The conversation surrounding artificial intelligence (AI) has exploded with the launch of Chat GPT, but companies have been using AI technology for years to disrupt almost every industry. Investors are highly focused on companies like Nvidia and Microsoft, which are creating the technology behind AI, but it would be a mistake to ignore the companies that are using AI to revolutionize how people live their lives.

Consider Stitch Fix (SFIX 0.73%) and Revolve Group (RVLV 1.85%), which are each using AI in different ways to disrupt fashion.

1. Stitch Fix: Your AI shopping stylist

Stitch Fix offers a differentiated shopping experience with its AI-powered stylist model. Its core business involves having clients go through several rounds of choosing clothing that matches their personal style, and then it uses its machine learning to generate personal style recommendations. Clients get a "fix," or selection of customized products, sent to them at chosen intervals, and they can choose to keep any or all of the products or return them.

The company has expanded its services to allow customers to buy pieces without the fix model, and they get a personalized showing of products based on their style profile.

Using data science to prepare product recommendations is the main way Stitch Fix has leveraged AI to operate its business. But it's taking it in new directions. It now uses generative AI to create product descriptions, and it's newly using it to predict client preferences and manage inventory based on that. 

Stitch Fix has suffered dramatic sales declines after soaring at the beginning of the pandemic. Its main goal right now is becoming financially healthier so it can stay solvent, but it's also fine-tuning its model to spring back toward growth. Wall Street cheered its fiscal third quarter (ended April 29) results last week, which were better than expected. But it's still dealing with major challenges. Sales fell 20% from last year, and customer count fell 11% to 3.5 million. Revenue per active client fell 9%.

Some positives were that net loss of $22 million was much better than $78 million last year, and that management is taking action to improve. It's closing down two of its U.S. warehouses and its entire U.K. business. Founder and former CEO Katrina Lake is back in the driver's seat as an interim CEO while it gets back into shape.

There's a lot of risk here, and it's not the right stock for every portfolio. But the company could be just at the beginning of its story as the world opens up to AI opportunities. 

2. Revolve Group: High tech, high fashion

Revolve Group uses AI and highly trained data points to manage inventory, price products effectively, and predict fashion trends. Management believes it has an edge in its targeted merchandise combined with the mass reach of the internet. It releases about 1,500 new products every week based on its data, and 85% of products were sold at full price in 2022. So far, it's done a phenomenal job of becoming a real fashion destination, and it has performed admirably despite severe macroeconomic pressure.

Sales fell 1% year over year in the 2023 first quarter, its first decline. Net income fell from $23.6 million to $14.2 million. But other metrics showed strength. Active customers increased 19% over last year, and orders placed increased 6%. Average order value remained flat. Customers might be cutting down, but if they're spending, they want it to be at Revolve. 

Management's update was that sales were up 7% in April against tough comps from last year, so the situation might already be improving despite the economy. It has used its powerful AI algorithms to rebalance inventory given the current climate, boosting its margins and helping it generate $49 million in cash from operating activities in the first quarter.

Revolve is profitable and cash-flow positive, and it's well positioned to weather inflation and skyrocket when the economy is in a better place. Its stock is down 28% so far this year and trades at only 24 times trailing-12-month earnings. This looks like a no-brainer bargain to buy right now.