Artificial intelligence (AI) is taking the world by storm, impacting startups and tech majors in a big way. Incidents like when the greatest Go player Lee Sedol lost to AI program AlphaGo, developed by Alphabet Inc. GOOGL, speaks volumes about the same.
The rapid development of AI technology is reflected in the stellar performance of the Robotics & Artificial Intelligence ETF BOTZ and the ROBO Global Robotics and Automation Index ETF ROBO. While BOTZ has rallied 59.6% over the past year, ROBO gained 44.8%. Both ETFs outperformed the S&P 500’s 19.4% gain.
The Concept of AI
AI technology focuses on developing computer algorithms by analyzing the working of the human brain when it comes to solving complex problems. AI has gained immense popularity over the past few years buoyed by massive demand for analyzing unstructured data like tweets, social media posts, photos, and videos.
According to a Narrative Science report, 38% of company surveys used AI in 2016. This is expected to grow to 62% by 2018. Some of the revolutionary AI technologies expected to rule are deep learning, natural language generation, speech recognition, machine learning, virtual agents, AI-Optimized Hardware, robotic processes automation, and biometrics.
United States and China are willing to spend billions of dollars to achieve the top spot in the AI landmark.
Silicon Valley has huge resources and talents to produce AI chips. China could utilize the strength of its population to surpass the United States. Investors should know that a huge bank of data is essential for developing AI and humans are the prime source.
China to Invest Heavily in AI
Per Xinhua News Agency, China intends to invest a massive 13.8 billion yuan, or $2.1 billion, for the construction of a technology park that will likely develop AI. The research park will likely spread over 54.87 hectares of land and will attract roughly 400 businesses, reported Xinhua. The value of yearly output from the businesses is estimated at 50 billion yuan.
The plan to build the park within five years reflects China’s aim of becoming the leader in the AI space within 2025. The world’s most populated country’s advancement in AI research is quite worrisome for the United States. In fact, a current report from the Pentagon reveals that there is a requirement to control the free flow of Chinese investment in U.S. startups trying to develop AI solutions for military applications.
US Still a Leader in AI Chips
Per CNBC, many startups in the United States — where China is making significant investments — are researching military robots. CNBC added that during 2015, China made a massive $9.9 billion investment in Silicon Valley startups.
Venture capitalist Jim Breyer believes that the competence level of Silicon Valley is far better than China. Silicon Valley is highly creative in the AI space, added Breyer. Per media reports, the revolutionary AI chips are mostly manufactured by U.S. firms and it is expected to take a while for China to catch up with the United States in the race.
Notably, Beijing is purchasing AI chips from Santa Clara, CA-based firm NVIDIA Corporation NVDA, per the media reports.
Time to Focus on AI Stocks
According to Russian President Vladimir Putin, the nation with the strongest AI technology will rule the globe. In the view of such developments, it is the ideal time to focus on stocks working on AI technologies.
Employing our proprietary Stock Screener, we have narrowed down our search to the following stocks based on a solid Zacks Rank and other relevant metrics.
NVIDIA Corporation and Baidu BIDU announced a partnership in July 2017. Per the tie-up, Baidu will use NVIDIA’s AI technology in three different areas. This partnership will help Baidu bring in the best AI technology in its cloud computing services, self-driving vehicles and AI home assistants.
The company has expected earnings growth of almost 63% for fiscal 2018. Also, the Zacks Consensus Estimate for fiscal 2018 has been revised upward over the last 60 days.
NVIDIA has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Founded in 1977, Apple Inc. AAPL is headquartered in Cupertino, CA. According to TechCrunch, Regaind — a startup in France — was acquired by Apple last year. Media sources claim that this will help Apple users take photos with the help of AI.
Currently, Apple carries a Zacks Rank #2 (Buy). The stock will likely witness earnings growth of 21.4% in fiscal 2018. Moreover, the Zacks Consensus Estimate for fiscal 2018 has been revised upward over the last 60 days.
Facebook, Inc. FB, headquartered in Menlo Park, CA, helps create and foster social networks through its web portal. In 2018, Facebook intends to work on AI with its competent research team, per CNBC.
The stock carries a Zacks Rank #2. For 2017 and 2018, we expect the company to post year-over-year earnings growth of 37.6% and 12.5%, respectively. On top of that, the Zacks Consensus Estimate for 2017 has been revised upward over the last 60 days.
Idaho-based Micron Technology, Inc. MU has established itself as one of the leading worldwide providers of semiconductor memory solutions. The company is among the leading players in the memory chip landscape. Memory chips are of high demand in the AI era.
Micron sports a Zacks Rank #1. For fiscal 2018, the company will likely witness earnings growth of 98.1%.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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