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3 Top Artificial Intelligence Stocks to Buy in 2017

By Anders Bylund - Updated Sep 28, 2017 at 6:09PM

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Computer-assisted data analysis is not exactly a new thing, but these tools are becoming incredibly powerful. Here are three ideas for investors who want to jump aboard this careening bandwagon.

Artificial intelligence (AI) is a hot topic nowadays. Computer chips and clever programming can accelerate and improve an ever-growing numbers of tasks normally reserved for the intuitive thinking skills of human beings.

The number of ways to invest in this unstoppable trend is also large and growing. Any technology specialist worth its salt is at least investigating the artificial intelligence space right now, either as a product for their clients or as back-end tools for their own use. Therefore, what follows is not an attempt to cover the entire universe of artificial intelligence stocks but just a handful of the most investable names in that market today. On that note, I'll take a look at Samsung (NASDAQOTH: SSNLF), (CRM 1.69%), and IBM (IBM 1.11%) through the lens of artificial intelligence.

Salesforce Einstein, explained on a chalkboard.

Image source: Salesforce.

Everything is relative in sales and marketing

You know Salesforce as a maker of cloud-based tools for management of customer relationships. Most of the time, this business amounts to automating or at least streamlining repetitive tasks in the process of finding customers and closing sales. The company's innovative approach to a set of traditional business problems has rewarded investors with a market-crushing 660% return over the last decade.

Now, the cloud computing veteran is taking the next logical step by building an artificial intelligence platform to analyze customer data. Salesforce Einstein was built out of several small acquisitions, bringing together their specialized tools under one unified umbrella. So Einstein takes the sales and marketing process, bakes in elements of machine learning, natural language processing, data analytics, relationship intelligence, and much more as a user-friendly all-in-one data management helper.

The platform was introduced last fall and rolled out to customers earlier this month. These are early days for Salesforce's artificial intelligence ambitions, but Einstein is designed to learn from experience and get better over time. The more data Einstein gets to process, the more sophisticated its results will become.

And so will Salesforce's overall efforts in this emerging market. If you're not buying in right now, make sure to at least keep an eye on Salesforce Einstein as the platform matures.

IBM Watson vs. Ken Jennings and Brad Rutter in a rollicking game of "Jeopardy!"

IBM Watson facing off against two elite human "Jeopardy!" players. Image source: IBM.

It's elementary, my dear IBM Watson

Big Blue is a veteran in the artificial intelligence market.

Way back in 1996, the company built a chess-playing supercomputer capable of challenging world champion Garry Kasparov. Kasparov won that first match but Deep Blue collected two draws and one outright win along the way.

The next year, Kasparov lost the rematch against an upgraded Deep Blue. Thus began a new era in the contest between man and machine, with IBM carrying the robotic banner.

Kasparov moved on to promote computer-assisted chess, conceding that he -- the best human chess player -- no longer could challenge the best computer systems. And computers have only improved since then, giving humans no chance to keep up. "Today you can buy a chess engine for your laptop that will beat Deep Blue quite easily," Kasparov said in a podcast interview with ChessBase last year.

Encouraged by this early success, IBM dug deeper into artificial intelligence with qualities of human-like intuition. In 2011, the IBM Watson system beat Jeopardy! champions Ken Jennings and Brad Rutter at their own game. That system was powered by analysis of 200 million documents, including the then-current full text of Wikipedia.

Now, the Watson system has become the linchpin of IBM's overall strategy. The company recently reorganized to create a reportable business segment focused on Watson's cognitive computing. That segment already accounts for more than 40% of Big Blue's annual sales and more than half of its operating profits.

Watson is promoted as a catch-all platform for data analysis and human-to-machine interaction. The system "can understand all forms of data, interact naturally with people, and learn and reason, at scale," according to IBM's marketing materials.

If a few hundred million documents were enough to beat Ken Jennings at Jeopardy! six years ago, the system has evolved much further -- with hand-curated access to the entire internet and tons of private training data along the way. If I had to pick an artificial intelligence tool to assist in a life-or-death situation, Watson would be it.

And IBM is already making big money from that market-defining advantage. The best is yet to come.

The new Samsung Galaxy S8 smartphone.

Galaxy S8 in Orchid Gray. Image source: Samsung.

Bixby, help me sell this Galaxy S8 phone

Finally, the most obviously consumer-facing pick on this list comes from South Korea.

No, you probably don't think of Samsung as an authority on artificial intelligence -- yet. That's about to change, if the Koreans have their way.

The Galaxy S8 smartphone flagship is hot off the presses, and comes with Samsung's first try at an AI-powered digital assistant. The Bixby tool was built around technology from Viv, a $214 million acquisition in October of 2016 that brought in talent originally associated with Apple's Siri assistant.

Like Watson and Einstein, Bixby knows how to communicate with humans using natural language instead of hand-picked key words. Samsung hopes to get its users accustomed to controlling their phones largely by voice, making on-screen keyboards irrelevant in the long run. Bixby has the artificial intelligence savvy that's needed to start moving in that direction.

Where existing digital assistants in the Siri mold tend to create a voice-driven bridge between the user and various online services, Bixby prefers to interface with the handset's internal operation. "Anything you can do with touch, you can do with voice," is the Samsung mantra here. The camera is also tightly integrated into Bixby, reaching for that elusive experience of augmented reality through your Samsung phone.

Bixby is a major talking point for the Galaxy S8, and Samsung hopes to make it a major selling point as well. The system may need to earn its wings by trial and error in real-world usage, but Samsung has the resources and motivation to make it work in the long run.

Samsung's Galaxy S phones have come a long way since a fairly low-key start in 2009. Expect Bixby to follow a similar trajectory, until it starts showing up in Samsung's TV sets and refrigerators. This is till the very early going of the whole artificial intelligence race.

Knowing the basics of investing in stocks is the best way to build wealth and make your financial dreams come true.

Anders Bylund owns shares of IBM. The Motley Fool owns shares of and recommends AAPL. The Motley Fool has the following options: long January 2018 $90 calls on AAPL and short January 2018 $95 calls on AAPL. The Motley Fool recommends The Motley Fool has a disclosure policy.

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International Business Machines Corporation Stock Quote
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