Artificial Intelligence stocks in the market
Artificial intelligence, to most, is a relatively new sector. While it is true that most artificial intelligence tools have garnered traction in the last decade, AI has been around since the second world war, with Alan Turing and UK’s “Enigma” codebreaker, which was used to crack coded messages sent by the Germans.
In recent times, AI has evolved to solve an extensive range of problems ranging from self-driving vehicles, to targeted online/mobile shopping suggestions and even suggestions for the best traffic routes as you navigate busy cities.
In the equities markets, pure-play AI stocks are rarer than is commonly thought, because while many companies AI technology initiatives and machine learning, very few companies go public with AI as their primary product.
The majority of public traded companies in AI are chip makers, enterprise software companies and technology giants that utilize AI tools in many applications. The biggest global players are like cloud computing giants Amazon.com (AMZN), Microsoft (MSFT) and Google-parent Alphabet (GOOGL).
Below are AI stocks that can be considered a good addition for your portfolio.
It is arguable that no company in the world uses AI more than Amazon. Products and operations by the company that use AI include:
- Alexa, its industry-leading voice-activated technology
- Amazon Go cashierless grocery stores
- Amazon Web Services Sagemaker, the cloud infrastructure tool that deploys high-quality machine learning models for data scientists and developers.
- To determine product rankings
- Recommend products to customers
The amazon stock, like othe US equities, took a beating in the first half of the year. Since hitting its lowest point in June, Amazon shares have soared as much as 40%, alongside the S&P 500, which is up 13% since June 30, putting up an 18% since it hit bottom on June 1. Inflation and oil prices coming down are majorly the culprits for this upside, as the job market remains strong. The company’s orporate earnings were solid in the second quarter, which also played a huge role in the upside.
So far this year, Amazon has posted $5.2 billion in operational losses in its e-commerce segments, but it has generally been profitable in recent years and should return to overall profitability. Renown investors and analysts are also betting on the Amazon stock’s growth, with Warren Buffett’s Berkshire Hathaway adding to its positions of Amazon.com. Berkshire reported 10.7 million shares of Amazon, up from 534,000 shares in the previous quarter.
Nvidia, the world leader in graphics chips and the de facto standard in data centers around the world, has benefitted hugely from the advancement of AI. While not all segments of the company are AI based, sections like Nvidia’s data center business produces graphics cards that are used to accelerate a wide variety of data center applications.This implies AI is one of the driving forces behind the company’s growth.The data center business represents a steadily increasing share of the company’s total revenue and looks set to top gaming in revenue in fiscal 2022.
Self-driving cars are another area of focus. Nvidia develops platforms, including hardware and software, that can power driver-assistance features, as well as fully autonomous driving. A self-driving car must process massive amounts of data from multiple sensors and cameras in real time, detect objects such as pedestrians and other vehicles, and make complex decisions. They require a tremendous amount of computing power, and that’s exactly what Nvidia’s platform delivers.
The company stock haas also seen a rough year. Earlier in the month on August 8th, Nvdia’s stock slumped 6% on Aug. 8, but rallied off lows, after the company lowered its revenue outlook for the current quarter, mostly due to weakness in the computer game consoles market.
The chip bellwether Nvidia forecast revenue of $6.7 billion, well below prior guidance of $8.1 billion. The company forecast gaming revenue of $2.04 billion, down 33% year over year. The company however expects data-center revenue to be up 61% to $3.81 billion.
On the short term, Nvidia does not score strongly as a buy option but the potential on the upside in the long term is massive.
C3.ai is an Enterprise artificial intelligence application software company that can be considered a pure-play AI company. The company provides a platform that enables clients to develop and deploy enterprise AI applications. The company first hit the market in 2020, The enterprise AI software company went public at $42 a share that December, and it opened at $100 before hitting an all-time high of $177.47 later that month. However, the company’s stock price stands at below $20, about 8 times lower its all time high.
The slump however can be explained in three simple reasons:
- Its valuations had reached unsustainable levels. At its peak, it was valued at $17 billion – or 93 times the revenue it would actually generate in fiscal 2021, which ended last April.
- Its growth decelerated after its public debut. Its revenue rose 71% in fiscal 2020, but grew just 17% in fiscal 2021 as the pandemic disrupted its core energy and industrial markets. Its revenue rose 38% to $253 million in fiscal 2022 as those headwinds waned, but it only anticipates 22%-25% growth in fiscal 2023 as it grapples with several delayed deals.
- The company remains deeply unprofitable. Its net loss narrowed from $69 million in fiscal 2020 to $56 million in fiscal 2021, but more than tripled to $192 million in fiscal 2022. That sea of red ink made it even less attractive as rising interest rates boosted lending costs for unprofitable companies.
While the stock continued to perform dismally this year, with the company’s shares down 38% year to date, investors ae still positive on the eventual growth of the company. Developments within the company that include the expansion of its partnership with Google Cloud, landing a $90 million contract with the U.S. Department of Health and Human Services (HHS), and a $500 million contract with the Department of Defense (DoD) to scale up its AI-powered applications, raises investor sentiment on the long-term value of what can be considered, an AI growth stock.