Rapid advances in the field of artificial intelligence (AI) have been making headlines, and businesses and investors alike have been scrambling to stake claims in this groundbreaking field of technology.
Why the mad rush? Cathie Wood, CEO and co-founder of Ark Investment Management, recently released the investment firm's Big Ideas 2023 report, and its conclusions are staggering: "AI should increase the productivity of knowledge workers more than 4-fold by 2030 ... If vendors were to capture 10% of value created by their products, AI software could generate up to $14 trillion in revenue."
That's just the beginning. The bullish case suggests that with a 20% capture and 6.5 times productivity gains, the amount could surge to $41 trillion.
Gains of that magnitude suggest a significant opportunity for investors. Here are two top stocks to buy now to play the AI revolution.
Image source: Getty Images.
1. Meta Platforms
In early 2021, Apple fired a shot heard 'round the adtech world. With the debut of iOS 14, the iPhone maker enacted privacy changes that forced users to opt in to allow the tracking of their activity across apps and websites. This threw a monkey wrench into advertisers' ability to effectively target ads at users on Apple's platform. Arguably, no company felt the blow more keenly than Meta Platforms (META +2.31%).
Yet recent technological advances might have finally helped the company regain its strategic advantage. After three consecutive quarters of year-over-year revenue declines, Meta returned to growth in the first quarter. One of the biggest contributors to its success? AI -- a subject that came up 57 times on the company's earnings call.
CEO Mark Zuckerberg shared a number of metrics to help illustrate the impact of AI on the company's turnaround. For example, 20% of the content shown in Facebook and Instagram feeds is the result of AI recommendations. The strategy appears to be working, as AI-based recommendations have helped fuel a 24% increase in the amount of time spent on Instagram.
NASDAQ: META
Key Data Points
AI is also helping improve Meta's profitability.
"Reels monetization efficiency is up over 30% on Instagram and over 40% on Facebook quarter-over-quarter. Daily revenue from Advantage+ Shopping Campaigns is up 7x in the last six months," Zuckerberg noted.
This could be just the beginning, as Meta is investing heavily to embrace the future of generative AI. As the owner of the world's largest social media platform and second-largest provider of digital advertising, Meta Platforms is well positioned to benefit from this accelerating trend.
Yet investors can buy all this potential growth for a song, as Meta stock is currently selling for just 4 times next year's sales. Time to buy before the sale is over.
2. Baidu
Baidu (BIDU +7.65%) might not be a household name in the U.S., but you'd be hard-pressed to find someone that hasn't heard of the company in its native China. Baidu boasts the leading internet search platform in a country of more than 1.4 billion people, with an estimated 61% of the market. The company has leveraged its data to generate some of China's most advanced AI and self-driving technology.
Not content to rest on its laurels, Baidu is expanding its library of AI-powered products. In mid-March, the company announced the launch of Ernie, its next-generation AI chatbot, which is similar to ChatGPT. The system is accomplished in a number of areas, "including understanding Chinese language and culture, generating literary and business writing, performing complex mathematical calculations, and producing multi-modal content."
The chatbot can also produce text, audio, and video in response to queries. According to the press release, "The AI product can comprehend human intentions and deliver accurate, logical, and fluent responses approaching human level."
Due to Ernie's focus on China, the chatbot can respond to queries in a number of Chinese dialects while generating images and videos from text and voice prompts.
NASDAQ: BIDU
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The results have been impressive. In the six weeks since its debut, more than 120,000 companies signed up to test the chatbot, which suggests demand in China will rival that of its American counterpart.
On Monday, Bernstein analyst Boris Van upgraded Baidu to outperform (buy) from market perform with a price target of $160, which suggests potential upside for investors of 33% compared to Friday's closing price. The analyst suggests that the company's "GPT-related innovation" will act as a tailwind, resulting in a "virtuous cycle." This will accelerate many of Baidu's core businesses while increasing its future revenue potential, according to real-time stock news site The Fly.
Yet despite all that potential, Baidu stock is currently selling for less than 2 times next year's sales, putting it squarely in bargain-basement territory.
