With major indices all over the map, and individual sectors suffering varying degrees of misery, this holiday season failed to deliver much joy to investors. That said, every bear market provides shrewd speculators with a steep discount on quality names. Among them, those armed with a long-term strategy should zero-in on artificial intelligence (AI) stocks.
Integrated AI represents the ultimate paradigm shift for society and the global economy. Prior technological innovations have introduced various iterations of assisted applications. For instance, we have computers that allow us to perform our work faster, or vehicles that greatly expand our range. But for the most part, they require human input.
In the last few years, we've witnessed massive leaps in deep learning, or the capacity for computers to engage in dynamic decision-making protocols. It's not just in the theoretical realm, either. Every time we log on to the internet, multiple platforms deep-learn our tendencies, providing us with relevant marketing and query answers.
Now imagine that tech developers combine mechanical advancements with deep-learning intelligence. The possibilities are seemingly limited only to our imagination. While we're a bit away from that integration, every year we push closer to that reality.
That alone makes AI stocks worth serious consideration. But with the recent market volatility, high-potential tech firms are on markdown. Here are a few companies that will lead the next wave in artificial intelligence applications.
Alphabet (GOOG, GOOGL)
Industry: Information Technology
If you're seriously considering jumping onboard artificial intelligence stocks, Alphabet(NASDAQ:GOOG, NASDAQ:GOOGL) is your one-stop shop. Although it's an incredibly predictable idea considering its size and influence, GOOG stock is a proven long-term winner.
Plus, there's nothing quite like Alphabet. As I've said repeatedly, the tech giant owns the internet. "Whoever owns the internet, owns the future. It really is that simple." Nowadays, people can't do anything without Google; not because they physically can't, but because its platform is undeniably effective.
Now, Alphabet is taking this open-source mentality and applying it toward the AI sphere. One powerful application is utilizing Google's deep-learning capacities to predict earthquake aftershock locations. Eventually, once the science is fine-tuned, it's not inconceivable for Alphabet to predict the initial earthquake.
This has powerful ramifications for the international community, and of course for GOOG stock.
Industry: Internet Content
Most people who use Facebook's (NASDAQ:FB) front-face product consider it as the premiere social-media firm. With over two billion active users, that lofty standing is not in dispute. Indeed, no American company is likely to challenge this dynamic.
But because it has such mass appeal, FB stock is truly a powerhouse among AI stocks. I'm not just talking about its AI initiative, in which they have invested heavily. Rather, I'm referring to their human database. If Google owns the internet, Facebook owns the hearts and minds of the international community.
At this time, I must address the pink elephant in the room: FB stock suffered a disastrous showing this year, and we've still got a month to go. Nevertheless, investors should think about the future of AI stocks. Facebook offers unprecedented synergies as it practically owns the largest database of human behaviours and trigger points.
After all, there's a reason why Cambridge Analytics was so keen on accessing this data goldmine.
Industry: Specialty Retail
Amazon (NASDAQ:AMZN) is another company that most people utilize for its primary retail business. However, if you're looking for a top-notch name among artificial intelligence stocks, Amazon also offers far-reaching synergies.
Everyone, especially in the current season, recognizes AMZN stock as the retail industry's gold standard. Yes, the brick-and-mortar concept will probably never die out, but let's not kid ourselves: e-commerce continues to steal market share from total U.S. retail sales. This trend shows no signs of stopping.
Next, factor in Amazon's machine-learning platform. Through the AWS infrastructure, data scientists and various developers and researchers can quickly tailor AI technologies for their specific needs. But internally, Amazon, and by extension AMZN stock, levers something more valuable: a database of human purchasing behaviors.
This isn't just about analyzing how people think. Rather, it's about what motivates people to open their wallets. AMZN brings an economic twist to AI stocks that deserve serious consideration.
Industry: Infrastructure Software
Among large capitalization artificial intelligence stocks, Microsoft (NASDAQ:MSFT) soars in rarefied air. As with the other top names in this sector, MSFT stock benefits from extensive and natural synergies.
If Facebook covers how people think, and Amazon how people buy, then Microsoft levers knowledge of how people work. Compared against all device platforms, Microsoft Windows is the leading operating-system provider. That's a massively impressive statistic when you consider how many consumers have purchased an Android-based smartphones.
