Credit: Abstract representation of technology; a finger pulsing against a web of light — stnazkul / stock.adobe.com
The artificial intelligence (AI) bull market is here.
Following the launch of ChatGPT, the power of generative AI technology has become clear, and tech companies are racing to take advantage of it, both to find better ways to serve their customers and to make their operations more efficient.
Investors have also caught on to this trend, and investor enthusiasm is a big reason why tech stocks have soared since the beginning of 2023, with the "Magnificent Seven" leading the way.
Let's take a look at a few of the companies leading the AI race.
Image source: Getty Images.
1. Nvidia
It's impossible to talk about generative AI without mentioning Nvidia (NASDAQ: NVDA). The company's graphics processing units (GPUs) have been at the center of the AI revolution, as they're the most valued piece of infrastructure in running AI models like ChatGPT.
Nvidia prepared for this moment years ago, building out its capabilities in AI and partnering with companies like OpenAI, and it's paid off. The company has an estimated 98% market share of the data center GPU market, and its technological leadership and soaring demand for its components have led to a shortage and given it tremendous pricing power.
Nvidia's recent results speak for themselves, and explain why the stock has jumped more than 400% since the beginning of 2023, making it the third-most-valuable company in the world behind Microsoft (NASDAQ: MSFT) and Apple.
Fourth-quarter revenue jumped 265% to $22.1 billion, driven by 409% growth in data center revenue to $18.4 billion. Its generally accepted accounting principles (GAAP) net income jumped 769% to $12.3 billion, giving it a profit margin above 50%.
Nvidia's growth rate will slow down, but the company has a solid lead in AI technology, which should mean it remains a winner.
2. Microsoft
While Nvidia is the clear leader in AI hardware, Microsoft has established itself as the leader in AI software.
Because of its partnership with OpenAI, in which it's invested an estimated $13 billion, and its diversification across multiple tech platforms, Microsoft has the ability to deploy AI capabilities across multiple product lines, and that's what it's doing.
With the help of OpenAI, Microsoft has added AI technology to products like Azure cloud computing, GitHub code repository, Microsoft Office, and Bing search engine, and it's deployed its AI Copilot chatbot across those products and others.
Those efforts are having an impact on the business already. For example, management said in its most recent quarter that six points of Azure's 30% revenue growth came from AI.
Microsoft also has no intention of taking its foot off the gas. The company recently hired Mustafa Suleyman, the co-founder of DeepMind, who is considered one of the top minds in AI. It also hired several of its employees from Inflection AI after the AI start-up folded.
Microsoft and CEO Satya Nadella have bet big on AI, and the company will continue to look for new ways to leverage the new technology.
3. Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) hasn't gotten as much attention as Nvidia or Microsoft in the AI race, but it deserves to be recognized as one of the leaders.
Like Microsoft, Alphabet has been investing in AI for years. The company acquired the AI lab DeepMind in 2014 and recently merged it with Google Brain. It's also been developing its own AI technologies for roughly a decade.
Alphabet has been less aggressive than Microsoft in AI, but the Google parent quickly responded to the launch of ChatGPT with its own chatbot, Bard. That has evolved into Gemini, which may be the closest challenger to ChatGPT today.
Alphabet's investments in its Waymo autonomous vehicle subsidiary shouldn't be overlooked either. While self-driving cars have largely been a disappointment thus far, Waymo appears to be the leader in the emerging technology, and its driverless vehicles are now on the road, ferrying passengers in cities like San Francisco, Phoenix, and Los Angeles.
The company also uses AI to improve search results on both Google Search and YouTube and to offer increased functionality in Google Cloud.
Much like its rival Microsoft, you can expect Alphabet to look for new ways to integrate AI in its products as it's bet big on the booming technology and plans to be a leader.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of April 8, 2024
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
