We're on the trail of the future, and it's paved with artificial intelligence (AI). Today, we'll examine some towering behemoths of the AI world, but we will also visit a few lesser-known nooks and crannies where surprising opportunities lie in wait. Much like a well-trained neural network, you know the value of diversification in the thorny swamps that lead to long-term riches in the stock market.
So dust off your financial compass -- I hope it's digital -- and let's set off on a diverse journey into the realm of AI stocks.
1. Microsoft: The proverbial windows to AI's future
First up, we have Microsoft (MSFT 0.37%), the tech titan you probably associate more with operating systems and office software than with digital AI brains. But this old dog is learning lots of new tricks, often involving AI tools.
In 2022, Microsoft acquired Nuance Communications, a leading provider of AI-powered speech and language solutions. This $20 billion buyout not only boosts Redmond's AI prowess, but also grants Microsoft a foothold in the healthcare market where AI has a long history of improving patient care and outcomes with voice controls.
The AI commitment hasn't stopped there. As ChatGPT developer OpenAI emerged as a game-changing innovator in recent months, Microsoft promised to spend a cool $10 billion on that company over time. This move, fueled by the belief in AI's potential to transform how we live and work, will accelerate OpenAI's research and development efforts. The partnership also let Microsoft integrate ChatGPT and other OpenAI technologies into the Bing search engine and other Microsoft products.
With AI at the heart of its long-term growth strategy, Microsoft looks like an exciting growth investment after all these years.
2. Netflix: Streaming ahead with AI
Next up is Netflix (NFLX -3.92%). This streaming giant is quietly leveraging AI to keep us all hooked to its digital content. I mean, Netflix was an AI expert long before it was cool.
The company's AI-powered recommendation engine is a behemoth in the industry, creating personalized recommendations with inputs like the user's watch history, ratings, reviews, and the way you browse through the Netflix catalog. It's like having a friendly robot who knows your taste in movies better than you do.
Netflix's AI magic also extends to its search results. It understands the context of user searches, so the results are more in line with what you're actually looking for at that particular moment. Imagine being able to find "that movie with the guy from that other show" with just a few clicks. That's what Netflix is aiming for, and AI analytics can help.
AI also enhances the Netflix viewing experience. Ever noticed how your video quality adjusts based on your network's mood swings and shifting connection speeds? That's Netflix's AI technology at work. The automated traffic-analytics systems can adapt your video quality as needed without interrupting your binge session, and even learns what video quality tends to work best over time and in different situations.
It should be noted that AI comes with some brand new challenges, too; it's not all glitz and glamour. Earlier this year, Netflix faced backlash in Japan for using AI to generate the background art of an anime short. Critics argue that Netflix shouldn't blame a labor shortage for this controversial move. Instead, the company should give animators a healthier compensation package and set a positive example for the rest of the penny-pinching film industry. While Netflix may have stumbled here, the incident does underscore how deeply the company is thinking about AI applications.
3. Alphabet: Not just Googling around
Next, let's look at Alphabet (GOOG 0.74%) (GOOGL 0.55%), the parent company of Google. The company's deep interest in AI should surprise absolutely nobody. I'm just waiting for the massive AI assets behind Google's scenes to start appearing in the form of consumer-friendly or business-boosting tools over the next few years.
With the launch of LaMDA, an AI model that generates text and translates languages, and PaLM, its more advanced sibling capable of even writing code, Alphabet is poised to lead the pack in language-model development. These models could redefine interactions with Google's search engine, making it more intuitive and personalized than ever.
And with the recent introduction of "Search Snapshots," an AI-powered feature providing quick overviews of topics, Alphabet is starting to translate this AI prowess into tools that everyday users should find indispensable later on. Just give them some time to mature and find effective marketing channels.
4. John Deere: A high-tech harvest
Turning from digital entertainment to the open fields, let's ponder a more surprising name in the AI game: John Deere (DE -0.65%). Yes, the iconic green and yellow tractors are going high-tech.
Way back in 2021, John Deere sowed $250 million into the fertile soil of AI innovation by acquiring Bear Flag Robotics, a start-up specializing in self-driving technology for tractors. This isn't just about automated plowing; it's a vision for a future where entire farms run on autopilot.
The digital seeds didn't stop there. In January 2023, John Deere launched a new dealer-business system based on Microsoft's Dynamics 365 platform. This highly automated planning tool comes with a wealth of AI smarts, ranging from speech-based service controls to rich analytics of sales channels and marketing programs.
John Deere is proving that AI isn't just for tech companies; it's for any business that's ready to embrace the tools of the future. So, who's ready for an AI-powered harvest?
5. Etsy: Crafting a personalized shopping experience
Last but certainly not least, I'll give you Etsy (ETSY -2.17%). Like John Deere, this is not your traditional tech giant, but the e-commerce veteran is making strides in AI that could revolutionize the online shopping experience.
Etsy's CEO, Josh Silverman, often describes his company's AI journey as being in the "early innings" of a long and lucrative story. It has been on the cutting edge of AI-powered search technology for years, but the future holds even more potential. As the AI systems mature, Silverman envisions an Etsy search experience that moves away from the typical keyword-driven, text-based approach.
"You don't walk into a store and yell, 'Blue, shirt, cotton,' the way you search on Etsy today," Silverman said in last week's first-quarter earnings call. Instead, the aim is to leverage natural language and sophisticated data analysis to make the shopping experience more akin to a conversation with a helpful salesperson.
The goal, as Silverman puts it, is to "bring the human aspect of retail boutiques to e-commerce." Imagine walking into a digital store and saying, "I'm going to a chic cocktail party in Brooklyn, what shirt should I wear?" And instead of thousands of options you'll never be able to review, Etsy shows you a thoughtfully curated selection that perfectly fits the vibe. If the company can pull this off, it could become a true trailblazer in the e-commerce sector.
So there you have it: a diverse portfolio of AI stocks that span the spectrum from established tech titans to agricultural heavyweights, miles and miles away from Silicon Valley. Due diligence and a well-diversified portfolio are your friends. These great (though sometimes unexpected) AI experts can help you build a robust tech portfolio for the long haul.
