Please ensure Javascript is enabled for purposes of website accessibility

3 Stocks to Benefit From the Artificial Intelligence Boom

By Harsh Chauhan - Feb 27, 2018 at 5:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Micron, Salesforce, and Oracle are using AI to attack fast-growing markets.

There's no doubt that artificial intelligence (AI) is becoming a key part of our lives as the technology finds its way into more and more real-world applications. In fact, the massive spurt in real-world AI use across several verticals -- including business services, healthcare, and automotive -- could boost AI revenue from just $3.2 billion in 2016 to almost $90 million by 2025, according to Tractica.

There are several ways to buy into the AI market, with tech giants like NVIDIA and Alphabet among the top picks. But these aren't the only tech companies leveraging AI to their advantage. Micron Technology (MU 1.88%)salesforce.com (CRM 1.73%), and Oracle (ORCL 1.16%) are three stocks investors need to look at if they want to tap the AI boom.

Abstract representation of artificial intelligence with a human brain showing numbers and data points.

Image Source: Getty Images.

Micron Technology

AI deployment requires storage and processing of large amounts of data. For instance, self-driving cars that run with the help of AI gather data from several sensors and cameras, this data is then processed on the vehicle itself or is sent to the cloud. According to one estimate, a single self-driving car can generate 4,000 gigabytes of data daily. This is where Micron comes in, with its expertise in making memory chips.

Micron is already going after the autonomous car market with its recently launched high-performance memory solutions. The company started shipping automotive-grade low-power DDR (LPDDR) memories to several automotive customers late last year. Micron claims that its LPDDR4 product for the automotive industry is best in its class, as it runs the highest speed grade allowed by the LPDDR4 specification.

Using Micron's product, automotive companies can achieve data transfer rates as fast as 100GB per second, which could be used as a foundation for powering fully autonomous cars that require faster bandwidths. According to Micron, fully autonomous cars will need memory-system bandwidths as fast as 300GB per second, and the chipmaker is already working to fulfill this requirement with the help of GDDR6-based memory solutions, which are usually designed for use in high-bandwidth applications such as gaming consoles, graphics cards, and computation of large data sets.

Micron plans to leverage its existing expertise in this technology to make automotive-related solutions. The company claims that it is already engaged with automotive partners to power fully autonomous vehicles. So, it shouldn't be long before AI-enabled self-driving cars start contributing to Micron's growth. 

Micron trades at less than 7 times last year's earnings, making it a great value play for investors in the AI boom.

Salesforce.com

While Micron looks like a great hardware play in the AI space, Salesforce.com presents one of the best software picks to take advantage of this tech trend. Salesforce is a cloud computing company that specializes in customer relationship management (CRM), and it has been aggressively integrating AI into its operations to stay ahead of the curve.

In 2016, the company introduced Einstein to embed AI across its entire platform. More specifically, Salesforce Einstein allows customers to use AI in several areas -- like sales, service, and marketing -- to deliver customized and predictive experiences to customers. When Einstein was launched, Salesforce had made it clear that the platform would "automatically discover relevant insights, predict future behavior, proactively recommend best next actions and even automate tasks."

The good news is that customers have lapped up this service, as evident from the 475 million predictions delivered by Einstein every day just a year after its official launch. Salesforce had 18 Einstein-related features deployed across its platform when the service turned a year old in September last year, and it has stepped on the gas by adding more features.

For instance, the recently released myEinstein is a package of tools that will allow developers to customize AI for particular businesses. In all, there are 7,000 developers engaged in bringing Einstein's capabilities to more applications in CRM, so the adoption of this platform should get better with time.

Salesforce is targeting a lucrative area with the help of AI. IDC forecasts that AI-powered CRM will boost global business revenue to the tune of $1.1 trillion by 2021, and Salesforce customers will account for over a quarter of this increase. Companies are expected to spend $46.3 billion on AI-related CRM capabilities by 2021, as compared to $7.9 billion in 2016, indicating that there's a lot of room for growth.

But an investment in Salesforce.com won't come cheap. The stock trades at 65 times forward earnings, though investors willing to take the risk could be rewarded substantially, as its earnings are expected to grow at an annual rate of over 25% for the next five years.

Oracle

Just like Salesforce, Oracle is stepping up its game in the customer experience space. Last year, Oracle announced that it is adding a bunch of AI-related capabilities to its Customer Experience Cloud Suite. The company stated that it aims to use its huge arsenal of over 5 billion consumer and business users across the globe (which generate over 7.5 billion data points monthly) to bring automation in CRM activities.

The enterprise software specialist aims to democratize the use of AI in business processes and customer management by making it easier for developers to quickly deploy AI models in the cloud. For instance, the Oracle Autonomous Database Cloud, launched in October last year, can automatically update, upgrade, patch, and tune a database with the help of machine learning.

This will dramatically reduce downtime, eliminate the scope of human error, and free up a system administrator's time to attend to customers instead of updating the database.

This is just one of the areas where Oracle is integrating AI. The company has a wide suite of customer experience services -- including marketing and sales -- that aim to increase engagement and boost deal-making activity.

AI will help Oracle improve the efficiency of these services by giving more-insightful customer data that can help its clients improve sales. Oracle can help its clients deliver better customer experiences with AI, allowing it to tap the fast-growing customer experience management space, which is expected to grow at 23% annually for the next five years, hitting almost $17 billion in revenue by 2022.

And you won't have to pay a lot to get into this stock. Oracle trades at 21.8 times last year's earnings, way lower than the industry average of 48.8. The stock gets cheaper on a forward earnings basis with a multiple of 16.1, indicating bottom-line growth -- a smart way to tap into the AI space.

Micron, Salesforce, and Oracle can all benefit by integrating AI into their products and services -- targeting fast-growing markets that can give a nice boost to their business. They should definitely be on the radar of investors looking to win big from AI.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

salesforce.com, inc. Stock Quote
salesforce.com, inc.
CRM
$159.65 (1.73%) $2.72
Micron Technology, Inc. Stock Quote
Micron Technology, Inc.
MU
$67.87 (1.88%) $1.25
Oracle Corporation Stock Quote
Oracle Corporation
ORCL
$69.83 (1.16%) $0.80

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
322%
 
S&P 500 Returns
116%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.