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3 Stocks Investors Can Buy to Join the AI Revolution
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The recent release of ChatGPT and Microsoft’s new AI enabled Bing search engine seems to have put the Artificial Intelligence industry into hyperdrive. The possibilities of AI are being realized today and the competition is on to see who can build the best AI enabled applications.
AI, which requires more computing power than ever before, is going to make for a boon across the technology industry. The creative ways that AI can be used to enhance productivity and creativity are only just beginning to become clear. Furthermore, because of the required computing power necessary it will also boost all the computing industries surrounding it.
Industries that are likely to be altered by AI include software, search, semiconductors, mobile, research, music, art, gaming and the list goes on.
Of course, there are also some people who warn about the dangers this new wild west of AI can bring. Some people in the field believe there needs to be more oversight of the activities going on, for fear of birthing AI sentience or singularity.
I have used some of these apps and although they are impressive, they are still very imperfect. So the singularity talks sounds a bit alarmist to me – at least for now.
ChatGPT and OpenAI
The release of ChatGPT, by OpenAI was extremely exciting and very well publicized. Using it for the first time truly felt like technology was entering a new paradigm, and the use of the application exploded. ChatGPT was the fastest growing web application of all time, building a user base of 100 million people less than two months after release.
With funding from Microsoft (MSFT - Free Report) , OpenAI now functions essentially as another arm of the technology giant, and MSFT hasn’t waited to implement the technology. The AI underlying ChatGPT has been implemented into MSFT’s Bing search engine, as well as Microsoft Teams, and the reception has been very positive.
MSFT seems to have the jump on other technology giants, but it is unlikely that Alphabet (GOOGL - Free Report) , Apple (AAPL - Free Report) , or even Meta (META - Free Report) are going to just roll over. It will be exciting to see the creative ways they decide to implement AI into their own ecosystems.
I am sure smaller start-ups will come out with exciting new technologies as well.
Semiconductors
“Pick and Shovel” investing is an expression that applies well to the semiconductor industry regarding AI. Pick and shovel refers to the 19th century gold rush, where pioneers traveled west in search of gold. But the people who really got rich during the rush were those selling the tools such as pick axes and shovels.
Semiconductors are a logical play to benefit from the explosion in AI. Big tech and new startups will be in ruthless competition to create the best apps and technology, but predicting the winner is very challenging. Start-ups and established companies alike are all going to need to upgrade their computing power though. There is no doubt that more and regular upgrades of microchips are going to be necessary for developing AI enabled tech, as well as consumers, who want to utilize the applications.
One semiconductor stock that looks very appealing is Microchip Technology(MCHP - Free Report) . Microchip Technology currently boasts a Zacks Rank #1 (Strong Buy), indicating upward trending earnings revisions. MCHP is also one of the leading stocks in the market today, up 14% YTD.
Microchip Technology is well positioned to benefit from the explosion in AI, with an extensive portfolio of microprocessors optimized for AI, and machine learning research and frameworks.
Image Source: Zacks Investment Research
Making it an even more compelling investment is its very reasonable valuation. MCHP is trading at 14x one-year forward earnings, below its five-year median of 17x, and below the industry average 18x.
Image Source: Zacks Investment Research
When semiconductors come up many investors will go straight to Nvidia (NVDA - Free Report) . After its most recent earnings, which were decent, NVDA highlighted its commitment to the AI industry and became a buzz in the industry. But I think MCHP is a much more appealing investment right now. While NVDA gets all the hype, it comes with a very premium valuation.
Nvidia is trading at a one-year forward P/E of 77x, well above its median of 50x, and way higher than the industry average of 18x. There is no doubt NVDA is a phenomenal business, but this valuation is extremely rich, and there are semiconductor stocks with more appealing valuations.
Image Source: Zacks Investment Research
C3.ai
C3.ai (AI - Free Report) is an enterprise artificial intelligence software company based in California. C3.ai has created a design and development environment to enable AI developers to build enterprise ready apps for CRM, and data analysis.
