Artificial Intelligence may still sound like something out of science fiction, but it’s already a reality. And its uses are only increasing. While it may not be as dynamic and robust as human intelligence, it can take over and improve processes in nearly every walk of life.
For consumers, that may mean interacting with a virtual assistant or the facial recognition technology to unlock their cell phone, to say nothing of the programmed intelligence of video game characters. There’s no single AI system, so much as an amalgamation of different programs. That makes the AI market broad and open to new competitors.
Artificial intelligence is finding new uses all the time, making it one of the most potentially explosive niches of the tech space, and one of the best places for returns that beat the tech-heavy Nasdaq, to say nothing of the stodgier plays on Wall Street. Investing in this space is critical to your long-term success in the market; that’s why we’ve identified the best AI stocks to buy to play this powerful trend.
Best AI Stock #1: Nvidia (NVDA)
Best known for its graphics processing units (GPUs), Nvidia (NVDA) is a huge player in artificial intelligence. Its positioning makes it the top AI stock.
GPUs have overtaken traditional computing chips for their faster processing speeds, which has enabled the latest generation of video games, cloud computing needs, and even cryptocurrency mining and even complex pieces of technology like autonomous vehicles!
The beauty of Nvidia’s products are that they can be used in just about any technology that utilizes artificial intelligence. So while the company may not have the profit margin potential of a purely software company, chances are it will continue to be the world leader in the AI space for years to come.
That industry position has allowed NVDA stock to experience explosive growth, even as the rest of the economy has been shaky. Shares are up 140 percent in the past year, about in line with earnings growth of 133 percent. Revenues are up nearly 40 percent, and the company has a solid 28 percent profit margin.
Best AI Stock #2: Microsoft (MSFT)
While Microsoft is best known for the Windows operating system, its growing web-services division, its Xbox video game system and even assets like the social media networking site LinkedIn, it also has an artificial intelligence division. It’s called Microsoft AI.
The lackluster name hides a large platform that provides tools and services for creating AI-run products. It also includes the infrastructure needed to integrate new AI developments with existing ones. Its best-known product in the space is the Azure Machine Learning service.
While not a huge part of the Microsoft brand as a whole, it’s still a big business in its own right. In 2019, the company made a $1 billion investment in OpenAI to increase its capabilities.
When Microsoft enters into a space, it competes to be one of the top dogs. Its artificial intelligence investments show that it will continue to forge ahead in this space, providing the software and cloud services needed to take AI technologies to the next level.
Best AI Stock #3: Alphabet (GOOG)
Google’s artificial intelligence is likely best known from its Google Home product. But items like Google Translate and Google Assistant are tools that integrate into existing Google products with ease. Google’s overall focus is on information and how to organize it effectively, so it makes sense that the world’s leader in the search engine space has turned to artificial intelligence to improve that process even further. Expect far more AI applications from them in the future.
In 2017, Google Brain even created an artificial intelligence program that was capable of generating its own AIs as well! This type of headline may sound scary, but it means that an artificial intelligence is now able to reliably identify objects, which is useful for medical technology or autonomous vehicles that use artificial intelligence as well.
As with other mega-cap companies in the artificial intelligence space, Google’s operations are a small part of a wider whole. But that small part is growing, and it’s capable of improving the performance of the company’s other divisions as that happens. That’s a win-win for investors today.
Best AI Stock #4: Salesforce (CRM)
One of the best-performing tech stocks of recent years, it’s no surprise that Salesforce has its own artificial intelligence division as well, making it a solid AI company to boot. Known as Salesforce AI, it integrates with their software-as-a-service (SaaS) suite of products.
Salesforce is a great cloud play, and adding artificial intelligence on top of that could be huge for the already-massive company. Artificial intelligence could allow the company to better serve its customers, perform predictive analytics, and better help out the companies that rely on Salesforce to get its job done. Specific examples could be in finding ways to improve workflow, determine the effectiveness of team members, and analyze data in ways that may not have been traditionally thought of.
