Artificial intelligence (AI) burst into the mainstream in 2023 thanks to innovations such as ChatGPT's ability to mimic human responses. But so much hype surrounds AI right now, it's a challenge distinguishing companies where the tech delivers substantial business benefits from those with limited AI upside. In some ways, the AI hype is reminiscent of the metaverse fad that has largely fizzled out.
That's why Amazon (AMZN -1.07%) and upstart tech provider Symbotic (SYM -6.62%) are worth looking at as potential AI investments, since the technology is already a key component of their operations. Each uses AI in warehouses to efficiently process packages for delivery -- in Amazon's case, they are being sent to consumers; and in Symbotic's case, to businesses.
This utilitarian application of AI might not be the stuff of exciting sci-fi stories, but the technology brings tangible value to both businesses. Consequently, it can translate into value for shareholders of each company as well.
Let's take a look at AI's role in each business to determine which is a better AI investment.
How Amazon uses AI
Amazon is well known for its retail operations, and it holds nearly a 38% share of the U.S. e-commerce market. Rival Walmart, which owns a stake in Symbotic, is in second place with a 6% share.
Part of Amazon's success in the space is due to its reputation for fast shipping, sometimes within mere hours of an order. It achieves these stellar shipping speeds through its use of AI.
For example, AI algorithms can predict what items will be in demand and when, so Amazon can stock warehouses with these products to ship immediately.
The company also uses AI as part of its army of over 700,000 robots in its warehouses to efficiently process customer orders. These machines can find products and move them to delivery trucks thanks to the AI technology that trains them on how to perform such tasks.
These AI-enabled efficiencies help to accelerate shipping speeds, which improves the customer experience, and translates into more sales. Amazon's second-quarter revenue of $134.4 billion was a double-digit increase over 2022's $121.2 billion. The company expects third-quarter revenue to continue the year-over-year growth trend with sales of at least $138 billion, up from $127.1 billion in 2022.
Amazon has a competitive advantage when it comes to its AI efforts. Training AI software to execute tasks requires massive amounts of data. The company not only has the necessary volume of data from its enormous retail sales, it also owns the infrastructure to store and make use of that data through its Amazon Web Services division, the world's largest cloud computing business.
Symbotic's use of AI
Like Amazon, Symbotic improves supply chain operations in warehouses and distribution centers through the use of robots managed by AI. This technology allows Symbotic to optimize the flow of packages to fulfill orders at lower cost and greater efficiency.
Unlike Amazon, Symbotic focuses on providing its tech to other businesses. Customers include Walmart, Target, and supermarket chain Albertsons. Its initial public offering was in June of 2022, so Symbotic's stint as a public company has been brief, yet it has enjoyed steadily rising revenue.
Data by YCharts.
The company's $311.8 million in its fiscal third-quarter revenue, ended June 24, was a 78% increase over the prior year's $175.6 million. Symbotic forecasts its fiscal fourth-quarter revenue to reach at least $290 million, up from last year's $244.4 million.
The company generated all of its third-quarter revenue from the U.S. and Canada. Now Symbotic is planning for international growth, forming a joint venture called GreenBox with SoftBank to execute that expansion. This deal is expected to add approximately $500 million in annual revenue once its systems are fully implemented by customers, which typically takes two years.
Is Amazon or Symbotic the better AI stock?
Symbotic looks positioned to continue strong year-over-year revenue growth with its international expansion. The challenge for investors is its limited track record of success as a public company, making it difficult to gauge long-term trends.
Also, its business isn't profitable. Through nine months of its 2023 fiscal year, the net loss totaled $162.5 million, which is already higher than its $139.1 million net loss in all of fiscal 2022.
Many tech companies are not profitable for years, prioritizing business growth instead, so Symbotic's net losses are not too concerning yet. However, over 95% of its revenue comes from just three customers. If it loses any of these clients, revenue would be significantly affected. So it's better to put Symbotic on your watch list to see if it can grow customers, as well as to evaluate if its GreenBox relationship can bear fruit.
This makes Amazon the clear AI investment choice between these two companies. Its market dominance in e-commerce and cloud computing combined with troves of data to fuel its AI software give it the means to continue leveraging AI's potent possibilities for the benefit of its business and customers.
