Artificial intelligence (AI) is undoubtedly 2024’s hottest theme in stock markets globally. But deciding which shares to invest in from the sector isn’t always as straightforward as picking the ‘momentum stocks’… or is it? Four Fools have their say!
Amazon
What it does: Amazon is a technology company that operates in the e-commerce, cloud computing, and digital advertising markets.
By Edward Sheldon, CFA. One AI stock I own that I reckon has game-changing potential is Amazon (NASDAQ: AMZN).
Amazon is really active in the artificial intelligence space and it has recently launched some new exciting AI solutions. One example here is Amazon Bedrock. This allows companies to use existing foundational models like GPT-3 to build generative AI applications. Another example is Amazon Q. This is a generative AI-powered chatbot assistant designed specifically for businesses.
It’s worth noting that Amazon Web Services (AWS) is likely to be the cloud computing platform that a lot of AI developers turn to in the years ahead. “We’re optimistic that much of this world-changing AI will be built on top of AWS,” wrote CEO Andy Jassy in the company’s recent annual letter.
Now, Amazon is likely to face some intense competition from rivals in the coming years. In the cloud space it’s up against the likes of Microsoft and Alphabet.
I’m very excited about the long-term potential here though. I’ve made the mega-cap tech stock one of my largest holdings.
Edward Sheldon owns shares in Amazon, Microsoft, and Alphabet.
Apple
What it does: Apple designs and manufactures smartphones, tablets, computers and wearables. It also provides a variety of related digital services.
By Harshil Patel. Until recently, Apple (NASDAQ:AAPL) appeared to lag behind in the artificial intelligence race. But recent announcements of its AI plans could be game-changing.
For instance, it will be integrating OpenAI’s ChatGPT into its mobile devices. Its voice assistant Siri has been upgraded with more integration across apps. And image editing has got an upgrade powered by generative AI.
These features require iPhone 15 Pro or newer models. I believe that will lead to an acceleration of iPhone user’s upgrade cycle. So users with older models will now have a stronger incentive to replace existing devices.
With iPhones representing more than 50% of Apple’s sales, this is a big deal.
Bear in mind that using a third-party AI tool like ChatGPT introduces some risk and reliance on an external provider. That said, overall this is a high-quality and profitable business with loyal customers.
I’ve owned Apple shares for over a decade, and with recent updates, I expect I’ll still own it for many years to come.
Harshil Patel owns shares in Apple.
Sage Group
What it does: Sage Group is a major provider of accounting and human resources software to industries across the globe.
By Royston Wild. Shares in Sage Group (LSE:SGE) plummeted last month after the software giant dialled back its sales forecasts for 2024.
Such slumps can be common when companies with high valuations like this disappoint investors. The FTSE 100 firm predicted impressive sales growth of 9% for the second half. Unfortunately, this was down from a previously forecast 9.6%.
Sage continues to trade on a lofty valuation despite April’s price drop. And so further plunges remain a risk.
But I believe the company remains a great way to capitalise on the AI boom. Its huge investment in this new tech frontier threatens to change accounting and human resources forever.
The firm’s Sage Copilot generative-AI-based digital assistant was launched for its UK accounting customers in February. The software automates critical tasks and provides users with strategic insights, and Sage plans to make it available to its cloud customers, too.
Helped by a pipeline of other AI initiatives, City analysts expect annual earnings growth at Sage to average a healthy 13% through to 2026. I think it could be a great dip buy following that recent share price drop.
Royston Wild does not own shares in Sage Group.
Tesla
What it does: Tesla is the world leader in electric vehicles. It also has plans to expand into fully autonomous robotaxis.
By Oliver Rodzianko.
I think Tesla (NASDAQ:TSLA) is one of the most undervalued stocks at the moment as it relates to its future potential in AI.
Some people might not know that it was Musk who was one of the key founders of OpenAI. When CEO Sam Altman said he didn’t want OpenAI to be bridged into an arm of Tesla, Musk went out on his own.
His master plan includes bringing a fleet of fully autonomous robotaxis to roads in the near future.
If he can achieve this, I believe the results will be truly game-changing. The effects won’t only be dramatic for the transport industry. Tesla shares should get a nice big boost in profit, too.
However, there are a tonne of regulatory pressures that might slow this down. In addition, other players like Alphabet’s Waymo are further ahead.
Let’s see if Tesla can pull off its plan.
Oliver Rodzianko owns shares in Tesla and Alphabet.
