelligence company in 2020. Analysts expect profits to compound at 45% annually over the next five years.
Ever since IBM’s Deep Blue defeated the world’s top chess player, Garry Kasparov, in 1997, IBM has been publicly foreshadowing its interest in being at the forefront of artificial intelligence. Its next pop culture success in the field came in 2011 when IBM’s Watson won a game of “Jeopardy!” against some of the trivia gameshow’s top contestants. But IBM’s Watson technology and AI capabilities aren’t just for parlor tricks — they’re increasingly important to the underlying business. IBM now makes a conversational AI assistant for businesses, AI-powered tools to prevent financial fraud and manage customer life cycles, and even software that can deliver health care insights to help save lives.
Facebook is deeply committed to machine intelligence. Since January 2018, the company has had Jerome Pesenti, a legend in the field who famously led IBM’s Watson division, running point on its AI Research team. Automating self-teaching algorithms to improve Facebook’s News Feed algorithm is central to FB’s success, and using AI to screen for hate speech and fake news has never been more important to the company (or society). With 2.6 billion monthly active users (MAUs) for the first quarter of 2020 and 3 billion MAUs across Facebook, Instagram, WhatsApp and Messenger, FB has a singular opportunity to test machine learning techniques with massive real-time datasets, giving FB a huge theoretical advantage over peers. After its AI team spent months studying them, the social media network announced it is banning misleading deepfake videos on its platform ahead of 2020 elections.
Transitioning from the largest social company in the U.S. to the largest social company in China, the tech conglomerate Tencent rounds out the list of the best AI stocks to buy. China’s first tech firm valued at more than $500 billion largely hit the jackpot with WeChat, a dynamic app ubiquitously used in China for messaging, payments, ride-hailing, social media, mail and other functions. One can imagine the practically endless ways machine learning and artificial intelligence can augment that service — and in the meantime, how WeChat’s more than 1 billion daily active users can be used to test and rapidly improve this technology. TCEHY has recruited several top AI experts in recent years from rivals including Microsoft and Baidu (BIDU).
— Nvidia Corp. (NVDA)
— Alphabet (GOOG, GOOGL)
— Salesforce (CRM)
— Alteryx (AYX)
— Amazon.com (AMZN)
— Microsoft Corp. (MSFT)
— Twilio (TWLO)
— IBM (IBM)
— Facebook (FB)
— Tencent (TCEHY)
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