AI stock has done extremely poorly since its IPO, down -80% off its 2021 high, but that may be a good thing for discerning investors.
Image Source: Zacks Investment Research
C3.ai is not a profitable company, posting negative earnings for its entire time as a public company. Additionally, trading at 10x one-year forward sales, it is still quite expensive. But AI is putting together an improving financial situation and has been posting earnings beats for the last few reporting periods.
Image Source: Zacks Investment Research
AI has a Zacks Rank #3 (Hold), indicating a flat trend in earnings revision. AI is a company that has benefitted from the hype of AI, and though its valuation is maybe a bit ahead of itself, it is worth putting on the watchlist. As AI implementation into enterprise applications becomes more popular, C3.ai may be one of the first places businesses go to enhance their AI capabilities.
Alphabet
Alphabet, with its unfathomably large data sets, is likely to be major benefactors of the AI revolution. It seems that MSFT and GOOGL are currently in an AI arms race, and MSFT is ahead, but maybe it will work in GOOGL’s advantage. Mistakes are likely to be made in the early days, so those who can learn quickly from them and remain flexible should do well.
Alphabet also has a long history of being on the cutting edge of big data, machine learning, and artificial intelligence. Though it hasn’t been releasing chat bots, these technologies have been critical in optimizing search and other products. GOOGL likely already has some of the top talent in the industry, allowing the team to quickly build on the innovations of OpenAI.
GOOGL’s valuation is as appealing as it has been in a very long time. Trading at 18x one-year forward earnings is well below its five-year median of 26x and is close to its all-time low of 15x. In addition to its future AI potential, GOOGL is a beast of a company, with very strong sales and earnings growth, even as a very large and mature business.
Image Source: Zacks Investment Research
Conclusion
Artificial intelligence has already begun to shake industries across the spectrum. The potential capabilities of AI are hard to fathom. At the least these tools will upgrade our productivity and enhance our creative abilities. At the most, it may completely alter the way we live, and give rise to intelligent machines.
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3 Stocks Investors Can Buy to Join the AI Revolution
The recent release of ChatGPT and Microsoft’s new AI enabled Bing search engine seems to have put the Artificial Intelligence industry into hyperdrive. The possibilities of AI are being realized today and the competition is on to see who can build the best AI enabled applications.
AI, which requires more computing power than ever before, is going to make for a boon across the technology industry. The creative ways that AI can be used to enhance productivity and creativity are only just beginning to become clear. Furthermore, because of the required computing power necessary it will also boost all the computing industries surrounding it.
Industries that are likely to be altered by AI include software, search, semiconductors, mobile, research, music, art, gaming and the list goes on.
Of course, there are also some people who warn about the dangers this new wild west of AI can bring. Some people in the field believe there needs to be more oversight of the activities going on, for fear of birthing AI sentience or singularity.
I have used some of these apps and although they are impressive, they are still very imperfect. So the singularity talks sounds a bit alarmist to me – at least for now.
ChatGPT and OpenAI
The release of ChatGPT, by OpenAI was extremely exciting and very well publicized. Using it for the first time truly felt like technology was entering a new paradigm, and the use of the application exploded. ChatGPT was the fastest growing web application of all time, building a user base of 100 million people less than two months after release.
With funding from Microsoft (MSFT - Free Report) , OpenAI now functions essentially as another arm of the technology giant, and MSFT hasn’t waited to implement the technology. The AI underlying ChatGPT has been implemented into MSFT’s Bing search engine, as well as Microsoft Teams, and the reception has been very positive.
MSFT seems to have the jump on other technology giants, but it is unlikely that Alphabet (GOOGL - Free Report) , Apple (AAPL - Free Report) , or even Meta (META - Free Report) are going to just roll over. It will be exciting to see the creative ways they decide to implement AI into their own ecosystems.
I am sure smaller start-ups will come out with exciting new technologies as well.
