Editor’s note: This article is part of InvestorPlace.com’s Investing for the Next Decade.
For many investors, artificial intelligence is still a Jetsons-like technology — something that seems far off, but in reality might be just around the corner. Oxford academics Carl Benedikt Frey and Michael Osborne estimated that 47% of American jobs are at high risk of automation by the mid-2030s, so it’s closer than we think. Many investors aren’t sure what the technology is or what AI stocks to buy in anticipation of its rise.
Essentially, artificial intelligence (AI) is able to increasingly leverage computing power to do more tasks. Not only are these tasks increasing in “smarts,” they are beginning to replace the need for humans to do them. Beyond that, AI capabilities are vastly surpassing what humans are capable of doing.
AI can be leveraged in healthcare, customer service, data analytics, drone use, agriculture, autonomous driving and virtually any industry.
In an email to InvestorPlace, Angeline Close Scheinbaum, associate professor of marketing at Clemson University’s Wilbur O. and Ann Powers College of Business, explains two trends that are leveraging AI and have been expedited by the pandemic:
Intensified Self-Service Technology: While self-service technologies such as kiosks at airports and self-checkout at the grocery store were already a shift before the pandemic, there will likely be a much greater use of consumers using technology to complete transactions for the long run for consumers who have now come to expect the technology.
New Mobile Services and Delivery Models: New mobile service options, that often come to the consumer instead of the consumer coming to the service provider seem to have trended during the pandemic. Consumers may appreciate the convenience of services or products, such as food, coming to them.
Let’s look at seven AI stocks to buy in anticipation of the next decade’s technological advances:
- Nvidia (NASDAQ:NVDA)
- Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG)
- Amazon (NASDAQ:AMZN)
- Twilio (NYSE:TWLO)
- McDonald’s (NYSE:MCD)
- Domino’s Pizza (NYSE:DPZ)
- Trimble (NASDAQ:TRMB)
AI Stocks to Buy: Nvidia (NVDA)
I would be remiss to start this list without beginning with Nvidia. The chipmaker has positioned itself to be one of the biggest beneficiaries of artificial intelligence.
Right off the bat, to pull off AI functionality, the user needs the right technology. If a product doesn’t have the proper hardware, forget about running the software. For Nvidia, that goes for drones and healthcare as much as it goes for self-driving cars.
Luckily when you want the most powerful GPUs, Nvidia is there with the best products in the industry.
On the flip side, AI and machine learning (ML) applications generate a ton of data. With its surging datacenter business, Nvidia can benefit on that side of the equation too.
Watch the first few minutes of one of Nvidia’s GTC introduction from a few years ago. CEO Jensen Huang had his company all over this trend before investors even knew it was a trend. I am lucky enough to have attended a few GTC conferences in the past. Nvidia is the real deal (and we did a deep dive on it as a result).
By the time talks start to center around AI stocks, Nvidia will have already build the foundation for this space. Don’t be surprised to see this name continue to ride AI trends higher.
If we want to talk about the companies that are leveraging AI to replace jobs, I think we have to talk about Alphabet.
Not that YouTube or Google are displacing the silent film producers and dictionary searchers. But rather, its Waymo unit has serious disruption capabilities in autonomous driving. Surprisingly, there is a lot of competition in this space.
Nvidia is making serious noise in the autonomous driving space, but more on the hardware and software side of things — yes, both! However, Waymo is actually rolling out the self-driving taxi service.
This isn’t an overnight development. Tomorrow we won’t wake up to fleets of self-driving robo-taxis. However, over the coming decade, expect it to play a larger and larger role.
Waymo has been operating mostly out of Arizona as a taxi service. But California could be next, as could semi trucks. Regarding the latter, it wouldn’t be all that crazy to think that select weather-consistent routes could be handled by autonomous driving solutions.
In the years ahead, autonomous driving could displace truck drivers, taxi operators and ride-sharing drivers.
Going beyond autonomous driving, Amazon could enter the ring with autonomous delivery.
The company has been pouring resources into autonomous and electric driving solutions for the last several years. Then in the summer of 2020, it dropped $1 billion on Zoox, an autonomous driving company.
I’m not sure how far into the future Jeff Bezos’ mind can see. However, I do know that it’s further than what I or most investors can see. In any regard, he’s not stopping with autonomous driving. Amazon is turning its sights to the sky.
The company is working on drone deliveries in certain areas. It’s also filed for a patent that would use a sort of blimp-like supply center to deliver from.
In present times, also consider Amazon’s use of AI and robotics within its warehouses. These little robots never tire, rarely stop and keep this well-oiled e-commerce machine humming.
It’s why Prime customers can have deliveries in just a few hours and why the company is increasingly able to handle more orders. While Amazon still needs plenty of employees, it’s also working diligently to use machinery, robotics and AI to take over the more menial tasks.
