Top Artificial Intelligence Stocks To Buy: Artificial intelligence (AI) is probably today’s hottest tech growth trend. Believed to be a vital cog of the Fourth Industrial Revolution, it is expected to impact almost all the sectors and generate tremendous amount of wealth for its investors.
Spending on AI systems is expected to soar from the current $37.5 billion in 2019 to $97.9 billion in 2023.
According to a McKinsey report, AI could unlock between US$1.4-2.6 trillion in value in marketing & sales alone.
As an investor it makes sense to have exposure to AI stocks in your portfolios. To help you cut through the clutter and aid you in making smart investing decisions, we list here the 5 top artificial intelligence stock to buy for 2020 and beyond.
[#5] Microsoft Riding the Cloud Powered by AI
Microsoft [NASDAQ: MSFT] is an American multinational technology company which develops, manufactures, licenses, supports, and sells a range of software products, personal computers, consumer electronics, tablets, gaming and entertainment consoles, phones, and related services and devices.
Its best known software products include the Windows operating system, Office productivity applications, and Azure cloud services. Its Windows line of operating systems powers more than 93% of the desktop computers in the world.
Other notable products of the Redmond, Washington-based company include internet search (Bing), cloud computing (Azure), business-oriented social network (LinkedIn), software development platform (GitHub), and software development tools (Visual Studio), among others.
Should You Buy Microsoft Shares?
Shares of Microsoft [NASDAQ: MSFT] soared over 55% in value last year as investors’ sentiment was boosted by the company’s performance and growth prospects in cloud computing. In fact, the tech giant’s Azure cloud services is now just behind Amazon Web Services.
Microsoft has been active in pursuing long-term growth opportunities in its intelligent cloud segment, something which should not come as a surprise given the fact that more and more businesses are migrating to the cloud.
Azure’s revenue surged close to 60 % year over year in the fiscal first quarter, keeping the momentum going from the previous quarter where the revenues clocked 64% growth.
Its hybrid cloud offerings and increasing user base of its different applications like Office 365 commercial, Dynamics and Outlook mobile have been the primary revenue drivers.
In fact, Azure and Office 365 are currently the twin engines powering Microsoft’s stellar growth.
The software giant witnessed double-digit growth in Office 365 subscriptions, with revenues from Office 365 Commercial in the latest quarter jumping 25%.
Its business-oriented social network LinkedIn is nearing 700 million users and revenues from it recorded an upswing of 25% in the last quarter.
The software giant earned $33.06 billion during the quarter, with the revenue jumping 13.7% compared to the same quarter last year.
Microsoft Is Betting Big On AI
The tech giant announced last year about investing $1 billion in an AI lab, termed OpenAI to create machines that can think and work like humans.
Microsoft [NASDAQ: MSFT] believes that OpenAI, set up in 2015, will help it fortify its Azure cloud computing service by developing new AI technologies for it.
The investment is part of Microsoft’s new strategy and will help the company stay in the reckoning with respect to its rivals like Google, Facebook, and Amazon, which have all been paying big attention to AI in recent years.
Microsoft is going to launch its Xbox Series X game console this fall. Additionally, the tech titan is also expected to reap rich rewards from its Project xCloud gaming service where it is consistently integrating cloud capabilities of Azure into its gaming segment.
Cloud gaming has just started to take off and Microsoft, with its experience and expertise with its Xbox gaming business and in-house game development studios, finds itself strongly placed to gobble a big chunk of this burgeoning market which is estimated to be worth billions of dollars.
However, with growing competition, analysts expect the revenue growth to taper a bit in 2020. But in the longer run, this is one stock which you should consider strongly in your portfolio, more so if you are keen on investing in growth stocks.
[#4] NVIDIA Corporation: Fast Becoming AI Powerhouse
NVIDIA Corporation [NASDAQ: NVDA] engages in the design and manufacturing of computer graphics processors for the gaming and professional markets, as well as system on a chip units (SoCs) for the mobile computing and automotive markets.
The Santa Clara, California-based company revolutionized the PC gaming industry by inventing the graphics processing unit (GPU) in 1999. It operates in two segments, GPU and Tegra Processor.
Its primary GPU product line is labeled “GeForce”, which includes GeForce for PC gaming and mainstream PCs; GeForce NOW for cloud-based game-streaming service; Quadro for designers; Tesla and DGX for AI data scientists and big data researchers; and GRID for cloud-based visual computing users.
The company has recently moved into the mobile computing market, with its Tegra mobile processors. In addition to GPU manufacturing, Nvidia provides parallel processing capabilities to researchers and scientists which make supercomputing inexpensive and widely accessible.
Should I Buy Nvidia Stock?
NVIDIA Corporation [NASDAQ: NVDA] stock has roared back to life over the past 52 weeks, rising a spectacular 67.6%, and outperforming the industry’s growth of 39% over a year by a considerable margin.