Compared to some of the other big-name companies in the artificial intelligence space, Salesforce hasn’t been as strong a performer. Shares have rallied 18 percent in the past year, amidst a 30 percent rise in revenue. But the company’s overall profit picture has been muted in the short-term. That makes this an optimal AI stock to buy for underperforming other peers in the space lately.
Best AI Stock #5: Baidu (BIDU)
This Chinese firm has a number of similarities to multiple American tech giants. For its work in internet search services, it’s most often compared to Google. And it has a number of video platforms, much like Google-owned Youtube. Add in an encyclopedia, social networking platform, and web services, however, and the company looks far more interesting than any American counterpart.
In the artificial intelligence space, Baidu is investing in Apollo, the name for its own autonomous driving platform, and has other AI solutions for the cloud-based businesses operating through their platform. Baidu ranked #1 for AI-related patents in China in 2018 and 2019, including such sub-groups as deep learning, natural language processing, facial recognition, and machine learning.
That’s a good basket of AI tech. Generally, companies that own patents carry a premium over companies that don’t. By having patents in place, a company can let others borrow their patents in a royalty revenue arrangement.
Baidu’s AI work doesn’t seem to show up on the company’s bottom line. Both shares and the company’s operational performance have appeared flat over the past year. But, long-term, the advantages of incorporating a vast artificial intelligence suite of products should allow the company to see reliable, sustainable growth.
Is AI a Good Investment?
Artificial intelligence is the next big thing that’s already here. From a product like a home speaker to a digital assistant, there are a number of products in the pipeline that will rely on this critical tool such as robotics, neural networks and machine learning. That makes artificial intelligence a great investment, not just a good one.
More importantly, it means that any investor looking to invest in the tech space should look for a company with an AI division behind it as well. That will likely separate a lot of winners from losers in tech in the years ahead. Screening for companies that have an artificial intelligence division is a good way to only find the best trading opportunities on the Nasdaq when investing.
Who are the Best Players in AI?
The artificial intelligence stocks listed above are the best players in AI technology trading on public markets today. There are some other great players, of course, from penny stocks to other big names on the Nasdaq like Xlinix, but in terms of the likelihood of artificial intelligence driving the company’s bottom line in the years ahead, the stocks on our list are the top players.
Investors looking for more potential plays in artificial intelligence can also consider looking at one of the artificial intelligence ETFs on the market. That way, an investor can buy a basket of AI stocks, or they can look at the top holdings of an ETF to find some trade ideas that play to this trend in a less obvious way than the big players.
What is the Best Stock for Artificial Intelligence?
Based on hardware, we’re giving the top slot to Nvidia (NVDA). Their graphics processors are what make the software of artificial intelligence fast enough to mimic true intelligence. Other companies trying to get into the space, like traditional chipmaker Intel (INTC), are still way behind the curve on this trend.
On the software side, where there are more competitors to choose from, we see the best artificial intelligence play in Microsoft (MSFT), although the difference between them and the next-best players are much narrower than on the hardware side.
Of course, “best” is a subjective term. Most of the “best” stocks are with the long-term in mind. For trading, look at AI stocks that have seen a large surge in volume lately, or have been in the news for upcoming development. Trading around those events, in addition to earnings season, can provide some short-term profits as well. Nvidia stock is pricey around $400 per share right now, but worth it for the long-term value it’s likely to create.
How do I Invest in Artificial Intelligence?
The beautiful thing about artificial intelligence is that it’s already a surprisingly important part of many of the big-name technology companies out there today.
While you could search for some penny stock artificial intelligence company, or see if you could privately invest in one of dozens of AI startups if you’re wealthy enough, sticking with some of the big names outlined in this report are going to provide you with the best exposure and the best chances of making continued profits over time from owning shares of these great artificial intelligence plays. That helps keep your risk down. Those more interested in stock trading can find some great ideas here as well.
And, with dozens of ETFs that mention artificial intelligence as a focus for the fund, there are plenty of ways for traders to get exposure to this space with a longer-term view in mind.