ChatGPT has been one of the largest tech phenomena of 2023 thus far. The advanced AI chatbot attracted more than 100 million users in January alone. It also currently receives 25 million daily visits, with many users showing up to try out the chatbot and test its knowledge of various subjects.
Beyond simply an internet trend, ChatGPT could have enormous economic value. The bot’s language processing and machine learning capabilities are both exceptional, giving it a wide range of applications in tech, business and other industries.
Naturally, investors are excited about the profits that companies could realize from this technology. Here are two of the top ChatGPT stocks for investors who are bullish on AI technology.
Microsoft
Microsoft (NASDAQ:MSFT) is by far the largest probable beneficiary of ChatGPT. The tech giant is a long-term partner of OpenAI, the company responsible for ChatGPT.
While the number is not official, Microsoft is also reportedly in talks to invest up to $10 billion in OpenAI. This status as a strategic partner and investor will likely offer Microsoft nearly unlimited access to ChatGPT and allow the company to implement the AI chatbot in several of its products.
The most important use case for ChatGPT at Microsoft will be in improving its Bing search engine. Using ChatGPT technology, Bing will be the first search engine capable of providing complete, detailed answers to complex questions.
The technology will also be used to refine search results and provide a better user experience. With this vastly improved interface, some bulls believe that Bing could even challenge Google for search dominance.
The increases in advertising revenue from Bing over the coming years could be massive if AI-powered search proves popular with consumers. Despite considerable improvement in 2022, Microsoft’s search ad revenue was largely stagnant from 2017 to 2021. Bing also pales in comparison to Google, which generated over $220 billion in ad revenue in 2022 to Bing’s $11.6 billion.
ChatGPT could also be instrumental for Microsoft’s cloud computing business going forward. The chatbot is gradually being made available to Microsoft Azure users. Given ChatGPTs ability to generate content and handle customer service interactions, many businesses will likely find the chatbot extremely valuable as part of their Microsoft Azure service.
Beyond ChatGPT, Microsoft is also pursuing other investments in AI technology that could set the stage for future growth. This could tee up an AI battle between Alphabet and Microsoft as the technology becomes increasingly ready for businesses and consumers. If Microsoft successfully takes the lead in AI, it could set the company up for several years of higher revenue and earnings growth.
Perion Network
Perion Network (NASDAQ:PERI) is another of Microsoft’s strategic partners, in this case focused on search advertising. Perion uses AI and machine learning technologies to power its advertising network. The company has also developed a cookie-free ad targeting system that promotes user privacy while still delivering relevant advertisements.
As the primary advertising partner of Bing, Perion is in a natural position to benefit from ChatGPT. As more and more users are drawn to Bing for AI-enhanced search, Perion will be able to serve ads to a much larger audience. This could result in rapid revenue growth and, in time, stronger profitability.
Even without AI enhancements to Bing, Perion has been performing extremely well recently. The company reported full-year revenue growth of 34 percent in 2022. Net income rose by an astonishing 119 percent. Video revenue, a major growth outlet for many ad-driven companies, increased by 134 percent.
Given Perion’s relatively small size and already rapid growth, the company could see its earnings rise drastically if Bing with ChatGPT becomes a serious contender to Google in the search engine market. Even smaller increases in user traffic would likely benefit Perion disproportionately.
Perion is also developing its own AI-based technology products related to advertising. As such, the company could have a strong growth story ahead of it irrespective of ChatGPT. The cookie-free ad targeting technology Perion has developed is apt to be especially valuable, as many platforms are becoming increasingly sensitive to user privacy demands.
While much of Perion’s near-term revenue and earnings will likely be related to its Bing partnership, the company also has plenty of potential on its own.
MSFT vs PERI: Which Stock Is Best?
Microsoft and Perion Network both have quite a bit to recommend them as investments. Ultimately, the question of which of these stocks is a better buy comes down to your personal investment strategy.
As an established and dominant business within its industry, Microsoft is likely the best choice for more conservative investors. The company also has the advantage of paying a small but growing dividend, potentially making it a decent long-term income play.
Perion Network, by contrast, is a small, high-growth company. Unlike Microsoft, Perion doesn’t have diversified business lines and a robust economic moat. What the company does have going for it is the potential for enormous growth as its partnership with Bing continues. As such, Perion is likely a better fit for more risk-tolerant investors seeking a chance at higher returns.
It is worth noting that Perion Network may be the better value of the two stocks at the moment. Microsoft currently trades at a price-to-earnings-growth ratio of 2.5, while Perion trades at 0.50 times its expected earnings growth rate. This suggests that Perion is likely priced better relative to its near-term growth potential. While Microsoft’s market dominance likely justifies its premium price, Perion may be a more attractive value for investors comfortable with its higher risk level.
Investors who are especially bullish on the potential of ChatGPT may even choose to buy both stocks in order to play both sides of the field. Although ChatGPT is having some well-publicized difficulties at the moment, the technology could have enormous long-term potential for Microsoft and its partners. As such, a dual position on Microsoft and Perion Network could make sense for some investors who are comfortable with higher exposure to the success or failure of ChatGPT.
#1 Stock For The Next 7 Days
When Financhill publishes its #1 stock, listen up. After all, the #1 stock is the cream of the crop, even when markets crash.
Financhill just revealed its top stock for investors right now... so there's no better time to claim your slice of the pie.
See The #1 Stock Now >>The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.