Experts attribute the solid momentum to the company’s ability to leverage AI-driven growth trends with management’s increasing focus on turning NVIDIA into a major AI player.
NVIDIA makes chips required to meet the heavy computational lifting and memory demands placed by AI.
NVIDIA’s involvement in data center AI applications has been reaping rich dividends for the company for the past few years. This is only likely to grow as the market for AI heads toward explosive growth with evolution of smart homes, driverless vehicles, drones, IoT and smart cities, among others.
The company has made significant advancements in other AI markets as well that include upscaling 1080p videos to 4K resolutions with deep learning technologies and offering AI services for IoT and 5G networks.
The company is leveraging the potential of AI in its gaming and professional visualization businesses as well by infusing its latest generation of GPUs with deep learning capabilities. The company’s GPUs are ruling the market for AI training in cloud data centers as well, which is great news given the rapid pace at which this market is growing.
Additionally, the acquisition of Mellanox will give NVIDIA the ability to penetrate further into the lucrative data center market by leveraging Mellanox’s data centers’ networking capabilities and technical know-how.
NVIDIA Corporation [NASDAQ: NVDA] is poised to mightily gain from its expertise and investment in AI, a sentiment shared by experts and analysts alike.
Analysts are forecasting a revenue growth of 35% in the fourth quarter of fiscal year 2020 to approximately $2.97 billion and EPS to more than double to $1.66 per share from $0.75 a year ago.
The momentum for the company is likely to spill over into fiscal 2021, with prediction of revenue reaching $13 billion.
[#3] Tencent Holdings Limited Sky is the limit
Tencent Holdings Limited [OTCMKTS: TCEHY] is a Chinese multinational conglomerate investment holding company.
It offers Internet-related value-added services and products, entertainment, artificial intelligence, online advertising and technology services in China, North America, Europe and other Asian countries.
Tencent is the world’s largest gaming company and one of the world’s largest social media companies.
It has a presence in a wide array of sectors and industries, including internet services, e-commerce, mobile games, social network, music, web portals, payment systems, smartphones, and multiplayer online games.
It surpassed the market value of US$500 billion in 2018, in the process becoming the first Asian technology company to do so.
It is also a major shareholder in China’s music Tencent Music Entertainment, which has more than 700 million active users.
Tencent Holdings Limited [OTCMKTS: TCEHY] was founded in 1998.
An early investor having invested around $2,000 in 2004 when the company went public would have seen that investment cross the magical one million dollar mark in late 2017.
The internet superstar made its debut on the Hong Kong Stock Exchange at HK$3.70 a share, which put its market value at around $800 million. The shares are currently trading around a surreal HK$400, which attests to the company’s meteoric rise.
Experts credit the spectacular growth of the company to savvy investment decisions, unwavering focus on customer experience, technological innovation and a burgeoning Chinese middle class.
An example of its smart business tie-ups is its investment in prominent video game companies with blockbuster games like League of Legends and Call of Duty to their credit, which has made it the largest video game publisher in the world.
Tencent’s WeChat “super-app” and social messaging platform today boasts of 1.15 billion users. It is one of the largest video streaming services in China and is also credited with pioneering mobile payments with TenPay.
To top it all, Tencent has made major investments in big US companies, including Tesla [NASDAQ: TSLA] and Snap [NYSE: SNAP].
With strong cash flows, tens of billions of dollars to spend on R&D, and hiring of the best AI resources, Tencent has been aggressively stepping up investments in the rapidly expanding AI space.
China is hoping to challenge the United States as the global leader in AI, which could be another reason for the flurry of investments in the field.
With hundreds of millions of WeChat users Tencent has access to tons of data. Given its market cap of almost US$450 billion, the company has the wherewithal to loosen its purse strings.
The Chinese technology giant was recently involved in the funding of Prowler.io, an artificial intelligence company based in Cambridge, England. In 2018, it led the funding round for Robotics start-up UBTech, raising $820m in the process.
Tencent is increasingly leveraging the power of AI to make its ads more effective, and to build chat bots. Tencent is now primarily focused on AI’s healthcare applications, which should not be surprising given that close to over 40,000 medical institutions have a WeChat account and around 60% of them accept appointment bookings online.
Elsewhere, upcoming signature of Phase I trade agreement between China and the United States, the successful launch of Nintendo Switch in China and the lucrative Chinese gaming market are expected to keep the momentum going for Tencent in 2020.
[#2] Alphabet: Deep-rooted Tech Giant & Emerging AI Powerhouse
Google Inc., the American multinational technology company that was founded in 1998 by Sergey Brin and Larry Page, today powers more than 70 percent of worldwide online search requests.
A subsidiary of the holding company Alphabet Inc. [NASDAQ: GOOG], Google has interests in Internet-related services and products, including search engine, cloud computing, AI, software, and hardware.
The Mountain View, California-based company’s product portfolio includes Google Search, Gmail, Google Drive, Google Cloud, Google Play, Google Home Google Maps, YouTube, and Google photos, among others.
