This week, most investors and consumers are focused on OpenAI’s ChatGPT. The new innovation from the privately held artificial intelligence (AI) startup is taking the world by storm. Essentially, ChatGPT can perform a variety of tasks; it has the ability to write entire essays, conduct detailed research, solve math problems and answer questions across a variety of topics.
ChatGPT’s scope of information is limited to what can be found on the internet. But even so, it’s clear that we’re facing an invention with tremendous power. This raises a question for investors: what are the best stocks to buy to benefit from an incoming AI revolution? Given the vast range of AI companies, answering that requires some in-depth analysis.
Companies across the tech landscape are doubling down on artificial intelligence. Advancements in technology are helping us take key steps in areas like autonomous driving (AD) and cybersecurity. But OpenAI’s recent chatbot progress is likely to further compel companies around the world to focus on developing similar products. The tech behind ChatGPT has the power to revolutionize how we teach children, fix computer code and more. InvestorPlace’s Luke Lango notes:
“In the simplest terms possible, ChatGPT relies on very complex AI algorithms to read, analyze, learn, and understand text. By doing this enough times with enough texts, it will eventually learn basically everything. It’s likely to become this all-knowing model that can communicate with you like a human.”
So, which AI stocks will be the winners of the next phase of this new industrial revolution? Let’s take a closer look at the companies already making chatbot advancements.
EPAM Systems (EPAM)
EPAM Systems (NYSE:EPAM) recognized the power of AI chatbots as a healthcare and business tool years before some of its peers. In 2020, the digital platform designer and engineering company highlighted how businesses could leverage conversational AI to help improve customer service. The following year, EPAM’s Vice President and Senior Manager published an article on the benefits of chatbot therapy. A team of company researchers went on to gain recognition in March 2022 for their work with an early cancer detection chatbot.
As Luke Lango noted in a recent podcast, AI adoption could boom in 2023 and beyond. If that’s true, EPAM stock could also lead the charge. The company has a proven ability to continuously innovate and it knows what chatbots are capable of. With a focus on this new tech, EPAM will likely redouble its efforts as the industry picks up steam.
Right now, EPAM stock is also down for the year, making now a good time for investors to pounce. As InvestorPlace contributor Will Ashworth reports, the company is growing in size and recently reported strong third-quarter revenue growth. That makes it a clear choice among stocks to buy for the coming AI boom.
Microsoft (MSFT)
It’s no surprise that one of the pillars of Silicon Valley is early to the chatbot market. While the company isn’t known for automated features, Microsoft (NASDAQ:MSFT) has won praise for its work with bots. In fact, AI customer service platform Netomi ranks its bot framework as the best open-source AI chatbot of 2022:
“The Bot Framework Composer is an open-source, visual authoring canvas for developers and multi-disciplinary teams to design and build conversational experiences with Language Understanding, QnA Maker and bot replies. The Microsoft Bot Framework allows users to use a comprehensive open-source SDK and tools to easily connect a bot to popular channels and devices.”
Microsoft features the Azure Bot Service, which allows users to build their own bots into sophisticated virtual assistants. Its open-source tools give users the ability to connect each bot to various devices and channels.
Like EPAM, shares of MSFT stock are also down for the year. That represents a rare opportunity for such an ironclad stock that has otherwise historically been to withstand hostile market conditions.
IBM (IBM)
IBM (NYSE:IBM) shocked the world decades ago with one of the first personal computers. Although the company may not be the first today to perfect a chatbot, it’s certainly making progress in that area.
Similar to Microsoft, IBM describes its own bot, the Watson Assistant, as “a natural language AI chatbot that understands human conversation and improves the customer experience.” Highly focused on improving the customer experience for businesses, IBM has designed its bot to use both entity recognition and intent classification to “better understand customers in context.” The company says the bot is adaptable and can understand any request.
IBM and Microsoft will likely find themselves in competition as the AI chatbot race heats up. Further, while IBM can’t be counted as a beaten down tech stock, investors should consider it as a stable investment. In 2022, shares of IBM stock have managed to rise 8% year-to-date (YTD). Moving forward, IBM’s chatbot work should also grant it a key competitive edge, making it one of the top AI stocks to buy.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
