Artificial intelligence (AI) is one of the hottest and most controversial segments of the technology industry. Elon Musk is wary of it and wants AI regulated. Tech companies are plowing resources into it. Investors see AI stocks as having huge growth potential.
For all of its complexity, the potential and allure of AI is straightforward. In a 2018 McKinsey & Company report, Professor Ajay Agrawa, of the University of Toronto’s Rotman School of Management sums it up in single a sentence: “AI serves a single, but potentially transformative, economic purpose: it significantly lowers the cost of prediction.”
If you want to invest in the companies that are bringing about this transformation, I’ve put together a list of eight of the best AI stocks on the market today.
- Amazon (NASDAQ:AMZN)
- Salesforce (NYSE:CRM)
- Facebook (NASDAQ:FB)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Microsoft (NASDAQ:MSFT)
- ServiceNow (NYSE:NOW)
- Nvidia (NASDAQ:NVDA)
- Twilio (NYSE:TWLO)
Many of these stocks earn a Portfolio Grader ‘A’ rating, and each is worth considering as a leader in the artificial intelligence industry.
The Best AI Stocks to Buy: Amazon (AMZN)
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Amazon was an early pioneer in commercializing AI with products like its Alexa-powered Echo smart speaker. In fact, that product single-handedly kicked off a global smart speaker market that’s projected to be worth $23.3 billion by 2025. Sounds good, but Amazon’s AI stake is much bigger than the Echo.
AMZN earned revenue from Echo sales, and used the smart speaker to help boost sales on Amazon.com. However the big win was all the data and feedback the company collected through the Echo. As Wired puts it, that flood of Echo data “supercharged its own machine-learning tools and platforms.”
Amazon Web Services (AWS) is the company’s most profitable division — by far. AWS is the machine that drives AMZN stock, and Amazon has been integrating machine learning capabilities into its cloud service. SageMaker is the name of the platform within AWS that offers advanced machine learning and AI capabilities for customers. SageMaker is the key to Amazon’s AI leadership, but it all started with a smart speaker. While that smart speaker market is on track to be worth $23.3 billion in five years, the AI market is projected to be worth $190.6 billion in the same timeframe.
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On the surface, Salesforce may not seem to be the sort of company where you’d see a focus on AI. But consider this description of how artificial intelligence benefits Salesforce customers: “AI solutions give businesses the boost they need to reach their customers in a more meaningful, personalized, and mutually beneficial way.”
Now it makes sense. A customer relationship manager (CRM) that employs AI offers significantly enhanced capabilities. Salesforce has AI onboard with its Einstein platform. Einstein powers an integrated advisor feature that helps Salesforce customers make smarter business decisions. That’s a powerful advantage over other CRM tools that capture data, but leave it up to humans to interpret it.
Salesforce has seen its shares increase in value by 264% over the past five years. That’s one reason it rates an ‘A’ rating on Portfolio Grader. I think the company’s embrace of AI is going to help power CRM stock to continued long-term growth.
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Given the amount of data it collects and its ubiquitous presence in our lives, it’s only natural that Facebook is all-in on AI.
The social media giant began investing in AI in 2013 — back when FB stock could be snapped up for under $30 a share. Now, Facebook is an AI leader, using the technology for everything from tagging people in photos to powering chatbots that converse with customers on Messenger.
Today, as Facebook drives AI research and continues to integrate the technology throughout its platform, FB stock is worth close to $300. That continued investment and its ongoing payoff makes Facebook one of the top AI stocks to own.
Alphabet’s Google is known for its “big bets.” Some of these pay off. Many don’t. Count the investment in artificial intelligence among one of the biggest wins for the company.
In 2017, Google CEO (and now also Alphabet CEO) Sundar Pichai said that Google was becoming an “AI first” company. He pointed to Google Assistant being a first step on that path, and noted that machine learning was being leveraged to improve other Google services such as Google Maps. By the following year, Google was topping the list of tech company AI spending.