Enough of the mega-tech names. What other AI stocks are out there that we can leverage? Let’s turn our attention to Twilio.
The company is using its technologies to make for the most effective customer service platform. As written by Daniel Laboe, “Twilio’s unmatched AI capabilities, embedded in its remarkable customer engagement platform, could mark the end of foreign call centers.”
I couldn’t say it better myself.
As the pandemic has been wreaking havoc on many businesses, Twilio’s business has been booming. In late-October, the company reported its most recent quarterly results. Earnings and revenue blew past expectations, as the latter exploded more than 50% year-over-year.
What more can investors ask for? The stock actually pulled back on the report, falling almost 5% on the day. The market didn’t like management’s Q4 guidance, which called for a loss of 8 cents to 11 cents per share. However, revenue guidance of $450 million to $455 million was well ahead of consensus estimates at ~$432 million.
No one knows how this pandemic will shape up, but it’s clear that Twilio is seeing a surge in demand because of it. After its acquisition of SendGrid, Twilio was able to expand its offerings ahead of Covid-19. As companies increasingly communicate with their customers, Twilio is set to benefit.
At least hear me out before exiting this story because McDonald’s is listed under AI stocks to buy.
No, McDonald’s is not a tech stock, nor is it the typical name that comes up at an investor brunch when AI discussions come up. However, the company is turning to tech to drive profits.
By now, many of us have seen or used an ordering kiosk. That’s when you walk into McDonald’s and order from a touch screen rather than through a person. It’s impersonal, but consumers don’t care; after all, they’re there to eat, not to exchange pleasantries with the employees.
In any regard, McDonald’s is looking beyond touchscreen kiosks. The company has been scooping up AI and machine learning companies, and even set up shop in Silicon Valley with its McD Tech Labs. The team there is working on voice-recognition software.
The company hopes that with more AI and less human interaction, errors and costs will decline.
In September 2019, McDonald’s acquired voice technology company Apprente for an undisclosed sum, after scooping up Dynamic Yield for $300 million a few months earlier. This is an aggressive strategy and it shows just how serious the company is about integrating AI into its operations.
Domino’s Pizza (DPZ)
Like McDonald’s, Domino’s Pizza has been making a big push into technology in an effort to boost efficiency.
Also like McDonald’s, the company didn’t start right away with AI in its business. Instead, Domino’s was a leader in all of fast food, as it began leveraging technology early and often.
Management realized that customers — particularly its younger ones — preferred to order online or from their phone. They didn’t want to call, talk to someone and place their order. Instead they wanted to pull up a menu, add items to their cart and checkout.
That realization is a huge reason why the stock is up 2,500% over the past 10 years. Now that sounds like how our AI stocks are supposed to perform. In any regard, the company isn’t resting on laurels.
As Dennis Maloney, the company’s chief digital officer, said, “Domino’s started off as a pizza company that sells online, and we’ve managed to transform ourselves into an e-commerce company that sells pizza.”
Domino’s uses machine learning to estimate order times and is even working on self-driving delivery units. Check out this statement, which incorporates the first name on our list of AI stocks, Nvidia:
With CPUs, it used to take three days for Domino’s to train an algorithm to predict when orders would be ready. Now using Nvidia GPUs, they can train the same algorithm in less than an hour and continuously retrain it using more data every day. This has enabled them to improve their accuracy from the previous 75% prediction accuracy rate to 95% accuracy.
Trimble is not a name many investors have atop their list of perspective AI stocks. While not exactly microscopic at a $12.5 billion market capitalization, it flies under the radar compared to names like Alphabet, Amazon and Nvidia.
That’s a good thing for investors looking for a diamond in the rough. I came across Trimble earlier this year digging through the top holdings of the ARK Autonomous Technology & Robotics ETF (BATS:ARKQ).
For those unaware, Ark Invest has done a tremendous job picking out high-growth winners in the past and it’s worth perusing the firm’s top picks for idea generation.
In any regard, Trimble has multiple end markets that can be disrupted via artificial intelligence and machine learning. Trimble says,
We have some of the most talented people in the industry working on the next generation of solutions. We’re using video to dramatically enhance driver safety, building artificial intelligence to make processes more efficient, and experimenting with augmented reality to deliver better driver training.
Beyond leveraging AI and ML for routes, driving capabilities, fleet management and preventing unplanned repairs, the company also has exposure to the agriculture and utility sectors. Both of these markets are ripe for innovation, as AI can drastically increase efficiency in those fields. In construction, the company helps “build smarter, more accurate, more profitable projects.”
Trimble doesn’t sport as robust growth as a company like Nvidia, but it’s worth a deeper dive if AI stocks are your focus.
On the date of publication, Bret Kenwell held a long position in NVDA and GOOGL.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.