It's been a little more than 15 months since ChatGPT launched, and it's clear who the early winners of the AI revolution are.
AI hardware stocks like Nvidia have been far and away the leaders in the new tech boom. Nvidia's GPUs are the core component required for running intense models like ChatGPT, and demand for them has been enormous, driving Nvidia's revenue up by more than 200% and its profits by an even greater multiple. Companies that partner with Nvidia to sell hardware have also emerged as winners. Those include Super Micro Computer, which specializes in selling high-density servers and storage equipment that work well for running AI applications; Arm Holdings, which licenses its power-conserving chip designs to Nvidia to use for running AI models; and Oracle, which has seen strong growth in its cloud infrastructure business as demand for Nvidia-based superclusters jumps.
Even other chip stocks, like AMD and Intel, have soared in anticipation of spiking demand even as those companies have yet to see significant revenue growth from the AI boom.
However, the cloud infrastructure giants, AI start-ups, and others aren't stocking up GPUs to hoard them. They're aiming to run new applications and software programs, and it's a good bet that software companies will be the next winners in the AI revolution. Keep reading to see two that could capitalize on the new tech boom.
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1. MongoDB
MongoDB (MDB +2.94%) has risen to prominence as a leader in NoSQL databases. It helps organizations organize data that doesn't conform to a strict spreadsheet grid.
As a database tool, there's a natural overlap between MongoDB's utility and the potential of generative AI, which makes it easier to find information, apply it, run models, or transform it as needed.
MongoDB has begun incorporating some generative AI features into its software. For example, in December, the company launched Vector Search, which uses generative AI to help its customers build applications with MongoDB data. However, the biggest tailwinds from AI are still yet to come for MongoDB.
On the recent earnings call, CEO Dev Ittycheria walked investors through the implications of AI for the business, saying, "It's important to understand that there are three layers to the AI stack. The first layer is the underlying compute and LLMs, the second layer is the fine-tuning of the models and building of AI applications, and the third layer is deploying and running applications that end users interact with."
NASDAQ: MDB
Key Data Points
MongoDB operates in the second and third layers of that stack, and Ittycheria said that MongoDB's customers are still experimenting with their AI applications. As experimentation moves to action, the company looks well positioned to benefit from an uptick in demand once businesses are confident that they can unlock the power of AI. That could take several quarters, but the company is likely to be a long-term winner from AI. In the meantime, MongoDB is still growing rapidly, with revenue up 27% in its most recent quarter.
2. Duolingo
Duolingo (DUOL +4.88%), the leading language-learning app, overcame some early concerns that AI could disrupt its business model rather than complement it.
Last spring, the stock briefly fell when education platform Chegg said it was losing customers to ChatGPT, but investors have since realized that Duolingo looks to be a winner from AI, and its shares have surged over the last few months as it's delivered impressive growth.
Duolingo has moved quickly to incorporate AI tools into its app. A year ago, it unveiled a new conversation mode built on OpenAI's GPT4, which served as the foundation of its new highest-tier product, Duolingo Max. The company has also begun using AI to create sentences for its lessons and has laid off some contractors as it relies more on AI and less on humans.
NASDAQ: DUOL
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Looking ahead, it's easy to imagine how Duolingo can more fully capitalize on the potential of generative AI. It could develop an AI conversation partner so users can practice a new language in a real conversation. It could offer AI-based customizable lessons so users can focus on context or a certain set of vocabulary depending on their needs, and it can use AI to accelerate its expansion beyond languages into areas like early literacy, math, and music.
Doing so will not only help Duolingo reach more users at a lower cost, but it could also help it gain greater adoption in K-12 and university education, tapping into a potentially highly lucrative revenue stream.
Duolingo's leadership is well versed in AI and technology, as CEO Luis von Ahn had previously sold a reverse image search technology to Alphabet's Google, and also helped develop CAPTCHA and ReCAPTCHA, tools that prevent robots from logging into a website.
Duolingo stock is pricey, but the company is growing quickly, its profitability is improving, and generative AI significantly expands its addressable market.
