For all the potential scientific and cultural advances brought about by artificial intelligence (AI), it is the humble silicon chip that makes it all possible. Sure, there was the confluence of big data, cloud computing, and the right algorithms, but without the underlying CPUs and GPUs, none of this would have occurred.

With artificial intelligence still in its infancy, there are opportunities for investors to benefit from this paradigm shift that melds science and computing. We don't know who the ultimate winner in AI will be, and there will likely be more than one. What we do know, though, is that chips will be there. 

Market intelligence firm Tractica estimates that chipset shipments for AI will grow from 863,000 units in 2016 to 41.2 million units annually by 2025. Two companies are currently positioned to benefit the most from the rapid technological innovations brought on by AI, with one more to watch: NVIDIA Corporation (NVDA 0.06%), Intel Corporation (INTC -0.62%), and Advanced Micro Devices, Inc. (AMD 0.88%).

NVIDIA DGX-1 AI supercomputer in a box.

NVIDIA DGX-1 AI supercomputer in a box. Image source: NVIDIA. 

Leading the charge

NVIDIA leveraged its position in the AI revolution by having the right tool for the job when AI came calling. Its graphics processing units (GPUs) can handle large numbers of basic mathematical calculations simultaneously. The way these chips processed graphics and AI math calculations was strikingly similar and gave NVIDIA a lead in the space. The computationally intense training of AI systems is still primarily the domain of GPUs, and NVIDIA sits firmly in the lead.

In 2016, NVIDIA grew its revenue 38% over the prior year to a record $6.91 billion and increased earnings per share by 138%. In its most recent quarter, data center revenue, where its AI chip business is housed, more than tripled over the prior-year quarter to 14% of the company's revenue. The stock price mirrored its financial performance with the stock up 230% for 2016. 

Diane Bryant, president of the Data Center Group at Intel on stage.

Intel held its "AI Day: Unleashing the Next Wave" to lay out its vision for AI. Image source: Intel.

Intel (acquisitions) inside

Intel has designs on the AI space, and the company has made numerous acquisitions that place it squarely at the intersection of several emerging trends.

Altera developed a field programmable gate array (FPGAs), a chip that can be customized or configured by a customer after manufacturing. Microsoft Corporation (MSFT -0.64%) deploys these across its Azure cloud server system for the inferencing stage of AI -- performing a function once the AI system has already been trained -- for applications such as image recognition.

Machine learning start-up Movidius produced systems on a chip (SoC) designed for the computer vision systems used by drones and virtual reality headsets that reduced the power consumption of these data-intensive systems. Deep learning start-up Nervana developed an application specific integrated circuit (ASIC) that is central to Intel's Lake Crest chip (aka, Nervana Engine), which is custom-designed and optimized for AI.

Most recently, Intel acquired machine learning and computer vision company Mobileye N.V. (MBLY), which developed cameras used in autonomous driving and software that could detect hazards or obstructions that will be central to self-driving car technology. 

Each of the chips in Intel's arsenal serves a distinct function, and these acquisitions give the company a stake in a variety of applications that cut a broad path through the AI marketplace. It would be hard to gage the impact of these latest developments on future performance, but given the breadth of applications, Intel will likely thrive.

AMD Radeon Instinct GPU.

AMD introduces Radeon Instinct for AI. Image source: AMD.

One to watch

AMD is playing catch up in the field and recently released an entire line of chips aimed squarely at deep learning AI applications. While it has produced GPUs for years, it only recently developed processors specifically for AI. AMD has a dedicated following among those looking for a "quality on a budget," and it appears to be pursuing the same strategy in AI. There are also indications that its new line of dedicated chips may seek to match or improve upon existing performance across a broad range of AI applications.

AMD gained market share and rode the coattails of its larger rival with its stock price quadrupling over 2016, while its revenue grew 7% to $4.27 billion. It remains to be seen if AMD can affect a market that is currently dominated by NVIDIA. It may be able to create a niche similar to the one it carved out for itself in the gaming market. 

A cautionary note

While each of these companies offers a different way to play the AI market, it is important to note that the field is still in its infancy, and no one solution works best for every application. There is still the potential that someone will build a better mousetrap that will make any or all of the choices described above obsolete. Such is the nature of investing in emerging technology -- fortunes are made and lost, sometimes overnight.