The year 2023 has proven to be a charm for several artificial intelligence (AI) companies. On the one hand, the stock market has rewarded these companies with huge share price gains, while on the other hand, big enterprises have been chasing them for partnerships.

AI has become all-pervasive and has the ability to improve productivity and efficiency across sectors, industries, and functions. According to Ark Investment Management's Big Ideas 2023 report, AI software can rake in $14 trillion in revenue and build up $90 trillion worth of enterprise value by 2030.

Companies such as Nvidia (NVDA -4.99%) and UiPath (PATH -0.97%) stand to benefit dramatically from this AI revolution. Here's why these companies can prove attractive picks now.

Nvidia

Chipmaker Nvidia has had a dream run in 2023, with the stock rising by nearly 80% so far this year. While the company is exposed to inflationary and recessionary pressures in the short run, Nvidia's long-term prospects look bright thanks to its focus on developing AI chips and software.

The launch of OpenAI's ChatGPT chatbot has triggered an AI arms race across the big tech titans of the world. Companies big and small are now fighting to capture a share of the AI market. And Nvidia seems well-positioned to benefit from this frenzy surrounding the AI megatrend.

It is said that Nvidia's A100 graphic chips (priced at around $10,000 each) played a key role in training ChatGPT, while more than 30,000 additional A100 chips will be required to commercialize ChatGPT completely. Nvidia has also launched another advanced AI chip -- the H100 (priced at $40,000 per chip) -- reportedly 4.5 times faster than A100. Surging demand for AI chips (priced 10 to 20 times higher than average gaming chips) is expected to translate into higher revenue and earnings for Nvidia in the coming years.

According to The New York Times, generative AI-based chatbots sometimes give "irrelevant, nonsensical, or factually incorrect" answers, also termed hallucinations. To mitigate these problems, Nvidia has developed the Nemo Guardrails software, which enables developers to integrate rules-based systems into chatbots.

If effective, this could help strengthen trust in generative AI, thereby further boosting demand for high-performance computing power and Nvidia's AI chips. Nvidia has estimated its total addressable AI market to be $600 billion. With Nvidia's graphics processing units (GPUs) playing a major role in a range of AI and machine learning applications, Credit Suisse analysts consider Nvidia the "leading silicon AI enabler."

Since AI models require significant computational power, it could result in a GPU shortage in the coming months. This can further increase Nvidia's pricing power for its entire GPU portfolio -- leading to a higher top line and profitability for the company in coming quarters.

Nvidia is currently trading at nearly 45 times forward earnings, dramatically higher than the Nasdaq Composite's forward price-to-earnings (PE) ratio of 19.8. However, the premium valuation seems justified, considering the company's leadership in cutting-edge AI technologies and its history of delivering robust financial results. Hence, it makes sense for retail investors to pick a small stake in this tech giant now.

UiPath

Leading robotic process automation player UiPath may not be the top-of-the-mind AI stock for many investors. However, unlike many tech companies banking on their potential to leverage AI in the future, UiPath already has well-proven AI and machine learning solutions (bots) that enable organizations to automate and scale repetitive processes and low-skill tasks without the help of a software engineer.

In May 2020, the company introduced an end-to-end hyper-automation platform that improves automation by leveraging advanced technologies like AI, process mining, and analytics.

With inflation making it more difficult for organizations to control expenses, automation can provide a way to save on expenses while improving productivity and reducing errors. This tailwind is apparent when we assess the company's results for fiscal 2023, ended Jan. 31. Revenue jumped 19% year over year to $1.06 billion, while annual recurring revenue soared by 30% to $1.2 billion.

The company ended the fiscal year with 1,785 customers spending $100,000 or more annually and 229 customers spending at least $1 million on its offerings. The company's Q4 dollar-based net retention rate of 123% is a testament to the company's successful cross-selling and upselling strategies. UiPath also has a very strong balance sheet with $1.8 billion in cash and negligible debt.

UiPath is not yet profitable and has been using stock-based compensation extensively to reward employees. However, this young company has been improving non-generally accepted accounting principles (non-GAAP) operating margins and free-cash-flow margins. Hence, based on its leadership position in robotic process automation and its improving financials, the company can be considered an attractive pick now.