When you narrow the framework down to desktop computers, Microsoft wins by a landslide. And this victory has significant implications. Despite the chic nature of trendy devices, most people get their work done through traditional PCs. Knowing this; Microsoft can apply analytics and algorithms towards applications that regular folks frequently depend on.
Even if you consider MSFT stock a bit "old school," it's this very nature that should contribute long-term upside.
A distinct challenge in deciphering AI stocks to buy is balancing potential with performance. Most, if not all, tech companies market their potential. But only the elite few have the goods to back it up. Fortunately for Intel (NASDAQ:INTC) shareholders, their target investment falls into the latter category.
Earlier in August, Intel made the rare step of disclosing its AI-specific chip sales, which numbered $1 billion in 2017. Undoubtedly, management wanted to pressure its semiconductor rivals, which have recently challenged Intel's dominance in next-generation markets. But it also demonstrates how much confidence the leadership has in its strategies, which bodes well for INTC stock.
Another tailwind for Intel is the company's robust fundamentals. Compared to its lesser-capitalized rivals, Intel enjoys ample resources. This wealth isn't just for bragging rights. Management has invested heavily in beefing up its CPUs for AI applications, further bolstering INTC stock.
I have no way to sugar-coat it, Nvidia (NASDAQ:NVDA), which once bedazzled Wall Street for its amazing string of skyrocketing returns, is now in crisis mode.
During the October rout, few artificial intelligence stocks suffered the kind of bloodshed that Nvidia incurred. For that month, NVDA stock dropped nearly 26%. At that point, you'd expect at least a dead-cat bounce in the following month. Unfortunately, we have no such luck as shares are down 28% so far in November.
But with that terrible news out of the way, I genuinely believe that NVDA stock looks enticing from a patient speculator's perspective. This is because Nvidia is a leader in graphics processing units, or GPUs. In turn, GPUs are best suited for AI applications.
Why? Artificial intelligence requires multiple data computations. CPUs perform mathematical processes in sequential order, requiring one computation to complete before another could begin. In sharp contrast, GPUs allow these processes to occur in parallel.
We're talking millions of algos running simultaneously. This structural advantage allows GPUs to transmit realistic graphics on your video-game console while preventing your future autonomous vehicle from running over a pedestrian. This underappreciated fact makes Nvidia a compelling contrarian buys among AI stocks.
Similar to many other semiconductor-centric artificial intelligence stocks, Micron (NASDAQ:MU) has suffered badly this year. And while the October collapse in the broader markets didn't help matters, MU stock has suffered steep declines since the end of May.
Moreover, Micron shares have been mired in a perfectly-bearish trend channel for the trailing half-year period. Gambling that this time, it's different is akin to a knife-catching game. Admittedly, MU stock has many challenges ahead. Plus, the ongoing economic conflict with China is an acute sour spot for chip-based AI stocks.
Nevertheless, I believe patient contrarians should strongly consider MU stock. As the AI sector expands its scope, demand for Micron's memory chips will inevitably increase. Additionally, the tech company recently announced that it will invest $100 million in AI-related startups and research projects.
The leadership team isn't just focused on raw numbers, it's focused on positioning the organization for future success. I like that they remain bullish on their prospects despite nearer-term pain.
International Business Machines (IBM)
Industry: Information Technology
Out of all the large-cap artificial intelligence stocks, I'm most disappointed in International Business Machines (NYSE:IBM). As a boring investment which many folks view as a legacy entity, IBM stock typically flies under the radar. That's not great if you love high-flying growth names but in a bear market, ignorance is bliss.
Or so I thought. During the October selloff, IBM stock took it on the chin, absorbing a 24% freefall. That is an Nvidia-style decline, but without any of the sex appeal. Typically, dividend-paying companies mitigate losses better than non-paying firms in a corrective phase. That too didn't help Big Blue.
Still, I see potential for IBM stock. For one thing, its huge discount puts shares in Great Recession territory. That's a little overkill considering the iconic firm's AI cred. Most people recognize IBM for its Watson commercials, but their investment goes far deeper, extending into diverse subjects like chemistry and speech recognition.