Artificial intelligence (AI) services could help businesses analyze data, optimize their companies, craft more targeted ad campaigns, and can even pilot autonomous vehicles and machines. That ongoing shift could allow the global AI market to expand at a compound yearly rate of 40.2% by 2028.
But that secular trend might also be confusing because of all the many companies that depend on AI as a buzzword instead of a business model. I will simplify that search process for traders by highlighting two reliable tech businesses that will likely benefit from future expansion of the AI market.
Alphabet, Google’s parent company, produces most of its earnings from online ads. Those advertisements are powered by certain AI algorithms that target certain users based on their search history, location, and other data.
The AI-powered targeted ads have been so effective that they have allowed Google to claim 28.6% of the entire digital ad spending around the globe this past year. Meta Platforms, which owns Instagram and Facebook, ranked in second with 25.2% of the share.
Google also owns the globes third-biggest cloud infrastructure platform that provides computing, data storage and AI services to firms. Google Cloud’s growth is continuing to expand as big companies migrate more of their information to public cloud services. It is also continuing to invest in next-gen tech, such as Waymo’s driverless vehicles, which might evolve into revenue-producing business in the future.
Analysts predict Alphabet’s earnings and revenue to grow 85% and 39% respectively, in 2021 as it laps easy comparisons to the beginning of the pandemic. They predict its growth to slow down in 2022, but it remains one of the cheaper FAANG stocks at just 26 times forward earnings.
Ambarella sells picture processing system-on-chips (SoCs), which are commonly used in dash cams, security cameras, and drones; and computer vision chips that are AI-powered, which enable autonomous and semi-autonomous vehicles to travel the road.
During 2021, Ambarella’s revenue and adjusted earnings fell 3% and 52%, respectively, as the pandemic had disrupted the semiconductor supply chains and auto sector. The Trump administration blacklisted some of the Chinese owned security camera businesses — some of which happened to be Ambarella’s largest customers — which only made things worse.
Ambarella’s prospects have improved in fiscal 2022 as the car market has gradually recovered. Its security camera company in China has also stabilized as newer customers replaced the blacklisted customers, and it added new customers around the globe.