Semiconductors
“Pick and Shovel” investing is an expression that applies well to the semiconductor industry regarding AI. Pick and shovel refers to the 19th century gold rush, where pioneers traveled west in search of gold. But the people who really got rich during the rush were those selling the tools such as pick axes and shovels.
Semiconductors are a logical play to benefit from the explosion in AI. Big tech and new startups will be in ruthless competition to create the best apps and technology, but predicting the winner is very challenging. Start-ups and established companies alike are all going to need to upgrade their computing power though. There is no doubt that more and regular upgrades of microchips are going to be necessary for developing AI enabled tech, as well as consumers, who want to utilize the applications.
One semiconductor stock that looks very appealing is Microchip Technology (MCHP - Free Report) . Microchip Technology currently boasts a Zacks Rank #1 (Strong Buy), indicating upward trending earnings revisions. MCHP is also one of the leading stocks in the market today, up 14% YTD.
Microchip Technology is well positioned to benefit from the explosion in AI, with an extensive portfolio of microprocessors optimized for AI, and machine learning research and frameworks.
Image Source: Zacks Investment Research
Making it an even more compelling investment is its very reasonable valuation. MCHP is trading at 14x one-year forward earnings, below its five-year median of 17x, and below the industry average 18x.
Image Source: Zacks Investment Research
When semiconductors come up many investors will go straight to Nvidia (NVDA - Free Report) . After its most recent earnings, which were decent, NVDA highlighted its commitment to the AI industry and became a buzz in the industry. But I think MCHP is a much more appealing investment right now. While NVDA gets all the hype, it comes with a very premium valuation.
Nvidia is trading at a one-year forward P/E of 77x, well above its median of 50x, and way higher than the industry average of 18x. There is no doubt NVDA is a phenomenal business, but this valuation is extremely rich, and there are semiconductor stocks with more appealing valuations.
Image Source: Zacks Investment Research
C3.ai
C3.ai (AI - Free Report) is an enterprise artificial intelligence software company based in California. C3.ai has created a design and development environment to enable AI developers to build enterprise ready apps for CRM, and data analysis.
AI stock has done extremely poorly since its IPO, down -80% off its 2021 high, but that may be a good thing for discerning investors.
Image Source: Zacks Investment Research
C3.ai is not a profitable company, posting negative earnings for its entire time as a public company. Additionally, trading at 10x one-year forward sales, it is still quite expensive. But AI is putting together an improving financial situation and has been posting earnings beats for the last few reporting periods.
Image Source: Zacks Investment Research
AI has a Zacks Rank #3 (Hold), indicating a flat trend in earnings revision. AI is a company that has benefitted from the hype of AI, and though its valuation is maybe a bit ahead of itself, it is worth putting on the watchlist. As AI implementation into enterprise applications becomes more popular, C3.ai may be one of the first places businesses go to enhance their AI capabilities.
Alphabet
Alphabet, with its unfathomably large data sets, is likely to be major benefactors of the AI revolution. It seems that MSFT and GOOGL are currently in an AI arms race, and MSFT is ahead, but maybe it will work in GOOGL’s advantage. Mistakes are likely to be made in the early days, so those who can learn quickly from them and remain flexible should do well.
Alphabet also has a long history of being on the cutting edge of big data, machine learning, and artificial intelligence. Though it hasn’t been releasing chat bots, these technologies have been critical in optimizing search and other products. GOOGL likely already has some of the top talent in the industry, allowing the team to quickly build on the innovations of OpenAI.
GOOGL’s valuation is as appealing as it has been in a very long time. Trading at 18x one-year forward earnings is well below its five-year median of 26x and is close to its all-time low of 15x. In addition to its future AI potential, GOOGL is a beast of a company, with very strong sales and earnings growth, even as a very large and mature business.
Image Source: Zacks Investment Research
Conclusion
Artificial intelligence has already begun to shake industries across the spectrum. The potential capabilities of AI are hard to fathom. At the least these tools will upgrade our productivity and enhance our creative abilities. At the most, it may completely alter the way we live, and give rise to intelligent machines.