If you're an active investor and frequently look at new companies to potentially buy stock in, you've undoubtedly heard a substantial increase in the use of the term "artificial intelligence," or AI. This technology has the trending attention of many investors as something new and fresh to consider.
The reality is that AI has been around for a long time. So why is it being talked about so much now, and why is it so important?
Let's take a closer look at AI and why it's getting all this fresh attention. Along the way, I'll leave you with some companies to consider as AI investments.
The chatbot revolution kick-started the AI conversation
First, let's start with a basic AI definition not inspired by a sci-fi movie. Alphabet (GOOGL 0.42%) (GOOG 0.56%) defines AI as "a set of technologies that enable computers to perform a variety of advanced functions, including the ability to see, understand and translate spoken and written language, analyze data, make recommendations, and more."
NASDAQ: GOOGL
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Essentially, engineers can train AI to do basic human tasks, especially related to crunching data. A good recent example of AI being put to use is OpenAI's ChatGPT. After it is fed various (and large amounts of) data and given parameters for how to use the data, ChatGPT can do tasks for you in an almost human-like way, like writing an email or drafting a business plan. But if you ask it a question about something it doesn't know, the chatbot falls short of its task (or, in some cases, makes up a false answer).
The Google Search engine (which uses AI to a lesser extent and in a different way) processes around 8.5 billion searches daily. There is some concern that ChatGPT could capture a growing share of Google's search business should the chatbot prove to be a superior alternative. So when Microsoft (MSFT 1.57%) announced it was launching a ChatGPT-powered form of its Bing search engine, it shook this massive market. In the fourth quarter alone, Google Search generated $42.6 billion in revenue for Alphabet.
The initial results suggest this technology is not quite ready to effectively compete. In one interaction, Microsoft's chatbot told a user he should leave his wife. In another interaction, it insulted the user by comparing them to various dictators.
Despite the obvious need for adjustments to be made, many companies are expressing interest in using it.
AI isn't a new technology
CrowdStrike (CRWD +0.01%), a cybersecurity company, uses something called machine learning (ML), which uses AI technology to extract data and continuously learn, to help its customers and give itself an edge over the competition. The software constantly analyzes its users' resources and tries to detect patterns that might indicate whether some activity is a threat. Furthermore, if one customer is attacked, that same threat pattern is also distributed to all of CrowdStrike's other customers, so another won't be vulnerable to the same type of attack.
NASDAQ: CRWD
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Palantir (PLTR 1.65%) is another company with AI as the backbone of its offering. Palantir specializes in data analytics and can process massive amounts of data from various disparate sources to derive actionable insights. The platform started with public sector/government use (it reportedly helped track down Osama bin Laden's final hideout) but is now rolling out the same capabilities to the private sector. As the software impacts various companies (in one example, Tyson Foods utilized it on 20 projects to detect inefficiencies that eventually saved it over $200 million), Palantir's AI-powered data analytics platform will only become more commonly used.
NASDAQ: PLTR
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AI gets its moment in the spotlight
Both CrowdStrike and Palantir would make great investments and are a good starting point for investing in AI. Another excellent investment is Alphabet, even though some wonder if its reign as the Search king might be over after Microsoft Bing's chatbot rollout.
Alphabet CEO Sundar Pichai noted in the company's latest conference call that Alphabet has been an AI-first company for over six years and has developed the backbone of many AI technologies utilized today. You're likely to see the results of its AI research in the next few years, as competition is forcing Alphabet to reveal its hand. But with the vast resources Alphabet has devoted to AI, their investment should pay off in the long run.
AI isn't a new technology and it likely won't take everyone's job as some of the worriers about the technology think. Instead, it's there to help automate and improve aspects of data utilization. While AI had its time in the limelight, this technology will become increasingly discussed, so investors should leverage their portfolios accordingly to take advantage of the technological shift.
