5 Stocks to Get Your Feet Wet in Emerging AI

Artificial intelligence (AI) is more than a passing fad. But with an influence on such a broad range of industries, where should investors who are new to the space look first?

In this video clip from "Semiconductor Revolution," recorded on Feb. 24, Motley Fool contributors Trevor Jennewine, Billy Duberstein, Jose Najarro, and Will Healy list some of their favorite stocks to play artificial intelligence technology.

Trevor Jennewine: I think AI is going to be one of those technologies that's like the internet 10 years down the road. I think if you're not using AI in some way in your business, you might be doing something wrong. I think it's going to be pretty ubiquitous. That being said, I think Nvidia (NVDA 6.18%) is a great pure play, a picks-and-shovels play in AI. But there are a lot of other companies out there. One that comes to mind is Upstart (UPST 2.76%). Still a lot to prove with that fintech company and not really related to semiconductors. But Upstart uses AI to make consumer lending more efficient for lenders and help give consumers lower interest rates. I think if you're interested in the fintech space in AI, maybe check out Upstart.

Billy Duberstein: Yes, just about, think about how AI works it's basically just massive amounts of data storage and computing power and the software, algorithms that go with it. You take something like Nvidia, you want to look at companies that have a distinct advantage in one of those areas. So far, Nvidia is out front in terms of GPUs, which are critical to the parallel processing needed for AI. There's all the memory companies needed to store data and they need to transmit the data for memory. Then you could even go to something like Google or Alphabet (GOOG 9.96%) (GOOGL 10.22%), which just invest billions of R&D dollars into artificial intelligence that not only for their search, but also for the cloud for the Waymo self-driving cars. If you go back and listen to Jensen Huang is the CEO of Nvidia on the last earnings call, he basically said AI is going to be the biggest industry software world has ever seen, or one of the biggest. It's going to be across a lot of different companies. You just want to look at those have a competitive advantage and who is the best managed, and when you can buy them at a reasonable price, which could be one of those times.

Jose Najarro: Definitely. Go ahead, Will.

Will Healy: The other one going on the fintech point, Lemonade (LMND 1.64%) is also a good one, just think as the financing industry in general and so ripe for innovation. They still have a lot of arcane processes in that industry. They did not have a great quarter, but if they prove they could sell insurance, which makes it probably a little bit speculative right now, but if they prove they can do it, that can really go much higher over time.

Jennewine: I want to throw something else in the mix here, too. I'm not sure if we'll have time to talk about Tesla (TSLA -1.11%) today. I hate to keep mentioning wildly valued stocks. But Tesla is another company that does a lot in artificial intelligence. They're making their own chips, the in-car chips, and they're making their own datacenter chips. During the most recent earnings call, CEO Elon Musk said that eventually, the company's AI software, he sees that as a bigger part of the business than the actual car part of the business. Then he further down the road, Tesla teased their autonomous humanoid robot, they call it Optimus, at the AI day last year. He said that he sees that as an even bigger businesses in the automotive business for Tesla down the road. Another company in the AI space that maybe a lot of people don't think of at first.