AI has sparked considerable market hype for 2023, promising to revolutionize our economy and labor market. High-potential AI stocks, including top machine learning stocks, have already seen substantial gains. Yet, despite this surge in prices, investment opportunities persist. AI, while not magical, presents groundbreaking applications that investors shouldn’t overlook. Securing AI stocks for the long haul is key to tapping into the gains of the next revolution.
Beyond chatbots and AI art making headlines, leading AI stocks provide far greater possibilities. Every aspect of a company’s workflow can leverage AI, with enterprise AI projected to match the importance of the enterprise cloud from a decade ago. Think of AI not merely as hobbyist toys but as crucial tools for the future.
Current AI and machine learning tools, although still in their early stages, are already disrupting various industries. The most promising long-term AI investments are companies that not only offer AI tools but also utilize them to enhance their own products. Keep an eye on how these firms integrate AI directly into their existing products. After all, AI represents the future toolset. Here are three high-potential top machine learning stocks worth holding.
Adobe (ADBE)
In the art world, Adobe (NASDAQ:ADBE) has a long and well-known history of using AI and machine learning. For over a decade, many of Adobe Photoshop’s most popular tools have been built using these techniques. Consider that Photoshop brought out content aware fill (which allows changing the background of an image without altering the subject) in 2010. As the premier tool for digital artistry, Adobe’s embracing of AI makes them a great AI stock to buy and hold forever.
Building upon its AI capabilities, Adobe has recently unveiled new generative AI tools to their suite of Adobe creative products. This includes Adobe Firefly, which creates images using text, and gives artists new ways to imagine and experiment with their art. Adobe is also buying AI generated art for Adobe Stock, their stock image repository. There has been drama over the acceptability of AI art in artist spaces, but Adobe is making it clear that they will accept AI in their marketplace. By embracing AI art, Adobe has put itself at the forefront of a new art movement. This makes it one of those top machine learning stocks.
Financially, Adobe has been doing stably, but they have the potential to grow massively. Their Q1 2023 revenue grew 9% year over year to $4.7 billion. And their R&D spending grew by $126 million to $827 million. Earnings were flat, but their investments in AI tools are setting them up as a big beneficiary of the AI revolution. If their newest tools can follow Photoshop in becoming a standard in the art world, Adobe’s position as a top AI stock is all but guaranteed.
Alphabet (GOOG)
Alphabet’s (NASDAQ:GOOG) Google search engine has been the premier search engine for a generation. New language AIs threaten to upend this stranglehold on search, but there is opportunity within the crisis. Google has already done the hard work in indexing the web, now they can use their indexing to build AIs.
Google’s Bard AI had a rocky rollout, and it is still negotiating its entry into the EU. But the search engine giant has plowed ahead with its own large language model for curious users to ask questions to. But AIs are so much more than just chatbots and artists. Google has patented a system to automate game testing as well, and this technology can be brought to many industries. It’s clear that Google has its eyes on upending as many repetitive-task jobs as it can. This could mean big savings for Google customers, and big gains for Google.
The highest potential of AI stocks comes not from what they offer to consumers, but what they can offer to enterprises. Chatbots dominate the news, but enterprise software rules the market. The fact that Alphabet is a strong enterprise-cloud company as well as an AI company is part of what makes them one of those top machine learning stocks.
Financially, Alphabet has shown modest earnings growth but flat revenue recently. In Q1 2023 revenue was $68 billion, down from $70 billion in Q1 2022. Meanwhile net income was $16.4 billion, up from $15.1 billion in Q1 2022. Google’s recent growth has been sluggish but if AI is half as transformative as Google says it will be, then buying Alphabet will still be one of the best long-term AI investments you can make.
Intel (INTC)
Machine learning doesn’t just happen on its own. To develop the right algorithms requires huge amounts of data and data processing in cloud servers and dedicated datacenters. That’s where Intel (NASDAQ:INTC) comes in. As one of the few remaining chip fabricators, Intel can make the chips powering the AI revolution.
Intel’s fabrication business is also receiving a significant boost from the world’s governments. Germany is subsidizing an Intel fab with $11 billion. Ohio will be giving intel $2 billion and the US Federal Government will be giving billions more for fabs in America. While Intel itself does not have the money it needs for expansion, its position as a Western chip manufacturer means Western governments have been eager to help.
This is because Intel’s chips are not just important economically, but also politically. Taiwan Semiconductors (NYSE: TSM) is the largest manufacturer of chips, but they have a geopolitical risk factor due to China’s tensions with Taiwan.
On a trailing 12-months view, Intel doesn’t look good. In Q1 2023 they had $11.7 billion in revenue, a collapse from $18.5 billion in Q1 2022. Net income fared even worse, they had a net loss of $2.8 billion in Q1 2023 versus net income of $8.1 billion in Q1 2022. But with a long term, forward looking view, Intel is one of the best positioned semi-conductor stocks in the world. And that makes them the perfect AI stock to buy and hold forever.
On the date of publication, John Blankenhorn held LONG positions in GOOGL, and INTC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
