AI investing has been one of the year’s most dominant themes. All with some of the top tech firms looking into AI as a way to boost growth, reduce costs and improve product offerings. This is not a flash-in-the-pan technology. Not by any stretch. In fact, I’ve been following AI for a long time, covering Nvidia (NASDAQ:NVDA) when it was ramping up its GPUs for exactly this purpose (specifically, when it was being applied to autonomous driving). In fact, NVDA CEO Jensen Huang made it clear (and demonstrated how) it would impact almost every business and industry out there.
Here are a few of the top tech stocks to watch, as the AI story unfolds.
AI Investing: Nvidia (NVDA)
It’s impossible to ignore this Nvidia. If AI is going to take off (and it will), it will need a power source to make it a reality. That power source is Nvidia. I always love watching Nvidia’s keynote presentations from its GTC events. Huang talks with so much excitement, so much passion and so much upside that it’s impossible not to come away enthusiastic about Nvidia’s future. Admittedly that may just be me — and admittedly, that’s the whole point of his presentations.
Nevertheless, the company has been demonstrating the potential of AI for years now and its role in energy, drones, robotics, the cloud, autonomous driving, agriculture, education, healthcare…and just about every other industry out there. While AI may be new to many investors, Nvidia has been working on these advancements for a long time and it’s finally paying off. Has the stock run a tremendous amount? Yes. Could it be susceptible to a notable pullback as a result? Of course. But the long-term looks incredibly bright for this firm.
Under Steve Ballmer, Microsoft (NASDAQ:MSFT) fell behind in growth. While Ballmer had all the enthusiasm that Huang has (and maybe more), the company continually struck out at key moments. However, Microsoft nailed its move into the cloud, and under CEO Satya Nadella, there’s been a rebirth in the stock. Once considered an old-school tech stock deeply in need of a catalyst, Microsoft stock has rallied 645% since Nadella took over the helm in Feb. 2014.
That said, not all of Microsoft’s products hold a dominant position in their respective markets. Its search engine Bing badly trails Google. Its internet browser Edge badly lags behind Chrome and Safari. Now though, Microsoft has put its massive balance sheet to work, pouring billions of dollars into ChatGPT’s parent company OpenAI. It’s being used to overhaul the company’s Edge and Bing platforms, as well as being integrated into its other enterprise platforms.
While it’s possible that other technologies catch up to ChatGPT — and that Edge and Bing never displace its larger competitors — it’s clear that Microsoft does not plan on missing out on this trend and that should reassure investors that Nadella will once again be well-positioned in this technology.
Alphabet (GOOGL, GOOG)
I hate to say it because Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) is such a terrific company. But it’s become a sort of punchline when it comes to AI stocks and mega-cap growth. ChatGPT became public in the fourth quarter and burst onto the scene in Jan. It now boasts 100 million monthly active users. Right now, investors are certain that ChatGPT can trump Alphabet’s AI-driven chatbot, Bard. That’s particularly after an embarrassing gaff in a demonstration earlier this year. “In a public demo, Bard made a factual mistake that wiped out $100 billion in Google’s market value.”
So things aren’t going so well right now. But guess what? Alphabet CEO Sundar Pichai has been talking about AI for years now. That means Alphabet has been working on it for years, too. Given that the company dominates the two most popular websites in the world — Google.com and YouTube.com — I’m confident that over time, Alphabet will get AI right too.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.