If there has been an overarching investment theme in 2023, it has probably been artificial intelligence (AI). Ever since the conversational chatbot ChatGPT launched in late 2022, tech giants have been scrambling to incorporate the newest AI technology into their business models while investors have been bidding up shares of the companies they believe will be most successful in capitalizing on it.
So far, chipmaker Nvidia has been one of the biggest winners in this hype cycle. But under-the-radar AI investments like Advanced Micro Devices (AMD 2.37%) and Symbotic (SYM 1.62%) could soon have their chance to shine. Let's explore why these stocks could make excellent additions to your investment portfolio.
Advanced Micro Devices
Graphics processing units (GPUs) and other types of computing hardware are the unglamorous backbones behind many of our favorite consumer-facing technologies, and artificial intelligence is no exception. While Nvidia currently dominates the market for the most powerful AI-capable chips, Advanced Micro Devices is hot on its heels and debuting impressive offerings of its own. And this could hugely benefit its long-term investors.
AMD and Nvidia have long been rivals in computing hardware, where they produce chips for video games, data centers, and cryptocurrency mining, among other uses. Traditionally, Nvidia has occupied the bleeding edge of the market, while AMD has competed on price -- offering buyers better value for their money. This rivalry could spill over into AI chips as AMD pursues a lucrative slice of a market that CEO Lisa Su expects to be worth roughly $400 billion by 2027.
This month, AMD announced two new chips in its M1300 series: the M1300x and the M1300A, which are designed to run large language models -- algorithms that can generate original content based on vast arrays of training data. According to Su, AMD's new chips are comparable to Nvidia's flagship H100 chip, and even outperform it on some criteria. Her company has also won big-name clients like Microsoft and Meta Platforms, both of which will deploy the chips in their data centers.
In the third quarter, AMD's earnings increased by 4% year over year to $5.8 billion. But investors should expect its revenue growth to accelerate in the coming quarters as its AI chip business scales up.
Symbotic
Before the popularization of large language models like ChatGPT, most people likely associated AI with robots -- machines that could make life easier by performing tasks that would otherwise have to be done by humans. Symbotic aims to use this technology to improve the efficiency of warehouse operations. And it might be at the right place at the right time to pioneer this opportunity.
There are several reasons why a company may want to automate its warehouses or manufacturing processes. A large workforce may introduce unwanted political scrutiny and the threat of unionization, which could increase labor costs. Symbotic can help companies solve these problems while also increasing the speed and accuracy of their warehouse operations. Industrial robots are nothing new, but AI technology can make them more autonomous and able to respond to challenges.
Symbiotic offerings have earned a big vote of confidence from America's largest retailer, Walmart, which plans to install its warehouse robotics in all 42 of its U.S. distribution centers. These systems won't completely replace workers, but should boost their productivity.
In the fourth quarter, Symbotic's revenue grew 60% year over year to $391.9 million based on healthy demand for its automation systems. And while the company isn't profitable on a GAAP (generally accepted accounting principles) basis, its net loss declined by around 15% to $45.4 million, suggesting it has a pathway to profitability as it continues to scale up its operations.
Image source: Getty Images.
Which stock is better for you?
Advanced Micro Devices and Symbotic are both great ways to bet on the fast-growing AI market, but they serve different investment strategies. As a large and mature company with diversified revenue streams, AMD is the safer bet. Symbotic's future is less certain because of its smaller size and lack of profitability. But this gives it the potential for more long-term growth as its business reaches scale.
