Enterprise AI is the application of artificial intelligence to enterprise grade software to help organizations improve their productivity and efficiency. It’s an area of AI that will undoubtedly produce some of the greatest stock investments moving forward. Currently, three enterprise AI stocks stand out in my mind although there are plenty of other logical choices.
The enterprise AI market itself will be marked by massive compounding annual growth over the next few years and beyond. Enterprise adoption of AI is still early in its development. Large organizations require greater accuracy than individual consumers like you and I receive through applications such as ChatGPT for example. That requirement for greater accuracy has slowed adoption relative to consumer AI applications. The costs of errors at enterprise scale are vastly greater than a simple falsehood told through ChatGPT.
Anyway, enterprise AI stocks should be a high priority investment for anyone seeking to capitalize on AI at this point. Exposure to these three companies would make an excellent, diversified position overall.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is a huge enterprise AI name to watch in part because the company has invested so much in Anthropic. The privately held AI firm has raised billions from Amazon and Alphabet (NASDAQ:GOOG,GOOGL) and just debuted the most advanced version of its Claude chatbot. According to the company:
“Claude 3.5 Sonnet sets new industry benchmarks for graduate-level reasoning (GPQA), undergraduate-level knowledge (MMLU), and coding proficiency (HumanEval),” the company said. “It shows marked improvement in grasping nuance, humor, and complex instructions, and is exceptional at writing high-quality content with a natural, relatable tone.”
Investors should fully expect Amazon to leverage Anthropic’s AI prowess in building its own AI capabilities, particularly in the enterprise space. Anthropic’s Claude chatbot is noted to be much better at producing accurate facts whereas OpenAI’s ChatGPT is arguably better for creative projects.
I’d argue that for most enterprise applications, like Excel for example, the value of accuracy trumps the value of creativity overall. Amazon’s strong position in Anthropic early on suggests that the company has an excellent chance at cornering a position of the market.
Palantir Technologies (PLTR)
Palantir Technologies (NYSE:PLTR) has created a cutting-edge AI platform that has propelled its stock substantially higher since the beginning of 2023. The company began its early life as an analytics provider to the public sector and was highly associated with the defense sector and government overall. Since then, Palantir quickly became more commercially oriented and is growing into an enterprise AI stock of note.
The reason to believe that is the relative growth of Palantir’s commercial side. While overall revenues at the company grew by 21% in Q1, commercial revenue grew 27% to $299 million. Government revenues reached $335 million during the first quarter.
It is likely Palantir will soon recognize greater commercial revenues than it does from the government business. That is a testament to the company’s strength as an AI enterprise firm overall. investors should also note that Palantir reported its sixth straight quarter of overall GAAP profitability during the first quarter.
Microsoft (MSFT)
There are a lot of ways to look at Microsoft (NASDAQ:MSFT) stock in relation to enterprise AI.
Microsoft is one of the leading cloud providers. That’s an area where enterprise AI development is particularly important and one in which Microsoft is directing billions of dollars. Enterprises of all sizes currently leverage Microsoft Azure which utilizes AI.
Then there’s CoPilot, the AI-enabled version of Office. Earlier in the year it was revealed that Microsoft had more than 1.3 million paid GitHub CoPilot members. It was also revealed that more than 50,000 organizations use CoPilot.
At the same time, there were more than 53,000 Azure AI customers. More than half of all Fortune 500 companies use Azure OpenAI. It certainly appears that Microsoft’s heavy investment into AI early on is paying off.
It will also be interesting to see how the competition between OpenAI and Anthropic plays out. Fortunately, by investing in Amazon and Microsoft, exposure to both is guaranteed.
On the date of publication, Alex Sirois did not have (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.
