Artificial intelligence is already revolutionizing industry, like it or not.
Wall Street occasionally seizes upon futuristic themes with religious fervor, bidding up shares in companies that supposedly lead in one space or another. AI once occupied that "fascinating-but-far-off" thematic market sector, but the best artificial intelligence stocks to buy today use techniques like 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, 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. Here are 10 AI companies betting big on artificial intelligence.
Nvidia Corporation (ticker: NVDA)
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) recently partnered with Nvidia to introduce a car prototype at the Consumer Electronics Show in 2020. NVDA is marketing itself to automakers as the go-to solution for unified architecture across software, AV chips, data center and more. NVDA's first-mover advantage in high-performance GPUs has eroded with competition, but it remains a market leader and one of the best AI stocks to buy.
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 nearly $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 more than 20% each year.
The second company to ever reach a $1 trillion valuation, Amazon couldn't have hit that level by now 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 (AWS), 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 working rabidly to stay at the forefront of the fast-growing field.
Microsoft Corp. (MSFT)
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, one of the few tech giants not currently being targeted by U.S. regulators.
China's leading search engine predictably uses AI to improve results and serve ads. But it goes further, winning a 2019 facial recognition competition against competitors including Alibaba Group Holding (BABA), Huawei and elite Chinese universities. Arguably China's most devoted AI investor, Baidu's self-driving software platform Apollo has over 135 auto industry partners, and Baidu logged 91% of all self-driving miles in Beijing in 2018. Analysts expect earnings growth above 20% in both 2020 and 2021, and after falling in 2019, BIDU's valuation combined with China's willingness to incentivize AI research, and a large population, means BIDU is one of the top AI stocks to buy today.
Intel Corp. (INTC)
One of the more conservative ways to bet on this space is Intel, the blue-chip, dividend-paying semiconductor giant. Investors get the benefit of an established, well-diversified tech leader -- and a cash cow with $15 billion in free cash flow. That's some decent spare change for boosting R&D, making acquisitions and hiring talent. Intel already provides key hardware components behind the magic; Microsoft uses Intel's field-programmable gate arrays to run deep learning models on its cloud. Additionally, Intel's vision processing units power machine vision in surveillance cameras that can count crowds, perform facial recognition and analyze behavior. Its Mobileye division, which helps vehicles prevent potential collisions, grew by 20% last quarter.
"TWLO may have the greatest risk/reward of the top AI companies," U.S. News's original write-up of the best AI stocks, circa early 2018, read. "At $3.8 billion, the cloud software business could be wildly overvalued -- or shares could quintuple in the next five years." Well, it didn't take that long. By summer 2019, its valuation hit $20 billion. It's pulled back some since, but Twilio -- which offers cloud-based application programming interfaces (APIs) allowing developers to build voice, video and messaging features into their apps -- still 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.
Facebook is deeply committed to machine intelligence, and since January 2018 has had Jérôme Pesenti, a legend in the field who famously led IBM's (IBM) Watson division, running point on Facebook's 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 2.4 billion monthly active users (MAUs) and 2.8 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. The nearly $500 billion company 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 could augment that service -- and in the meantime, how WeChat's more than 1 billion daily 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.
The best AI stocks to buy:
-- Nvidia Corp. (NVDA)
-- Salesforce (CRM)
-- Amazon.com (AMZN)
-- Microsoft Corp. (MSFT)
-- Baidu (BIDU)
-- Intel Corp. (INTC)
-- Twilio (TWLO)
-- Facebook (FB)
-- Tencent (TCEHY)
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