Artificial intelligence (AI) has become one of the most promising fields of technology, with the potential to revolutionise virtually every aspect of our lives. It involves the development of computer systems that can perform tasks which have traditionally required human intelligence, such as speech-recognition, data interpretation and decision making. Here is a collection of stocks poised to benefit from the AI revolution.
AI companies to invest in:
C3.ai is a pure-play AI stock, specialising in enterprise AI, and servicing entities like Shell and the US Air Force.
Microsoft, a big tech player, has been building the world’s first AI supercomputer with Nvidia.
Tesla is positioned to be the “biggest artificial intelligence play,” according to Cathie Wood.
The pure-play AI stock
C3.ai [AI] has been “at the vanguard of the enterprise AI market for over a decade”, according to CEO Tom Siebel. Despite near-term volatility in the C3.ai share price, the company is bullish on its outlook, even titling its recent earnings release ‘Generative AI changes everything’. In the three months to 30 April, C3.ai closed 43 agreements, including 19 pilots, adding that the number of enterprise opportunities had more than doubled year-over-year.
It expects growth to build momentum as pilot projects become full-blown ones. In time, this will enable it to “establish a market-leading position globally in enterprise AI”, and the company believes it “is ready to now capitalise on the $800bn AI transformational opportunity over the next decade front and centre,” Wedbush analyst Dan Ives said in a tweet following the earnings release.
C3.ai’s software is used by oil major Shell [SHEL.L] for predictive maintenance. More than 10,000 pieces of equipment are monitored around the clock to identify problems before they occur, minimising operational downtime and extending the life cycle of assets. The US Air Force has also partnered with C3.ai to maintain aircraft.
The big tech AI stock
Microsoft [MSFT] has been making significant investments in AI technology over the last two decades. Microsoft Ventures launched an AI fund in 2016, backing start-up incubator Element AI, and Tact, an AI-powered CRM. Microsoft’s latest AI investments include TwoHat, a content moderation platform, OpenAI, the research lab responsible for ChatGPT, C3.ai, an AI software provider, and Nuance Communications, AI-powered voice recognition software.
In January 2023, Microsoft pledged to invest $10b in OpenAI, the creator of AI tool ChatGPT. Since then, it has bolstered its existing cloud and search offerings by integrating ChatGPT into its Bing and Azure platforms. In recent months, companies across industries have entered into an arms race to deploy AI to supercharge their products and services and compete in this age of exponential technology.
Microsoft’s Azure cloud platform hosts a range of AI services such as speech recognition, natural language processing (NLP), and computer vision. Microsoft has also developed several AI-powered applications such as Cortana, its virtual assistant.
It is also building the world’s first AI supercomputer. In March 2017, Microsoft, in partnership with NVIDIA [NVDA], unveiled a new hyperscale GPU accelerator called HGX-1, designed for AI workloads in the cloud.
The wild card
Tesla [TSLA] is positioned to be the “biggest artificial intelligence play,” Cathie Wood, CEO and founder of Ark Investment Management and manager of the renowned ARK Innovation ETF [ARKK], told Bloomberg TV in May.
She is bullish that software companies will be the next to benefit from the AI boom propelled by Nvidia. “For every dollar of hardware that Nvidia sells, software providers, SaaS providers will generate 8 dollars in revenue,” she stated.
One of the world’s most innovative car manufacturers, Tesla has been investing heavily in AI and machine learning technology. Tesla's AI capabilities are used in its self-driving features: autopilot and full self-driving (FSD) technology. These are still under development, but are being optimised for fully autonomous operation, without the need for human intervention.
On 21 June, Tesla released its compute capacity forecast that ARK says could lead it to become one of the world’s biggest AI training companies. Tesla projects that by October 2024 it will reach a remarkable 100 exaflops, an approximately twenty-fold increase to what it disclosed during AI Day in September 2022. Operating at almost full utilisation on its current AI training infrastructure, Tesla is strategically ramping up its compute capacity to capitalise on its data advantage and solidify its competitive edge in the autonomous driving race. It is expected to increasingly move to its own hardware, Dojo, but will likely continue buying hardware from Nvidia.
Another way to play
ETFs, or exchange-traded funds, offer an economical and diversified way to invest in a variety of stocks within a particular theme.
The WisdomTree Artificial Intelligence UCITS ETF [WTAI.L], which has C3.ai among its top 10 holdings, is weighted heavily in favour of the information technology (IT) sector (85.93%) as of 2 June. Consumer discretionary, financials, healthcare, communication services, industrials and consumer staples all have a single-digit allocation. The fund is up 3.4% in the past year and up 22.9% in the past six months.
The First Trust Nasdaq Artificial Intelligence and Robotics ETF [ROBT], which has C3.ai as its top holding as of 2 June, offers broader exposure. IT makes up 60.71% of the portfolio and industrials 21.22%, while consumer discretionary accounts for 10.14%. Healthcare, communication services, real estate and consumer staples all have allocations of 5.16% or lower. The fund is up 7.5% in the past year and up 18.5% in the past six months.
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