The emergence of Artificial Intelligence (AI) as the biggest technological disruption has defined the past decade. The break-neck speed at which AI is pervading many spheres of life and business is extraordinary. AI has revolutionized and empowered a wide array of sectors, including healthcare, retail, education, entertainment, and banking. Organizations that have adopted AI have seen substantial business growth over the past years. AI-backed machines, chatbots, or other AI-powered apps are helping companies to scale their revenues. Companies are rushing to embrace the new technology to facilitate advancements in their businesses. According to Forbes, companies that have invested more than $50 million in big data and AI initiatives increased to 64.8% in 2020 from 39.7% in 2018.
AI is now becoming the core of most future technologies. According to Statista, the global AI software market will grow rapidly and reach nearly $126 billion by 2025. Over the next few years, AI will not only be glorified for its widespread benefits, but the use of AI will become more ethical, accountable and standardized.
Companies including Microsoft Corporation (MSFT), Alphabet Inc. (GOOGL), and International Business Machines Corporation (IBM) are deploying AI and offering innovative AI-based solutions to stay ahead of the game. These tech bellwethers are very optimistic about their increased presence in the AI space. Hence, investors looking to capitalize on the growing influence of AI, must consider these three stocks.
Microsoft Corporation (MSFT)
MSFT has been working assiduously towards empowering organizations and individuals to address and overcome major operational challenges by enhancing their access to advanced AI tools. The company’s Azure AI and Machine Learning platform has been adopted by most enterprise development, data analysis, and data science providers.
Over the past few years, MSFT has made significant acquisitions of AI start-ups to build up its own AI capabilities. Orions Systems, Canadian AI startup, Maluuba, and Semantic Machines are few of the notable purchases made by MSFT in the AI space.
Observe.AI, a contact center AI technology provider, has teamed up with MST to bring automation and AI to improve customer experiences, enhance compliance, and boost agent performance. The partnership allows companies to leverage AI to revamp their customer service operations cross applications like customer support, sales, compliance, and workforce optimization.
During the second quarter ended December 31, 2020, MSFT’s revenue grew 16.7% year-over-year to $43.1 billion. Its EPS for the quarter grew 34.4% over the year to $2.03. MSFT’s Intelligent Cloud segment saw a 23% increase year-over-year to $14.6 billion.
The consensus revenue estimate for the quarter ending March 31, 2021 is $41 billion, representing a 17.2% increase year-over-year. Meanwhile, its EPS is likely to grow 27.1% to $1.78.
Over the past year, MSFT has climbed 40.7% to end yesterday’s trading session at $243. Over the past six months, the stock rose 16.8%.
It is no surprise that MSFT has an overall rating of A, which equates to Strong Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
MSFT has a grade of A for Sentiment, and a B for Momentum, Stability and Quality. In the 108-stock Software – Application industry, it is ranked #15.
Click here to see the additional POWR Ratings for MSFT (Growth and Value).
Alphabet Inc. (GOOGL)
GOOGL has been a market leader in patronizing internal and external research for AI. Whether it be virtual assistants or smart speakers, the company has leveraged AI in most of its products and offerings. Machine learning and AI has been driving most GOOGL’s latest innovations. This includes YouTube recommendations, autonomous cars, its Cloud platforms, and its Verily Life Science Units. According to CB Insights, GOOGL has made 16 investments in AI startups to gain strength in t innovative technologies.
During the fourth quarter ended December 31, 2020, GOOGL’s revenue jumped 23.5% year-over-year to $56.9 billion, led by an upsurge in Search and YouTube. YouTube’s ad revenues climbed 46% in the fourth quarter. Meanwhile, the company’s EPS for the fourth quarter jumped 45.3% year-over-year to $22.30.GOOGL’s AI-backed projects are administered under its “Other Bets” segment. During the fourth quarter, this segment garnered $196 million in revenue, up 13.5% from the prior year period.
Analysts expect GOOGL’s revenue for the quarter ending March 31, 2021 to be $51.4 billion, representing a 24.8% year-over-year growth. Its EPS is likely to grow at the rate of 16.9% per annum over the next five years.
GOOGL has climbed 33.9% during the past year to close yesterday’s session at $2,058.88. Over the past six months, the stock climbed 29%.
GOOGL strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. GOOGL has a grade of A for Sentiment, and a B for Momentum and Quality. Of 64 stocks in the Internet industry, it is ranked #1.
In addition to the POWR Ratings grades I have just highlighted, you can see GOOGL’s ratings for Growth, Value, Stability here.
International Business Machines Corporation (IBM)
IBM is a global leader in advanced enterprise AI and is a leader in the future of machine learning systems for multiple industries. IBM’s Watson products and solutions offers companies AI tools necessary to transform their business systems and workflows and to enhance automation and efficiency.
IBM researchers recently unveiled a new approach that could bring big changes to r deep-learning applications with processors that use light to perform computations in lieu of electricity. The device has only been tested on a small scale. However, reports suggest that if the processor is developed it could perform one thousand trillion multiply-accumulate (MAC) operations per second and per square-millimeter.
IBM’s revenue for the fourth quarter ended December 31, 2020 declined 6.5% year-over-year to $20.3 billion. Its cloud & cognitive software segment, which includes cloud & data platforms, red Hat, cognitive applications and transaction processing platforms decreased 4.5% to $6.8 billion. Its EPS for the quarter declined to $1.52 from $4.14 posted in the same period last year.
Analysts expect IBM’s revenue for the quarter ending March 31, 2021 to be $17.9 billion, representing a 1.1% decline year-over-year. Its EPS is likely to grow at the rate of 6.1% per annum over the next five years.
IBM has declined 16.9% over the past year to end yesterday’s trading session at $119.15. During the past six months, IBM dropped 2.9%.
IBM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. It has a grade of B for Value, Quality, and Momentum. It is ranked #15 in the Technology – Hardware industry.
In total, we rate IBM on eight different levels. Beyond what we stated above we also have given IBM grades for Growth, Stability, and Sentiment. Get all the IBM ratings here.
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MSFT shares were trading at $241.03 per share on Thursday morning, down $1.97 (-0.81%). Year-to-date, MSFT has gained 8.37%, versus a 2.88% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education.3 Stocks to Buy on Increasing Adoption of Artificial Intelligence appeared first on StockNews.com