The company also boasts of Android mobile operating system, the Google Chrome web browser, and Chrome OS, a lightweight version of Chrome. It also manufactures Google Pixel smartphone, Google Daydream virtual reality headset, etc.
The word Google is so powerful that it is now used as a verb.. This itself attests to the power and dominance of the search engine giant.
Alphabet’s Google [NASDAQ: GOOG] has earned billions, and continues to do, as more and more ads move online. Its glittering portfolio consists of products and platforms such as Android, Chrome, YouTube, Google Maps, and Gmail, each boasting of more than one billion users. This gives it enormous web clout and enormous amount of data, which the advertisers find so alluring.
Google has been on the frontline when it comes to investment in AI, which should not come as a surprise given the company’s plans to evolve into the “AI-first world”.
Leading the way is search engine Google, which has been nothing short of the proverbial ‘golden egg laying hen’ for Alphabet’s AI services.
The giant ventured into AI with the launch of Google Brain in 2011. We currently see Google using AI in its search suggestions and suggested replies in Gmail.
The tech giant has also developed Machine Learning system TensorFlow, which is free. Then we have Google Assistant and Duplex. Google Assistant is a virtual assistant similar to Alexa or Siri.
Meanwhile, Duplex is also an AI-driven voice assistant that helps users set up business appointments via Google Assistant. Sundar Pichai has been talking proudly about Google AI Health algorithm, which is capable of detecting breast cancer more accurately than doctors.
Additionally, Google’s AI division has been working on accurately predicting the weather and revolutionizing mobility with self-driving car project called Waymo. Alphabet’s health technology-focused subsidiary Verily seeks to combine technology with data science and AI to revolutionize healthcare.
Google’s PAIR initiative, which stands for People + AI Research, aims to make the partnership more fruitful and enjoyable for all the parties involved.
There are organizations that love to be forward looking but lack the resources to put their plans into action. Then there are organizations that have deep pockets but are not forward thinking.
What goes in Google’s favor is that it has the resources to invest billions in new growth avenues. The company calls it in moonshot opportunities or bets vital to its future success.
Alphabet’s revenue was up 20.0% compared to the same quarter last year and its shares have risen over 37.2%, vastly outperforming the industry’s rise of 16.4%.
The company is currently valued just short of one trillion dollars, but it should not lull you into thinking that it cannot go any further from here.
It has more than doubled its revenue and earnings over the last five years, and given the resources at its command and its forward-thinking corporate culture, this is one stock that you need to invest in soon and hold for long.
[#1] Amazon: Rapidly growing market of e-commerce and AI makes Amazon a safe bet
Amazon.com, Inc. [NASDAQ: AMZN] is an American multinational technology considered to be one of the Big Four tech companies, along with Google, Apple, and Facebook. The company, known for its technical innovation and revolutionizing online retail, operates in the field of e-commerce, cloud computing, digital streaming, and artificial intelligence.
Measured by revenue and market capitalization, Amazon is the world’s largest online marketplace, AI assistant provider, and cloud computing platform.
The Seattle, Washington-based company founded by Jeff Bezos (richest man on earth) operates through three segments: North America, International, and Amazon Web Services (AWS).
Amazon Shares Underperform S&P 500
Amazon.com, Inc. [NASDAQ: AMZN] performance in the year 2019 was less than stellar, with the online retail giant’s shares climbing 23% in contrast to the S&P 500 index roughly touching 29%.
What made it more disappointing was the fact that other big tech companies performed exceptionally. Analysts, however, are not unduly worried about the lukewarm performance, their assurance rising from the huge growth potential of e-commerce and the company’s solid performance of its cloud computing business.
Its nearest competitor in cloud segment Microsoft’s Azure performance has been stellar while another tech giant Alphabet has been angling to close the gap in the cloud services market.
Despite all these factors, Amazon Web Services dominates the cloud computing space, continuing to generate cash for the tech giant. Amazon is also making inroads into domains where its competitors enjoy a dominant position.
It has been gaining significant ground in the highly lucrative digital advertising market and emerging as a powerful rival to Alphabet and Facebook in the category.
The online advertising revenue of Amazon’s advertising business clocked a highly impressive growth of more than 45% year over year in the third quarter, with experts predicting that its share of the total U.S. digital ad market could climb to 14% in 2023 from its present 9%.
The massive dominance the company, virtually synonymous with online retail, has built in the e-commerce market will continue to fuel its growth and expansion in the years to come. With global retail e-commerce sales expected to hit $6.5 trillion by 2022, Amazon is going to be the biggest beneficiary.
With its massive online retail operations, unmatched distribution strength, aggressive retail strategies, and presence of thousands of sellers on its platform, Amazon faces no immediate threat from any competitor(s).
On top of that, its leadership position in voice-assistant interfaces and smart speakers and the emphasis it is placing on AI give it powerful advantages in generation-defining tech trends.
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.