Artificial intelligence represents an opportunity for investors. Despite its widespread applications, investing in AI still requires careful consideration.
AI
April 9, 2024
Artificial intelligence (AI) represents a significant opportunity for investors, with its ability to simulate human intelligence and problem-solving capabilities. Despite its widespread applications across various sectors, investing in AI requires careful consideration of the underlying technologies and companies involved.
While the potential for significant near- and long-term upside exists, legal, regulatory, and ethical concerns, as well as market volatility, could impact AI's growth trajectory.
While it's difficult to assess the best stock to buy, there have been some top performers. Those looking for high stock price returns, steady earnings, strong revenue growth, or a growing industry can look to this list of companies as a starting point:
Microsoft stands out as a frontrunner in the realm of generative AI, actively spearheading the development of numerous tools while also backing and fostering innovations from entities like OpenAI.
Bing, Microsoft's search engine, made waves as the first major search platform to integrate generative AI capabilities through chatbots, positioning Microsoft's pole position. Notably, Microsoft's suite of Copilot technologies represents a significant presence in the generative AI landscape, particularly in the realm of assistance tools.
These encompass various iterations tailored for enterprise and workplace needs. Microsoft Copilot serves as a versatile interface supporting text and voice inputs alongside document attachments and multimodal outputs through diverse GPTs.
Copilot for Microsoft 365 extends assistive functionalities to popular business applications such as Word, Excel, Dynamics 365, and Power BI, catering to a wide range of tasks. Additionally, Copilot for Sales focuses on enhancing sales processes within platforms like Dynamics 365 and Salesforce.
For those seeking customization or tailored solutions, Copilot Studio offers the flexibility to adapt existing tools or craft bespoke ones. GitHub Copilot, a product of Microsoft's ownership of GitHub, further augments developer capabilities by providing assistance with coding and related tasks.
There are competitors, however, as Google is quickly improving and deploying its own search-based chatbot, Gemini, which will likely replace traditional Google search on PCs and mobile devices. With a massive distribution between Gmail, Android devices, Apple phones which Google pays to be included on, and YouTube, marketing their new Chatbot and Search bot is not going to be a problem.
However, Google seems poised to capture more of the consumer market, while Microsoft has long made most of its revenue from sales to businesses.
Powering all of this change and processing are Nvidia graphic processing units made with memory from Micron (MU) chips and built by Taiwan Semiconductors (TSMC).
Currently, the United States stands as the leading country in AI, boasting nearly 60% of top-tier AI researchers and amassing approximately $249 billion in private funding, according to Macro Polo and Mirae Assets.
Silicon Valley, a hub within the US, hosts key players in the AI industry such as OpenAI, Google, Meta, and Anthropic, contributing significantly to pioneering products like GPT-4, DALL E-3, Bard, Llama 2, and Claude 2. Notably, GPT-4 has garnered a substantial user base of 100 million weekly active users, solidifying its dominance in the AI race.
AI investment in the US is on the rise, reaching $47.4 billion in private investment in 2022, as revealed by a Goldman Sachs study, which also indicates that the US government allocated $3.3 billion towards AI research and development in the same year.
The most powerful AI currently reigning in the technological landscape is ChatGPT (Chat Generative Pre-trained Transformer), a groundbreaking AI assistant chatbot created by OpenAI and introduced on November 30, 2022.
ChatGPT leverages a sophisticated large language model, empowering users to direct conversations with precision, adjusting parameters such as length, style, and language. Through prompt engineering, users can shape interactions to their specific needs, ensuring tailored and nuanced exchanges.
Its dominance is undeniable, evidenced by its rapid ascent to becoming the fastest-growing consumer software application in history by January 2023, boasting an extraordinary user base of over 100 million. This meteoric success has propelled OpenAI's valuation to an impressive $29 billion, cementing ChatGPT's status as the forefront AI powerhouse of the moment.
When considering whether AI is a good investment, it's crucial to understand its potential impact and implications. Artificial intelligence (AI) represents a significant opportunity for investors, with its ability to simulate human intelligence and problem-solving capabilities. Despite its widespread applications across various sectors, investing in AI requires careful consideration of the underlying technologies and companies involved.
Established tech giants like IBM, which has been researching AI for decades, are pivotal players in this space. However, it's important to note that AI adoption is still in its early stages, suggesting substantial growth potential ahead. Semiconductor firms like Nvidia and tech companies such as Microsoft and Alphabet are key players driving AI innovation.
Investing in AI-specific exchange-traded funds (ETFs) or broad market indexes like the S&P 500 and Nasdaq 100 can provide exposure to leading AI stocks while minimizing risk.
While the potential for significant near- and long-term upside exists, legal, regulatory, and ethical concerns, as well as market volatility, could impact AI's growth trajectory.
Warren Buffett said in an interview with CNBC in April 2023 that artificial intelligence (AI) was "extraordinary." However, Buffett quickly added that he didn't "know if it's beneficial."
Whatever the multibillionaire's opinion of AI is, he has already benefited financially from the technology. Buffett has invested $159 billion in these eight AI stocks -- and most of them have been big winners over the last 12 months.
Apple
Apple is by far the biggest holding for Buffett. Berkshire Hathaway's stake in the tech giant is worth roughly $156.9 billion. The stock hasn't performed especially well over the last 12 months, though, due to sluggish sales growth and slow adoption of AI. However, all of that is soon changing as Apple announced plans to integrate AI from OpenAI and/or Google in coming iPhones.
Amazon
Berkshire owns $1.8 billion in Amazon stock. Although Buffett didn't make the original decision to buy the e-commerce and cloud services leader, he's expressed regret for not buying the stock earlier.
Microsoft
Is Microsoft a Buffett AI stock? Although you won't find it listed in Berkshire's regulatory filings, the answer is a resounding "yes." Berkshire subsidiary New England Asset Management (NEAM) has a stake in Microsoft worth $11.6 million.
Broadcom
Buffett also owns shares of Broadcom thanks to NEAM. The investment firm's position in Broadcom was valued at over $9.5 million at the end of 2023.
NXP Semiconductors
NXP Semiconductorsis another AI chipmaker in NEAM's portfolio (which makes it a Buffett stock, albeit indirectly). NEAM owns a stake of $8.9 million in NXP.
Qualcomm
Through NEAM, Buffett has a position worth $8.3 million in Qualcomm. Although Qualcomm hasn't delivered the sizzling gains over the last 12 months that some AI stocks owned by Buffett have, it's still up over 35%.
IBM
Berkshire Hathaway once directly owned shares of IBM but no longer does. However, the tech pioneer remains a Buffett stock due to NEAM's $5 million stake in IBM.
Alphabet
Buffett admitted publicly a few years ago that he made a mistake by not investing in Google parent Alphabet earlier. While the tech giant still isn't in Berkshire's portfolio, NEAM owns around $2.5 million worth of Alphabet's shares.
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