In the next few years, Artificial Intelligence could bring in the most transformative period of human history. Naturally, I’m looking for the best AI stocks to buy to take advantage
AI technology might lead to incredible productivity gains and replace millions of jobs. It stands to reason a few stocks could become huge winners.
Here are four stocks I’m looking to add to my portfolio soon. If AI does end up having that kind of impact, I can see potential for each one to skyrocket in value.
Nvidia
Nvidia designs high-performance computer chips. Its $10,000 A100 chip is reportedly used for 95% of machine learning at present.
Last week, the huge demand for these chips saw the company smash its expected earnings target. The stock gained a jaw-dropping $185bn in an hour-and-a-half.
The downside here is the price. At $389 a share, the firm trades at a trailing price-to-earnings ratio of 177 and forward P/E of 53.
Still, it seems inevitable that Nvidia’s chips will power the AI of the future. So this is a definite buy if I can get a more attractive entry point.
Microsoft
Since AI chatbot ChatGPT-3 was released in November last year, I’m not sure I’ve gone a day without hearing about it. Sadly, this revolutionary tech is made by OpenAI – a private company.
The good news is that I can get exposure to OpenAI and future ChatGPT success by investing in Microsoft. Bill Gates’ company recently invested $10bn in the AI firm.
The tech giant is seeing a return on investment already. Its use of ChatGPT in the Bing search engine has seen it increase to 100m daily active users – catching up to Google’s 1bn.
Microsoft’s massive $2.4trn market cap means it has the resources to become one of the big AI players. But it does also mean if I bought in my exposure to OpenAI would be relatively small.
Palantir
Palantir uses machine learning to analyse ‘big data’ to help companies and organisations. For example, it said its analysis helped one NHS trust shorten waiting times by 28%.
The stock is on the rise too and jumped 5% earlier this month. That came on the back of its Q1 earnings which showed an 18% increase in revenue to $525m. Net income of $17m was up from a $101m loss the year before.
There are risks, of course. The share price being down 55% from all-time highs and directors selling $1bn of stock since 2020 are both potential red flags here.
Ocado
UK firm Ocado’s ‘sci-fi’ tech uses warehouses staffed by AI-powered robots. These machines zip around and can bag a grocery shop all by themselves.
Ocado’s grocery delivery service in the UK uses this tech already – partnered with Marks and Spencer – and saw Q1 revenue increase 3.4% year on year to £584m.
But the really exciting potential here is for licensing out its tech. Leading grocers from the US, Canada and Korea have already signed deals to build warehouses.
The risk here is that the company has never turned a profit. But with £1bn still on the balance sheet, I’m happy to own a few shares in the firm.
