Suddenly, artificial intelligence (AI) is all the rage. The launch last fall of the ChatGPT chatbot has taken the world by storm. In only a few months, ChatGPT set a record for the fastest app to reach 100 million users, surpassing Google+, which took more than a year to reach that vaunted milestone. As consumers test ChatGPT’s ability to write essays, compose songs, and program video games (all in a matter of seconds), companies around the world are racing to release their own AI-powered chatbots and use them to enhance online search and bolster other applications. Analysts and commentators are conflicted about whether this new, powerful AI is good for society or poses a threat. But everyone seems to agree that the newest AI technology is revolutionary and destined to change all of our lives. Here are three tech stocks to buy for the future of AI.
Stocks to Buy for the Future of AI: Microsoft (MSFT)
You can’t directly buy the shares of OpenAI, the artificial intelligence company that developed ChatGPT, as that company is not yet publicly traded. However, investors can do the next best thing, which is to buy the shares of Microsoft (NASDAQ:MSFT), the tech giant that has poured more than $10 billion into OpenAI and is adding ChatGPT to its Bing search engine. In only a few short months, Microsoft has vaulted itself to the front of the AI arms race that has gripped the technology sector.
Microsoft is aggressively expanding its presence in AI, and the addition of ChatGPT has suddenly revived the outlook of the company’s search engine that, until now, had always run a distant second to Google.
Beyond Microsoft’s work with OpenAI and its utilization of ChatGPT, Microsoft is also expanding its share of key tech markets, such as video conferencing, cloud computing and video games. The sales of the company’s longstanding software products also continue to hold up well.
MSFT stock is down 10% in the last year. However, the stock has rallied 8% in 2023.
Bank of America (NYSE:BAC) recently raised its price target on Nvidia’s (NASDAQ:NVDA) stock to $255 a share from $215 and said the chip maker is well-positioned to lead the “AI arms-race.” Specifically, Bank of America wrote in a note to its clients that “NVDA’s full-stack of accelerated silicon/systems/software/developers positions it uniquely to lead the nascent generative AI arms-race among global cloud and enterprise customers.”
What it boils down to is that, going forward, ever more powerful artificial intelligence systems and platforms are likely to run on Nvidia’s semiconductors and microchips, driving the company’s financial results in a positive direction.
Nvidia’s market share of the chips used in large-language models such as ChatGPT is 75%, and some analysts forecast that Nvidia can maintain a 65% share over the long-term. NVDA stock has been on a tear since the start of 2023, rising 46% this year. However, its share price has still dropped 10% i nthe last year.
Sure, Alphabet’s (NASDAQ:GOOG/NASDAQ:GOOGL) demonstration of its Bard AI chatbot was a disaster. As one tech podcaster put it, Alphabet put the “AI” in “fail.” However, it would be a mistake to count Alphabet out when it comes to the future of AI. As several analysts have noted, Alphabet has more advanced AI than ChatGPT but has chosen not to release it yet. In fact, Alphabet’s AI is so powerful that one engineer working on it claimed that the technology had become sentient and that the company had achieved the singularity.
That engineer no longer works at Alphabet. However, many other engineers remain hard at work on the tech giant’s AI technology, and it won’t be long before Alphabet matches and potentially surpasses what ChatGPT is able to do for MSFT’s search engine.
Alphabet owns DeepMind, which is the premier AI research company in the world. With DeepMind, Alphabet is said to be working on AI tools that can be applied to everything from the entertainment industry to the healthcare and bio-sciences sector.
GOOGL stock has been clobbered over the last year and remains down 28% through the past 12 months. However, the stock has gained 6% in 2023.
On the date of publication, Joel Baglole held long positions in MSFT, NVDA, BAC and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.