Technology

AI 'Gold Rush': Focus on 3 Stocks Selling the 'Picks'

Andrew Rocco

Published: August 15, 2023 11:09 pm

Last Updated: August 16, 2023 12:16 pm

OpenAI and Microsoft’s (MSFT) AI “Chatbot” ChatGPT shocked the world in late 2022 with its capability, speed, and user growth. Less than a week after launching, ChatGPT reached a billion users, reaching the milestone well before previous consumer application record holders like Meta Platform’s (META) Instagram(took more than two months) and Netflix (NFLX) (took 3.5 years). A few months after ChatGPT went mainstream, Alphabet (GOOGL) launched its Chatbot named Bard.

Competition is Heating up

Like the internet boom of the late 1990s, innovators nationwide are beginning to understand how transformative and potentially profitable the technology can be. Today, we know that Google beat out Yahoo! and others in the search engine wars. At the same time Amazon (AMZN) took the cake for e-commerce with its laser focus on customer satisfaction and speed rather than early profitability. However, before these juggernauts became dominant in their respective spaces, it was unclear who would win out of the thousands of competitors who ultimately made it. While ChatGPT is the early leader, the race has just begun. Despite the tough competition, the rewards are perceived to be enough such that innovators worldwide are racing for AI supremacy.

Why Search for “Gold” When you can Sell the “Picks”?

Investors looking to cash in on the AI revolution have two choices: bet on a company they think can win the AI race, or bet on the companies that are necessary to run AI. In my mind, the odds favor the latter. Below are 3 such companies that are buyable now:

Semiconductors Will Power AI

Zacks Rank #1 (Strong Buy) stock Nvidia (NVDA) is the obvious choice. Nvidia is the market leader in high-performance semiconductors used in artificial intelligence, computing, and accelerated computing.

4 Billion Reasons to Buy

Last quarter, Nvidia shocked Wall Street by upping quarterly revenue guidance to $11 billion after announcing revenue of $7 billion. Wall Street is catching up – for the current year, Zacks Consensus Estimates suggest NVDA will grow eps at a cool 133.23%

Global Adoption

What analysts may not foresee is the global adoption taking place. China’s internet giants want to buy $5 billion worth of high-performance Nvidia chips used in generative AI. The buying mania comes as tensions between the US and China hit a fever pitch.

Quantum Computing Will Lead to Cost Savings

Ionq (IONQ) is the only pure-play publicly traded quantum computing stock. The company’s website says, “The dawn of the quantum age is here. IonQ is developing quantum computers designed to solve the world’s most complex problems and transform business, societies, and the planet for the better.”

AI Isn’t Cheap

Did you know its costs about $100 thousand daily to run ChatGPT? Meanwhile, Google’s Bard Chatbot costs about ten times more than a standard Google keyword search. As AI grows in popularity, these costs will only increase. Quantum computing companies like IonQ are a potential solution. IonQ can help companies like Google run the large language models (LLMs) necessary for generative AI at a fraction of the cost.

Investors are noticing the potential. Year-to-date, IonQ shares are up 348%. However, in the past few weeks, the stock has finally retreated to the 50-day moving average, offering investors another chance to get on board.

IonQ is just getting started. Like anything in economics, supply and demand forces are critical for determining future prices. Because IonQ has a tiny share float (# of shares available for trading by the public) of ~159 million shares, continued positive news may send shares even higher.

AI Will Drive Cloud & Database Growth

Zacks Rank #2 (Buy) Stock Oracle (ORCL) is one of the largest enterprise-grade database, middleware, and application software providers. In recent years, Oracle has expanded its cloud computing operations dramatically. The company offers cloud solutions and services that are used to build and manage various cloud deployment models. Oracle also entered the hardware business after acquiring Sun Microsystems several years ago.

Benefitting from the AI Revolution

Oracle is likely to continue to grow rapidly due to the AI revolution. The company offers AI-driven solutions and tools to help businesses integrate machine learning, natural language processing, and predictive analytics into their applications and processes – something almost every big tech company is rushing to do.

13F Shows Smart Money is Entering the Stock

Legendary investor Stanley Druckenmiller has famously never had a down year in more than 30 years of investing. Druckenmiller’s 13F disclosure shows that ORCL is a new buy for him.

Steady Mover

Despite Oracle’s massive size, it is talked about less than stocks such as Microsoft and Amazon.Oracle is not as “sexy” as these companies; however, it produces a ton of revenue and is a dominant player in its space. Furthermore, though Oracle has a beta of just 1 (the same volatility as the S&P 500 Index), it has outperformed 92% of stocks. Low volatility and high returns are an investors dream.

Technical Breakout

Oracle is breaking out of a classic bull wedge today. Furthermore, while the Nasdaq is deep in the red, ORCL is green and is exhibiting relative strength – a bullish sign.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

Netflix, Inc. (NFLX): Free Stock Analysis Report

NVIDIA Corporation (NVDA): Free Stock Analysis Report

Oracle Corporation (ORCL): Free Stock Analysis Report

Alphabet Inc. (GOOGL): Free Stock Analysis Report

Meta Platforms, Inc. (META): Free Stock Analysis Report

IonQ, Inc. (IONQ): Free Stock Analysis Report

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