Three AI stocks you could pick up after the correction
AI – or artificial intelligence – has been the theme of the stock market this year, and the most notable companies in the field have risen between 30 to 200% this year. As a correction is now underway, it makes sense to look at which stocks to pick up once the storm in the stock market is over.
Below are three stocks that may benefit from the opportunities AI offers to companies.
Interested in learning more about how to successfully invest in AI? Then sign up for our free webinar on Wednesday, October 11th at 8:00 pm. You can register here.
AMD – “the dark horse” in AI
This year, AMD has been somewhat overshadowed by its competitor NVIDIA. The stock has risen over 50% this year, while NVIDIA has concurrently risen over 200%. This is because NVIDIA was superior in the first round of the battle for market share in generative AI. The AMD stock has fallen nearly 30% from its peak in June. The primary concern in the market is that AMD’s chips can’t compete with Nvidia, especially in generative AI. However, this may not necessarily be true.
Advanced Micro Device (in USD) five year weekly chart
One of AMD’s challenges has been the lack of software and driver support, making it cumbersome to run AI models on AMD’s processors. Nvidia, on the other hand, has a mature software ecosystem, CUDA, giving them a sustained competitive edge as it makes it challenging for developers to switch from one system to another.
However, AMD is working on improving their ROCm software platform to better support their processors, which is a positive sign. Moreover, AMD sells its GPUs at a substantial discount of about 40% compared to NVIDIA. The company is working on its MI300 chip, touted as AMD’s most complex chip ever, and on par with NVIDIA’s best products. This positions AMD to join the battle for the generative AI market, which in 2023 is expected to reach a whopping 1.3 trillion dollars. GPUs – Graphical Processing Units – play a crucial role in determining where revenue goes in the initial wave of the AI revolution. AMD has previously been an underdog in the battle against Intel, so they have plenty of experience being “the little one”, and they can use this experience as they enter a new market. Ideally, investors may consider diversifying across both NVIDIA and AMD since both companies could have bright long-term prospects.
Airbnb – the digital travel agent
The American travel company Airbnb has, in recent years, strongly focused on AI, and now AI is becoming central to their business. This can give the company an even stronger position in the travel industry in the coming years. According to their plans, Airbnb is set to relaunch their app in May 2024, where AI will be the central element. This means that instead of currently searching for a destination with filters, users can have a "conversational search" with Airbnb. You'll be able to chat with Airbnb's chatbot in the same way you chat with Chat-GPT, making it much easier to find the properties and trips you want. The idea is to have access to an all-knowing, digital travel agent, enhancing your search experience before traveling. Overall, with these initiatives, Airbnb is poised to significantly enhance its product.
The American travel platform also expects to greatly improve its customer service with the help of generative AI and reports productivity gains of about 30% among the company's developers. This positions the company well to benefit from generative AI.
Alphabet – leading in AI
The tech giant behind the search engine Google, Alphabet, has had a remarkable development over the past year. After a drop in the stock price in 2022, the company saw significant increases in 2023, mainly due to its innovations in artificial intelligence.
One of the most exciting developments is the introduction of generative AI, which can create content on its own. This technology has already been integrated into several of Google's core services, helping customers compose emails or draft projects. More importantly, Alphabet's primary source of income, digital ads, benefits from this AI technology, strengthening the company's market position. Generative AI helps advertisers design more effective campaigns and improves their ad performance. Overall, Alphabet appears to be an attractive investment with their continuous focus on AI and their robust financial position. Add to this that Alphabet is expected to launch their new language model, Gemini, in the coming months, said to be even better than GPT-4. This could offer potential upside for the stock once the market correction is over.
Buy after the correction – or in multiple stages?
The stock market is currently undergoing a correction after the significant rises earlier in the year. If you would like to invest it makes sense to try and buy the stocks once this correction is nearing its end, meaning there's a short-term timing risk in entering the stocks. If you want to minimize this timing risk, consider buying in multiple stages. This way, the timing of a single purchase becomes less significant. However, when looking at recent peaks of stock prices also remember that past performance is no indicator of future results. There is no guarantee that these peaks will be reached again.
Interested in learning more about how to successfully invest in AI? Sign up for our free webinar on Wednesday, October 11th at 8:00 pm. You can register here.
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