Artificial intelligence (AI) is rapidly transforming the world as we know it. While this paradigm-shifting technology may seem like science fiction to many, its impact is already profoundly reshaping global business operations, technological innovation, and human society.
As AI advances at an unprecedented pace, investors would be wise to position themselves in companies leading the charge.
Image source: Getty Images.
Which AI stocks should be at the top of your buy list right now? Two names that stand out are Alphabet (GOOG +2.22%) (GOOGL +2.12%) and Microsoft (MSFT +2.05%). Here's a closer look at why these tech giants are prime picks for gaining exposure to the potent AI theme.
Alphabet's DeepMind: A wellspring of AI breakthroughs
Alphabet, the parent company of Google, is an undisputed force in artificial intelligence. The company has leveraged its vast resources and computing power to drive game-changing AI innovation through its pioneering subsidiary, DeepMind.
NASDAQ: GOOG
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Acquired by Alphabet in 2014, DeepMind has been at the forefront of AI breakthroughs in machine learning, reinforcement learning, and neural networks.
Among its most notable achievements is the development of AlphaGo, the first AI system to defeat a world champion in the ancient game of Go -- a feat once thought to be decades away.
More recently, DeepMind's AlphaFold has revolutionized the field of protein-structure prediction, unlocking new frontiers in biological research and drug discovery.
Alphabet's sprawling network of data centers and robust cloud infrastructure provide it with a significant competitive edge.
With access to vast troves of data and immense computational resources, Alphabet can train and deploy increasingly sophisticated AI models that push the boundaries of what is possible.
Beyond its cutting-edge AI research, Alphabet's world-class architecture puts it in a prime position to monetize its cutting-edge technology.
The company's Google Cloud platform offers a suite of AI-powered services and tools tailored for businesses and developers -- a market expected to surge as AI adoption accelerates across industries.
With its proven track record of innovation, unparalleled data, computing resources, and a budding AI-as-a-service business, Alphabet stands out as a compelling option for investors seeking exposure to this powerful trend.
Best of all, the company's shares trade at a reasonable 23 times forward earnings -- one of the more attractive valuations in the ultra-high-growth AI space.
Microsoft's transformative AI bet pays off
While Alphabet may be one of the earliest movers in the space, Microsoft has firmly established itself as a force to be reckoned with in AI. The company's strategic investments and partnerships in recent years have positioned it at the vanguard of AI's real-world applications.
NASDAQ: MSFT
Key Data Points
Central to Microsoft's AI strategy is its partnership with OpenAI, the ambitious artificial intelligence research company behind pioneering language models like GPT-3 and DALL-E 2.
In 2019, Microsoft announced a $1 billion investment in OpenAI, granting the tech giant exclusive access to OpenAI's groundbreaking AI systems. The tech giant's investment has since ballooned to over $13 billion, underscoring its intent to be a leader in this emerging field.
The fruits of this partnership have already begun to surface. Microsoft has since infused its Bing search engine with AI and integrated OpenAI's technology into its Microsoft 365 suite through tools like Copilot, which uses AI to assist with writing, data analysis, and other tasks.
With its strategic investments, innovative product integrations, and bold vision for an AI-driven future, Microsoft is well positioned to capitalize on the transformative potential of artificial intelligence.
What's the catch? Microsoft's stock isn't exactly cheap at 31.6 times forward earnings. However, Wall Street thinks its AI initiative will spur double-digit revenue and earnings growth in 2025.
Its hefty price tag, therefore, appears justified in the context of the company's AI-fueled growth prospects.
