Which Stocks Will Benefit From Chatbots?

A common thread unites the imaginary future worlds depicted in novels, television series, and blockbuster films: Artificial Intelligence (AI) that is smart, self-aware, and able to form tight bonds with their human companions.

A few fan favorites include Knight Rider’s KITT, Star Trek’s Lieutenant Commander Data, Star Wars’ C3PO and R2D2, and the collection of Terminators that stormed their way through the Terminator movie franchise.

Though AI is advancing quickly, today’s real-world technology isn’t as sophisticated as that of fictional worlds – but the gap is closing. In November 2022, the Microsoft-backed firm OpenAI introduced ChatGPT – a chatbot capable of incorporating some of the complex nuances of human communication into its output.

For example, ChatGPT can land a joke and produce creative written works, and it can write passable blog posts, essays, and articles. At the moment, it would be difficult to mistake ChatGPT communication for that of an actual person, but the technology is learning – and so are the developers responsible for perfecting it.

Chatbots are already in use for a variety of applications, and the potential for additional use cases goes up as the technology improves. Will chatbots have an impact on stock prices? If so, which stocks will benefit from chatbots?

Which Company Has The Best Chatbot?

ChatGPT got a lot of press after its rollout, and some tech industry commentators speculated that it would completely disrupt the search engine market.

Alphabet’s Google has a near-monopoly on search engine traffic – and related ad revenue – at roughly 84 percent of the global market share. Microsoft’s search engine, Bing, and its Edge search browser have captured just under nine percent of the market as of early 2023.

Microsoft’s agreement with OpenAI includes 75 percent of all profits until Microsoft recovers its $10 billion investment. After that, it will own 49 percent of the company.

Considering the platform is expected to do everything from complex research to drafting correspondence, there is tremendous potential for Microsoft to profit, and that will benefit Microsoft stock.

However, ChatGPT isn’t the only player in the chatbot world. Alphabet has no intention of losing market share to Microsoft, and it is bringing its own chatbot technology to market.

Unfortunately, when Alphabet introduced its chatbot, Bard, to the world in early February 2023, things didn’t go smoothly. Bard provided misinformation when asked for specific facts related to the James Webb Space Telescope. The embarrassing error caused Alphabet stock to drop more than eight percent in a matter of hours.

Does that mean Microsoft has the best chatbot?

Perhaps, for the moment, but most industry experts aren’t counting Alphabet out. The company is known for excellence in innovation, and it is likely to retool its chatbot to the point that it equals or exceeds ChatGPT in short order. That puts Alphabet firmly on the list of stocks that will benefit from chatbots.

Are these the only two companies poised to profit from chatbots?

Not a chance. Microsoft and Alphabet aren’t the only ones working on this technology. Amazon’s Alexa is already a fixture in millions of homes, and Alexa for Business controls more than 70 percent of its respective market.

In China, the massive tech company Baidu has announced its chatbot will go live in March. In English, Baidu’s chatbot will go by the name Ernie, and it will be powered by Baidu’s proprietary language model.

Aside from stocks directly associated with developing chatbot technology, the seemingly limitless opportunities to incorporate AI features into everyday applications suggests many other stocks will go up with the use of chatbots.

Which Companies Are Using A Chatbot?

Many companies have added chatbots to their customer support options, but some are more helpful than others. The least sophisticated are essentially search functions that direct users to an FAQ article with similar keywords. Some are a bit more advanced, but for the most part, they aren’t effective at problem-solving – particularly when an action is required. At best, they provide customer or order-specific information.

Advanced chatbots are expected to be capable of carrying on a full conversation, complete with probing questions and execution of solution-related transactions. When these chatbots roll out, they have the potential to benefit just about every industry. Instead of relying on people to manage customer concerns in B2C and B2B environments, the task will be delegated to chatbots.

From an expense perspective, the technology will deliver a return on investment by eliminating certain direct expenses, such as the payroll, equipment, and facility expenses associated with customer care centers. The indirect benefits include fast, convenient customer care, which improves customer satisfaction and increases engagement.

Meanwhile, skilled professionals previously spending their time on tasks associated with basic customer care can transition to strategic work that adds value to the organization.

Which Stocks Will Benefit From Chatbots?

Early adopters of chatbot technology are expected to include e-commerce companies like Amazon and Shopify.

Other retail businesses with multiple channels, such as Walmart and Target, will likely follow in short order. Financial services companies are next up once they can confirm that there are no concerns with data security. That may contribute to improved bottom-line results for organizations like Bank of America, JPMorgan Chase, and Wells Fargo.

The most exciting opportunities for chatbots may be in healthcare, where AI-powered chatbots would be able to demonstrate their full range of skills. The technology is designed to learn by processing and analyzing enormous amounts of data, and it continues to learn through experience.

At the moment, healthcare is bogged down by seemingly endless manual tasks – primarily data entry – that could be transitioned to AI so practitioners can put more focus on patient care.

More importantly, early testing shows AI is better able to provide early detection of negative outcomes, expanding the window for prevention. It can also point physicians towards resources for unusual symptoms or conditions, reducing the time it takes to diagnose illness.

On the patient side, chatbots can offer answers to basic health questions, as well as offer support through the process of being admitted, working with insurance, and handling payment arrangements. Chatbots can schedule appointments, and they can sound the alarm if patients appear to need emergency care.

While most healthcare facilities are likely to employ chatbots in some capacity eventually, the first stocks to benefit from chatbots are expected to be web-based. For example, chatbots would add efficiency for telehealth companies like Teladoc and Talkspace. Providers of health information technology services like Cerner Corporation will perfect chatbots for individual facilities, which suggests potential benefits for those stocks, as well.

Best Artificial Intelligence (AI) ETFs

If trying to pick the best chatbot stock isn’t practical, exchange-traded funds (ETFs) focused on AI are a smart alternative. ETFs pool investor funds and invest in a variety of stocks to ensure shareholders have broad exposure to the industry.

Four of the best include Cathie Wood’s ARK Autonomous Tech & Robotics ETF (ARKQ), Global X Robotics & Artificial Intelligence ETF (BOTZ), iShares Robotics and Artificial Intelligence Multi-Sector ETF (IRBO), and ROBO Global Robotics & Automation ETF (ROBO).

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