Artificial intelligence (AI) is the hot, new area of the technology sector, and investors are scrambling to separate winners from losers when it comes to AI stocks. While it’s still early days when it comes to AI, established companies such as Microsoft (NASDAQ:MSFT) and startup firms alike are pouring billions of dollars into AI applications in a rush to get them to market. The release late last year of the AI generative chatbot known as ChatGPT whet consumers’ appetites for artificial intelligence stocks and unleashed a race by firms to get more advanced AI products to market. Indeed, AI looks as though it will have more influence over our daily lives going forward. With that in mind, here are three AI stocks to watch as artificial intelligence goes mainstream, helping people with everything from writing grocery lists and school essays to powering appliances and motor vehicles.
| AI | C3.ai | $21.90 |
| BABA | Alibaba | $83.85 |
| GOOG/GOOGL | Alphabet | $94.15/$93.80 |
C3.ai (AI)
If there’s one stock that has skyrocketed since ChatGPT came on the scene last fall, it is C3.ai (NYSE:AI). The share price of the company that was founded in 2009 by billionaire businessman Thomas Siebel has soared over 90% this year as interest in artificial intelligence has ballooned. Interest in the stock has only increased since C3.ai announced fiscal third-quarter results that trounced the mean forecasts of analysts on both the top and bottom lines,. Moreover, the firm issued bullish forward guidance.
C3.ai reported a narrower-than-expected fiscal Q3 loss of 5 cents per share compared with the mean estimate of a 22 cent loss. Its revenue totaled $66.7 million, above the average estimate of $64.2 million. The company forecast revenues and profits for its current fourth quarter that were stronger than analysts, on average, had expected. Wedbush Securities and a number of other firms upgraded their ratings on AI stock following the company’s earnings.
A relatively small company, C3.ai is focused on developing enterprise AI software for clients, including Royal Dutch Shell (NYSE:SHEL) and the U.S. Air Force. The company’s technology is used to enhance machine learning and neural networks and can be applied in industries ranging from banks to industrials.
While the gains of AI stock have been impressive, there is speculation that the shares might be targeted for a short squeeze as the number of its shares being sold short by professional traders has grown in recent weeks.
Alibaba (BABA)
It’s not just U.S. companies that are speeding ahead with the development of artificial intelligence. Chinese tech giants are also focused on advancing AI technology. Some pundits have characterized the current situation as an “AI arms race” between the U.S. and China. A number of Chinese companies, such as Baidu (NASDAQ:BIDU), have already announced generative AI chatbots of their own. If there’s a sleeper company in China’s AI rush, it is Alibaba (NYSE:BABA).
An e-commerce giant that has been called “the Amazon (NASDAQ:AMZN) of China,” Alibaba is also squarely focused on developing cutting-edge artificial intelligence applications. Among its projects are a ChatGPT-style tool of its own that some predict will be integrated with Alibaba’s “DingTalk” communications app. BABA may use the tool to enhance its e-commerce shopping platform.
After a tough 2022, BABA stock has recovered somewhat and is now up 9% over the last 12 months.
Alphabet (GOOG / GOOGL)
It’s difficult to leave Google parent company Alphabet (NASDAQ:GOOG / NASDAQ:GOOGL) out of any discussion about artificial intelligence. Despite the company doing a face plant at the public unveiling of its own AI chatbot, called Bard, in February (a public relations disaster that wiped $100 billion off its market cap), the company, by most accounts, has the most advanced AI in the world. This stems from the fact that Alphabet owns DeepMind, widely viewed as the premier AI research company in the world.
DeepMind has already created leading AI products such as AlphaGo that has been able to beat some of the best professional Go players in the world, and AlphaFold, which uses AI to predict more than 200 million protein structures in the medical sphere. Alphabet’s executives have said that they have developed artificial intelligence technology as powerful or more so than ChatGPT, but have chosen not to release it yet. Indeed, one former engineer at Alphabet found the company’s AI so powerful that he accused it of being sentient.
In the long term, Alphabet is still expected to be a major player in the AI space. DeepMind is reportedly driving improvements to the Bard chatbot. Given that Google’s search engine has more than 4 billion regular users, Alphabet’s Bard chatbot can be expected to give ChatGPT a run for its money. GOOGL stock is down 27% over the past 12 months.
On the date of publication, Joel Baglole held a long position in GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
