Best AI Stocks of 2020

Source: Company websites

NVIDIA

Machine learning’s training phase demands a lot of computing power; its inference phase requires less. Graphics chips, used primarily for rendering video games, do both tasks well. Leading graphics chip company NVIDIA (NASDAQ:NVDA) has taken advantage of the AI boom, with its graphics cards becoming the de facto standard in data centers around the world.

NVIDIA’s data center business generated nearly $1 billion of revenue in its latest quarter. That’s not all AI-related – NVIDIA’s graphics cards are used to accelerate a wide variety of data center applications. But AI has been one of the driving forces behind the company’s growth.

Self-driving cars are another area of focus. NVIDIA develops platforms, including hardware and software, that can power driver-assistance features as well as full self-driving. The company’s DRIVE AGX Pegasus system includes two NVIDIA Xavier processors, two graphics processing units, and is capable of 320 trillion operations per second.

A self-driving car must process massive amounts of data from multiple sensors and cameras in real time, detect objects like pedestrians and other vehicles, and make complex decisions. They require a tremendous amount of computing power, and that’s exactly what NVIDIA’s platform delivers.

NVIDIA’s graphics cards could someday be supplanted by more specialized processors designed for AI, but for now the company is in an enviable position.

IBM

International Business Machines (NYSE:IBM) has been around for over a century. Today, the tech giant is an integrated provider of hardware, software, and services to large enterprise customers. Its mainframe computer systems are still ubiquitous in certain industries, and it regularly signs multi-year IT deals worth hundreds of millions of dollars each.

IBM’s strategy with AI is to apply the technology where it can augment human intelligence, increase efficiency, or lower costs. In the healthcare industry, IBM’s AI tech is being used to create individualized care plans, accelerate the process of bringing new drugs to market, and improve the quality of care. In the financial services industry via the company’s acquisition of Promontory Financial Group, IBM is using AI to help clients with the daunting task of regulatory compliance.

There are some applications that aren’t quite ready for primetime but show promise. For example, IBM is working with marine research organization ProMare on an “AI Captain” capable of allowing a ship to self-navigate across the Atlantic Ocean.

While the market for AI products and services is fragmented, IBM is leading the industry. The company generated over $2.5 billion of revenue from AI in 2018, according to IDC, giving it the largest market share in the industry.

IBM is a complicated company, and AI is far from its only growth opportunity. But if you’re looking to invest in a company that will benefit from the AI boom, IBM is a good choice.