Google’s ad revenue has proven to be more resilient than had been expected during the novel coronavirus pandemic. That’s been a big part of the GOOG stock recovery from the market crash in March. However, it’s artificial intelligence that holds the key to this stock’s long-term growth. A report from CB Insights sums up the importance of AI to the company: “Artificial intelligence is critical to Alphabet’s long-term outlook. AI is the thread that runs through search & advertising, cloud, autonomous driving, healthcare, and a host of the company’s Other Bets.”
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Microsoft is a cloud computing leader with Azure. The company has been able to leverage that massive processing power and data collection to become a leader in artificial intelligence as well. The company’s Azure AI is being commercialized through products like Microsoft Translator, and is being used to improve Bing search results. AI-powered features are an increasingly important part of Microsoft Teams and Microsoft 365.
Microsoft sees AI applications across virtually all industries and sectors, including retail, public service, healthcare, manufacturing, financial services and oil and gas.
After more than a decade of stagnation, MSFT stock has been on an impressive growth path over the past five years — despite a declining PC industry. Transitioning products like Office to a subscription model, embracing services, and growing its Azure cloud computing have been a big part of that. Increasingly, Azure AI has been a key advantage, including the company’s $10 billion U.S. Department of Defense JEDI contract win.
MSFT’s leadership in artificial intelligence bodes well for continued long-term growth.
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ServiceNow is a great example of a company that’s been successful in its niche, but is positioned to take off because of AI adoption.
In the case of ServiceNow, the niche is digital workflow. And it’s actually a pretty large niche. ServiceNow says its platform is used by roughly 80% of Fortune 500 companies.
In March, ServiceNow announced the release of its Now Intelligence, featuring AI and AI-powered analytics, plus embedded virtual agents: “With Now Intelligence embedded into its Now Platform, ServiceNow advances its position as a pioneer delivering practical, purpose-built AI and analytics to the enterprise.”
NOW stock has performed very well over the past five years (up 512%). The integration of AI into its platform shows that this company isn’t content to rest on its laurels. It’s going after the remaining 20% of Fortune 500 companies.
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You can’t have machine learning and artificial intelligence without massive parallel processing power. And nothing chews through parallel processing like data centers packed with graphics processors (or GPUs). That capability put Nvidia in the spotlight during the crypto currency mining boom — and it hurt NVDA stock when that boom turned into a crash in late 2018.
However, AI is no flash in the pan, and Nvidia is well-positioned to ride the AI boom for long-term growth. In a record-setting second quarter, NVDA reported data center revenue of $1.75 billion, up 167% year-over-year.
In addition, this A-rated stock has been feeling the benefit of a pandemic-fueled boom in video games. And it’s not just supporting AI, it’s also putting AI to work for competitive advantage. Nvidia is touting newly announced GeForce RTX video cards that feature real-time ray tracing effects, plus integrated AI to accelerate graphics performance.
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Even after two sessions where the market severely punished tech stocks — including well known AI stocks — Twilio shares are up 126% so far in 2020. Over the past five years? The growth for TWLO stock is a very impressive 788%.
The San Francisco-based company is focused on cloud communications. Its solutions enable developers to embed e-mail, voice, text and social media contact support within their websites. Naturally, that has been a big win during the pandemic, when offices shut down and companies scrambled to keep in touch with clients.
So where does AI come into the picture for Twilio? Autopilot. Twilio’s AI-powered chatbot solution can automate contact center messaging from customers. Autopilot chatbots can be deployed on websites, mobile apps, popular social media messaging apps like Facebook Messenger and even SMS. Autopilot chatbots leverage AI so they can be “trained,” they get smarter with use, and they know to seamlessly hand off to a human agent when needed.
Twilio is already a rising star in the cloud communication space, and TWLO stock is going to keep going thanks to the AI-powered boost of Autopilot.
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