We've entered the age of AI. Artificial intelligence is beginning to reshape huge swaths of the global economy, and businesses of all sizes are rushing to deploy the game-changing technology.
The AI market will approach a staggering $1.4 trillion by the end of the decade, according to a forecast by Fortune Business Insights. Here are the three companies best positioned to capture sizable portions of this booming industry.
Microsoft
Investors' excitement for AI reached a fever pitch after Microsoft (MSFT 0.46%) announced a multibillion-dollar partnership with ChatGPT creator OpenAI in January. Since then, the software giant has moved quickly to add OpenAI's technology to its popular productivity tools and its Bing search engine.
Investors are tantalized by the prospect of AI helping to bolster Microsoft's already formidable competitive position in the massive business software market by meaningfully boosting worker productivity. Doing so would likely allow Microsoft to raise prices for its ubiquitous Office software suite, making the already highly profitable franchise even more lucrative.
The market is also intrigued by the possibility that Microsoft could use its newfound AI advantages to challenge Alphabet in search. Every percentage point of market share that it can wrestle away from the search king would equate to roughly $2 billion in additional advertising revenue for Microsoft, according to Chief Financial Officer Amy Hood.
Better still, demand for the computing tools offered through Microsoft's Azure cloud infrastructure platform is likely to rise as more businesses seek to harness the power of AI for their own needs.
For all these reasons, investors seeking to profit from the adoption of AI would be wise to consider adding Microsoft's stock to their portfolios.
Amazon
Like Microsoft, Amazon (AMZN 1.49%) stands to profit handsomely from the growth of AI. The online retail juggernaut has long used machine learning to produce accurate product rankings and more relevant search results on its e-commerce sites. Amazon has also invested heavily in AI-powered voice-recognition software for its popular Echo devices and smart TVs, which feature its Alexa virtual assistant.
Yet it's Amazon Web Services (AWS) that's likely to benefit most from the surging adoption of AI. In February, AWS formed a partnership with Hugging Face, a leading machine-learning development platform. AWS will make its highly regarded AI tools available to the upstart's thriving community of developers.
"Machine learning is quickly becoming embedded in all applications," Hugging Face said in a blog post announcing the deal.
And said AWS CEO Adam Selipsky: "Generative AI has the potential to transform entire industries, but its cost and the required expertise puts the technology out of reach for all but a select few companies." The two companies will work together to help customers create their own AI applications by providing access to high-performance, low-cost machine learning models.
Amazon is often thought of as the 800-pound gorilla in its core e-commerce and cloud computing markets. But when it comes to AI, Amazon and its partner Hugging Face are helping to arm the rebels. That should help it earn goodwill among developers, and perhaps regulators as well, while also generating hefty profits for its shareholders.
Nvidia
The AI revolution is sparking a technological arms race -- and Nvidia (NVDA 4.35%) supplies some of the most powerful AI tools on the planet.
Nvidia designs the chips that power ChatGPT and other popular generative AI apps. The semiconductor leader's processors are increasingly being used to train AI models of all sizes.
Yet Nvidia has far grander plans than just being a chip supplier. It's seeking to combine its leading data-processing and model-training capabilities to become an operating system of sorts for a wide range of AI systems. To do so, it's partnering with the major cloud service providers to deliver its AI solutions to businesses large and small.
"Generative AI's versatility and capability has triggered a sense of urgency at enterprises around the world to develop and deploy AI strategies," CEO Jensen Huang said during the company's earnings call in February. Nvidia wants to help these companies harness the power of artificial intelligence.
By supplying its customers with the AI resources they need, Nvidia -- and its shareholders -- stand to profit handsomely in the coming years.
