Artificial intelligence (AI) is the next big thing. The field is advancing rapidly, with breakthroughs seemingly occurring every day. Business models that have worked for decades, like Google's lucrative search business, are going to be put to the ultimate test by AI.

While AI is almost certainly going to be a transformational technology, not every AI company will turn out to be a winner for investors. One way to ride the AI wave is to focus on established, mature technology companies that are using AI to improve their own products. Two stocks worth considering are International Business Machines (IBM 0.18%) and Oracle (ORCL -0.30%), both of which have put AI at the center of their long-term strategies.

International Business Machines

The excitement in the AI space right now is centered on generative AI. OpenAI's ChatGPT can answer questions, write code, and produce anything from headline suggestions to blog posts. Other AI models can generate images and produce audio using a person's voice.

IBM may not strike you as an AI stock, but really, it's the granddaddy of them all. Way back in 2011, the company's Watson question-answering system won a game of Jeopardy!. Multiple techniques were used, including natural language processing, machine learning, and automated reasoning.

While IBM isn't focused on the types of AI systems that are making headlines today, it's made AI one of the pillars of its long-term strategy along with hybrid cloud computing. Through its software and consulting segments, IBM helps its enterprise customers increase productivity and efficiency. AI will be an increasingly important tool in the years ahead.

During its first-quarter earnings call, management gave a few examples of how it's working with customers to leverage AI:

  • IBM is working with transportation company J.B. Hunt to streamline cloud deployments. With IBM's AI-powered Turbonomic software, infrastructure refresh costs were reduced by 75%.
  • IBM's call center clients are using AI to automate call center responses, achieving over 90% accuracy and improving customer satisfaction.
  • Finance, accounting, and human resources teams are using IBM's AI to automate labor-intensive data entry tasks.

IBM is also eating its own cooking, using AI to improve its own operations. Transactions are being automated with robotic process automation technology, and 94% of companywide HR inquiries are being handled by an AI-based system.

In the current economic environment, with businesses focused on reducing costs amid high levels of uncertainty, IBM can offer its various AI products as ways to boost productivity and cut spending. IBM's AI technology may not grab headlines, but it's working behind the scenes at the largest companies to make operations more efficient.

Oracle

Just like IBM, you may not classify database and software giant Oracle as an AI stock. But the company is using AI technology across its business, and it's also enabling other AI companies through its cloud infrastructure.

Oracle Fusion, a suite of enterprise resource management applications spanning finances, human capital, supply chain, sales, and other areas, is a prime example of the company putting AI to good use. Using Fusion with AI, Oracle touted in its most recent earnings call that its customers were able to close their books in days as opposed to weeks. Oracle itself reported its most recent results just nine days after the close of the quarter, a testament to how AI can improve operations.

Through its acquisition of Cerner, Oracle is leveraging AI in the healthcare space. And its cloud infrastructure business, which is growing by leaps and bounds, is being chosen by some start-ups that need powerful and flexible computing capacity. Oracle's Autonomous Database, a cloud database product, uses AI to handle administration and management tasks.

Oracle Chairman Larry Ellison summed up the company's place in the AI industry during the most recent earnings call:

So we're a huge consumer of AI. We're a huge vendor of AI, GPU capacity, clustered capacity is -- we build AI modules in healthcare. And people are coming to us. Nvidia is often recommending us as the best cloud for AI, and this is a good time to be there.

Like IBM, Oracle is using AI to help its customers boost efficiency. It's also helping power some of the start-ups that are making headlines with generative AI technology with its powerful cloud infrastructure. As demand for AI grows, Oracle should benefit in multiple ways.