Since the release of the artificial intelligence (AI) chatbot ChatGPT in late 2022, interest in AI technology has surged -- with America's biggest tech companies racing to claim a slice of the action. And it isn't hard to see why. According to data cited by Statista, the market could grow 20-fold to almost $2 trillion by 2030, making it a potentially transformational opportunity for businesses that can make the cut.
Alphabet (GOOG 0.37%) (GOOGL 0.35%) and Meta Platforms (META 1.54%) are already massive players in the tech world and appear to have what it takes to succeed in AI. Let's discuss why they could have a place in your investment portfolio.
Alphabet
Since its founding in 1998, Alphabet's Google has been the go-to platform for people searching for information on the internet. And it has leveraged its niche to create the world's largest digital advertising company. Some investors are now worried that its moat could soon be eroded by generative AI rivals like ChatGPT, which can fulfill a similar role. But this could be more of an opportunity than a challenge.
While it is true that generative AI can do some of the same things as traditional search, Google has some key advantages. AI chatbots simply respond to queries. And unlike search, they do not allow users to interact directly with the internet to find what they are looking for. Further, these platforms must be trained on a huge body of data, which can be outdated or incomplete because third-party websites refuse to provide access.
For example, Reddit, Twitter, and Stack Overflow no longer allow free access to their data, and other companies could follow suit.
On the other hand, as the owner of the world's two most visited websites (Google and YouTube), Alphabet's biggest advantage will be data. The company has a treasure trove of information for training its models. And it is integrating AI into its traditional search business through a platform called Google AI, which embeds the technology into its search results to do things like summarize information.
Google also has its own AI chatbot, Bard, which has had some initial hiccups, but that is par for the course, and it should fulfill a similar role as ChatGPT by answering questions with humanlike responses.
Meta Platforms
Known for its social media businesses, Facebook and Instagram, Meta Platforms is another tech giant that could be greatly influenced by the AI megatrend. While management has spent recent years pivoting to the metaverse (immersive virtual reality), it seems to be changing course toward what could potentially become a bigger near-term opportunity.
While Meta Platforms CEO Mark Zuckerberg denies that his company is switching focus from the metaverse to AI, the company's top execs are said to be spending most of their time on AI projects, according to Chief Product Officer Chris Cox. Like Google, Meta has a lot of user data (Facebook is the third most visited website in the world), which can prove useful for training generative artificial intelligence models.
Image source: Getty Images.
The company is actually early to the AI race. In September 2022, it announced Make-A-Video, an early-stage system designed to allow users to turn text prompts into video clips.
Meta is also exploring how the technology can boost growth in its digital advertising business. This month, it announced its AI Sandbox, which will allow clients to access early versions of tools to create targeted ads via text-to-speech. Such programs could help make ads more efficient and help Meta Platforms bolster its competitive moat against the competition.
Tech at a discount
While Alphabet and Meta Platforms have recovered sharply in 2023, both companies are still down substantially from their all-time highs ($150 and $382, respectively) reached in 2021. The dips give investors a chance to bet on their AI opportunities at a relatively low price and capture more of the potential long-term upside.
