Tuesday, November 17, 2020

Investor's Business Daily on Artificial Intelligence Stocks

There is a definitional problem with the term "AI stocks [or companies]" in that AI is a tool. Much as the (over) hyped nanotechnology revolution didn't produce "nanotech stocks" but instead became incorporated into processes and procedures that give companies employing same an incremental edge rather than epochal shifts.*

However, if there is an AI "company" Nvidia would deserve the moniker as much as anyone.

From Investor's Business Daily, November 16:

Artificial Intelligence Stocks To Buy And Watch Amid Rising AI Competition 

Artificial intelligence stocks are rarer than you might think. Many companies tout AI technology initiatives and machine learning. But there really are few — if any — public, pure-play artificial intelligence stocks.

The "AI" stock ticker, though, has been claimed. Startup C3.ai, which sells AI software for the enterprise market, filed on Nov. 13 for an initial public offering.
Thomas Siebel, who started Siebel Systems and sold it to Oracle for nearly $6 billion in 2006, founded Redwood City, Calif.-based C3.ai.
Further, the number of shares to be offered and the price range for the proposed offering have not yet been determined. In the year ended April 30, C3.ai said revenue rose 71% to $157 million, with a net loss of $69.4 million.

In general, look for companies using AI technology to improve products or gain a strategic edge, such as Netflix (NFLX).  Intel (INTC), Alphabet's (GOOGL) Google and Microsoft (MSFT) in 2019 made the most investments in AI startups, said a CB Insights venture capital report.

Microsoft, Nvidia Among AI Plays On Leaderboard

Microsoft belongs to the IBD Leaderboard. Further, the Leaderboard is IBD's curated list of leading stocks that stand out on technical and fundamental metrics.

Chip maker Nvidia (NVDA), a leader in artificial intelligence, also belongs to the Leaderboard. Nvidia in September agreed to buy Arm Holdings from Softbank for $40 billion.
In a report to clients, RBC Capital analyst Mitch Steves said that: "Nvidia will extend its architecture and offer artificial intelligence or 'acceleration in a box' for all ARM-based chips. He added: "Instead of looking at ARM as a potential CPU play alone, we think the bigger picture is that 22 billion-plus ARM chips can be accelerated with AI."

Square Capital, part of digital payment processor Square (SQ), provides loans to merchants. Square Capital uses an AI-driven credit assessment platform in granting new loans.

Software Companies

Aside from chip makers, some software companies are among artificial intelligence stocks to watch. Many software-as-a-service companies use AI tools. Further, Workday (WDAY) showcased its AI and machine learning product innovation at a digital transformation investor event on Oct. 20.

San Mateo, Calif.-based Coupa (COUP) on Nov. 3 agreed to buy Llamasoft, a provider of AI-powered supply chain software, for about $1.5 billion. Llamasoft's customers include Boeing (BA) and Home Depot (HD).

Enterprise software maker ServiceNow (NOW) has been making AI acquisitions. Under new Chief Executive Bill McDermott, ServiceNow in January acquired two AI companies, Passage AI and Loom Systems.
In addition, ServiceNow owns a Relative Strength Rating of 90 out of a possible 99. Further, ServiceNow stock belongs to the IBD Leaderboard.

DocuSign (DOCU) on Feb. 27 agreed to buy Seal Software for $188 million. The startup uses artificial intelligence for contract analytics.

Intel on Dec. 16 acquired Israel-based Habana Labs for $2 billion. Also, Intel in 2016 bought Nervana Systems in an earlier move to take on AI chip leader Nvidia.

In addition, analysts expect the battle in AI chips for data-center applications to heat up in 2020.

AI technology uses computer algorithms. The software programs aim to mimic the human ability to learn, interpret patterns and make predictions. "Machine learning" is the most widely used form of AI deployed in industries. Machine learning systems use huge troves of data to train algorithms to recognize patterns and make predictions.

AI Stocks: Chipmakers Nvidia, Intel Battle

All AI software needs computing power to find patterns and make inferences from large quantities of data. The race is on between Intel, Nvidia and others to build AI chips for data centers, self-driving cars, robotics, smartphones, drones and other devices.

AI chipmaker Graphcore recently raised $150 million at a $1.95 billion valuation. SambaNova Systems, another AI chip startup, raised $250 million at a $2.5 billion valuation.

It's no secret that Alphabet, Microsoft, Facebook (FB) and Amazon.com (AMZN) are all spending big bucks on AI technology. The tech giants are putting AI in consumer products and services, such as voice-activated smart home devices. Google and Facebook use AI tools in digital advertising....


*If interested see: 
These incremental advantages add up.
As noted in the outro from a 2017 post:
...Much more important than the direct monetization of big data is the strategic advantage it can bestow over time.
In a winner-take-all economy, as in a horse race, small differences in superiority are rewarded all out of proportion to the actual advantage. A top thoroughbred may only be a couple fifths of a second faster than the field but those two lengths over the course of a season can mean triple the earnings for #1 vs. #2.
In commerce the results can be even more dramatic because rather than the 60%/20%/10% purse structure of the racetrack the winning vendor will often get 100% of a customer's business.

Outro now intro. Here at Climateer Investing WE RECYCLE

And from a December 2010 post: 
...The reason for highlighting nano is two-fold.

1) Since Feynman coined the word there has been a misconception among investors that there would be a nano-technology "industry". This has proven not to be the case and won't be in the future. Rather nano is a tool, an approach toward problem solving.

There will be some breakthroughs that make their discoverers instantly (after 10 years of research) wealthy but the real beneficiaries will be companies like Kyocera and 3M and Siemens. They will use the technology to do what they are already doing, just better, faster, cheaper, more.

2) In spite of the fact that there will be few pure plays we are convinced that nano combined with advances in materials science and manufacturing technology is what will spur the next secular bull market....
When it becomes ubiquitous, the distinctions blur, the drive for creativity recedes, stasis, then death.
Wait what? Entropy! I meant to co-opt the physically precise  concept of entropy to metaphorically describe the trend. Not death.
No, death bad, Sand Hill Road good.