No longer the domain of science fiction, artificial intelligence (AI) is today a growing part of our everyday lives – from electronic payments and cars that park themselves to digital assistants such as Amazon’s (NASDAQ:AMZN) Alexa and robots that vacuum our floors. And this is just the beginning for AI stocks.
AI software is forecast to top $125 billion by 2025 as organizations integrate more AI into their businesses.
In this article we look at four cutting-edge artificial intelligence stocks that are shaping the world today and leading us into the future.
Cutting-Edge AI Stocks: IBM (IBM)
Admittedly, IBM is not the first company people think of when speaking about “cutting edge” technology. Founded in 1911 as International Business Machines Corp., IBM has been through many iterations and changes over the past 110 years.
Many investors today see IBM as an old and stodgy blue-chip company. That fact is reflected in the company’s share price, which has languished around $125 since April.
But when it comes to artificial intelligence, IBM is a global leader and deserves to be on most lists of companies that are pioneering work in the field. IBM has created one of the most famous AI applications with its “Watson” computer. Named after IBM founder, industrialist Thomas J. Watson, the supercomputer can answer questions that are posed to it in conversational language – a true leap in AI.
Watson-based programs are being used across a range of industries — from helping to diagnose diseases, to forecasting the weather, preparing taxes and creating advertisements. And Watson is just one aspect of IBM’s AI business.
In October, IBM announced that it is focusing more on cloud computing and artificial intelligence. The decision was cheered by Wall Street and investors who are hoping for a breakout in IBM stock. AI could be the catalyst to send the share price higher.
We’re moving from a well-known large cap company in IBM to a lesser-known small cap with Alteryx. While most investors may not be familiar with Irvine, California-based Alteryx, the company is doing exciting things in the AI space. It is growing a lot.
That’s because Alteryx’s software is increasingly used to power mainstream AI applications. Its products allow data scientists to collaborate, discover new insights, and better deploy machine learning.
Founded in 1997, Alteryx is profitable, and analysts are forecasting revenue growth of 30% in 2021, and compound earnings growth of more than 40% annually over the next five years.
AYX stock has been volatile this year, trading as low as $80.98 a share in March and as high as $178.66 in August. Today, the stock is at $124 a share. The volatility reflects the fact that many companies that would normally utilize Alteryx’s products had to scale back spending and conserve resources during the pandemic.
However, analysts remain bullish on the stock, stressing that the company’s AI offerings, underlying fundamentals, and management team are each strong. Now could be a buying opportunity.
While best known as a cloud computing play and for its market-leading customer relationship management software, Salesforce also has a robust AI business. The company routinely buys other hot tech companies that it feels will improve its software-as-a-service (SaaS) offerings.
Case in point: Salesforce’s recent announcement that it will buy workplace software company Slack for $27.7 billion in cash and stock. Salesforce has also made acquisitions in the AI space.
In 2019, Salesforce acquired Bonobo AI, an Israeli firm that utilizes automated analysis of customer phone calls, texts and chats to deliver actionable insights. This acquisition complemented Salesforce ‘s AI-powered software that uses data to identify previously unseen business patterns, deliver valuable sales leads, predict what marketing copy will perform strongly, and optimize how businesses operate and interact with customers. Bonobo is the latest in a string of AI companies that Salesforce has bought since 2010.
Going forward, AI should play a larger role in Salesforce business. CRM stock has sold off sharply since the Slack (NYSE:WORK) deal was announced, down 10% since the end of November at $223 a share. But Salesforce is too strong a company for its stock price to remain down for long. AI should help bolster the long-term share price.
Santa Clara, California-based Nvidia is doing a lot of things right, including in the area of AI. In fact, Nvidia has announced that it is creating the world’s fastest AI supercomputer that will be based in Europe and called “Leonardo.”
In the not-too-distant future, Leonardo is expected to be used for drug discoveries, space exploration and weather modelling. And powering the AI supercomputer will be Nvidia’s Ampere-based graphics cards and Mellanox HDR 200 GB networking system.
Additionally, Nvidia is using AI that it developed to improve video conferences, sharpening images and lessening instances of frozen screens. The company’s graphics chips are being used to power the next generation of video game consoles and cloud-based gaming that is expected to use AI to deepen the gamer experience.
Like Salesforce, Nvidia has been on an acquisition spree this year, buying companies that can help it advance its AI capabilities. Companies such as Mellanox Technologies, and its more recent $40 billion bid for ARM Holdings.
NVDA stock rose 200% from its March low to a November peak of $589.07. While the shares have given up some gains in recent weeks and now trade around $530, analysts maintain a positive outlook for Nvidia stock. The median price target on the company’s stock is $600 a share, with a high estimate of $700.
On the date of publication, Joel Baglole held long positions in CRM and NVDA.