Artificial intelligence (AI) permeated industries for years, but the release of ChatGPT thrust it into the limelight. It's the talk of the investment community and around the water coolers across the country. But what exactly is it?

AI extends far beyond "intelligent" (and sometimes sinister) robots in the movies or Chatbots like ChatGPT. At its base, it is the concept of using machines to perform problem-solving functions previously reliant on human intervention. Machine learning, a subset of AI, means that applications improve performance over time as they consume data.

Healthcare heavyweights

Healthcare is an industry that screams AI. Drug development costs billions of dollars in research and development and has a high failure rate. Estimates say that less than 15% of drugs that enter clinical trials will be approved, and this doesn't account for those that never reach the trial stage. Companies like AbbVie (ABBV 0.45%) are harnessing AI's ability to spot patterns and sift through massive amounts of data for drug discovery.

There are several reasons to love AbbVie, like its $58 billion in 2022 revenue and $25 billion operating cash flow, its impressive portfolio of drugs in development, and 4% dividend, which has risen every year since the company was formed in 2013. Biosimilars for the company's drug Humira were released in the U.S. this year, so AbbVie will see that revenue decline; however, new drugs Skyrizi and Rinvoq are forecast to fill much of this gap with combined sales of $17.5 billion by 2025.

AbCellera Biologics (ABCL -2.65%) is a small company ($2 billion market cap) that might intrigue investors with high risk tolerance. The company's technology uses machine learning to discover antibodies for drug companies faster. It has several high-profile partners, including AbbVie. The company's revenue and income jumped due to COVID-19, but investors should be aware that the company expects to revert to unprofitability in 2023 and is still speculative.

AI also reaches patient care and robotic-assisted surgical systems. Intuitive Surgical (ISRG -0.56%), whose da Vinci platform is far and away the market leader, sees AI as a way to improve care. The company uses it to mine data from millions of procedures and design cutting-edge tools that will assist surgeons and improve patient outcomes. Intuitive released stellar first-quarter earnings that saw procedures grow 26% year over year and revenue up 14% to $1.7 billion. The company is highly profitable with a 27% operating margin, has no long-term debt, and has secular tailwinds given increased adoption and an aging population.

The tech giants

Microsoft (MSFT -0.14%) made a big splash with its $10 billion investment in ChatGPT founder OpenAI. Building market share for the search engine Microsoft Bing is one goal. Currently, Alphabet's Google Search dominates with nearly 85% of the market, but this gives Bing room to grow.

Search engine market share.

Using AI tools allowed one Microsoft customer to create review summaries from thousands of pages in data in a fraction of the time it would take to do it manually. Microsoft also embeds AI and machine learning into its cybersecurity, and the cloud platform Azure is integral to many developers. Its second quarter of fiscal 2023 brought $52.7 billion in sales with 2% year-over-year growth; although operating income dipped slightly to $20.4 billion, its 39% margin is still fantastic. The stock trades near its 52-week high, so new investors could consider waiting for a pullback. 

Amazon (AMZN 1.80%) may not be the first to come to mind for AI, but perhaps it should. Its algorithms track consumer habits to effectively target advertisements. For instance, a pet food company uses Amazon's AI to target ads to reach pet owners. Amazon's digital advertising revenue has nearly doubled in two years from $19.8 billion to $37.7 billion.   

Amazon has lots more to offer. For instance, Amazon Bedrock facilitates the creation of AI applications. Customers can generate chatbots, text generation or summarization, and more using tools available through Amazon Web Services (AWS). AWS is now an $85 billion annual business for Amazon with a 29% operating margin in 2022. 

Amazon has been battered by headwinds in the aftermath of the COVID-19 pandemic, like inflation and increased labor costs. But the company is investing heavily in its future, and long-term investors can purchase the stock 27% off its 52-week high and 43% off its three-year high. There could be more short-term turmoil, so dollar-cost averaging is smart. 

Don't forget the picks and shovels

The best way to make money from a gold rush isn't just mining for gold -- it's selling the picks and shovels to those who are mining. AI applications require massive amounts of data, computing power, and network capability, and Cloudflare's (NET -0.80%) network infrastructure has an answer. Customers that use Cloudflare can ditch expensive on-premises servers for the cloud. 

Cloudflare has data centers near 275 cities globally. This edge-computing model means data on its network doesn't travel vast distances, making it faster, more secure, and more reliable. This is why Nvidia, a leader in advanced AI platforms, has partnered with Cloudflare. 

Cloudflare's sales reached $975 million in 2022 (49% year-over-year growth), and it forecasts $1.3 billion in revenue in 2023. Significant profits under generally accepted accounting principles (GAAP) are probably several years away for Cloudflare, and the stock isn't cheap at 21 times sales as of this writing, so this investment is most appropriate for those with a long-term growth mindset who can handle moderate risk and volatility. The company is led by founder Matthew Prince, has a massive addressable market, and trades 37% off its 52-week high as of Thursday. [This article was written before the stock's drop on Friday, April 28.]

Artificial intelligence is more than just a recent buzzword. It's something that companies have been leveraging and investing in for years. The current push into the mainstream offers investors a slew of options across industries. Those above are just the tip of the iceberg.