Artificial intelligence is the next big thing — and Silicon Valley isn’t planning to miss the boat when it arrives. In fact, the so-called FANG stocks — an acronym for the large-cap growth stocks Facebook (ticker: FB), Amazon.com ( AMZN), Netflix ( NFLX) and Google ( GOOG, GOOGL) — are rapidly incorporating AI into their own operations and offerings, helping to bring the technology mainstream.
The potential applications for AI are tremendous, and span across almost every discipline and industry imaginable, from warfare and drug discovery to autonomous vehicles and portfolio management.
With the mouthwatering commercial opportunities these developments will afford, it’s no wonder the tech world is investing heavily in AI research and development. So, which of the FANG stocks is winning the AI race? Here’s a look at the field:
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Facebook. “It seems likely that Facebook, which spent $5.9 billion — or 21 percent — of its 2016 sales revenue on research and development, has substantial resources dedicated to AI,” says Barry Randall, technology portfolio manager on Covestor.
Even in the high-tech world, Facebook’s research and development budget is an outlier. None of the other FANG stocks devote even 16 percent of their revenue to R&D.
While clearly not all of Facebook’s R&D spend goes to AI, it’s fair to say that a decent chunk of it does, and major parts of its current and future product stem from that field.
Facebook’s entire news feed, for example, is a personally curated stream of posts from your friends, the order of which is determined by an algorithm developed and fine-tuned by machine learning, a form of AI.
Additionally, Facebook’s virtual assistant, M, is powered by AI, as are Facebook chatbots, its soon-to-come augmented reality platform, its ad platform and its facial recognition software.
The company’s Applied Machine Learning team helps develop much of the day-to-day AI that’s used to create the Facebook experience, which means it sprang up in much the same way that Amazon Web Services (AWS) — the online retailer’s popular, profitable cloud service — sprang up, as an effort to improve internal operations.
Amazon.com. Due to AWS, “Amazon has consistently won the race in cloud infrastructure,” says Chris Nicholson, CEO of Skymind, the company behind Deeplearning4j, a widely used deep learning tool for Java.
That head start in the cloud allows Amazon to monetize its expertise in artificial intelligence, which it recently began doing through Amazon AI, an offering on AWS allowing outside developers to harness AI features like image and speech recognition.
Amazon CEO Jeff Bezos has said the company devotes “thousands of employees” to AI-related projects, and Bezos’s most recent letter to shareholders heavily emphasized the company’s focus on machine learning
Amazon’s AI-powered virtual assistant Alexa, which lives in the popular line of Echo devices, has also become pretty ubiquitous recently, a consequence of Amazon’s incredible first-mover advantage in the area. The first Amazon Echo was released in November 2014; it took Google another two years to release a competitor.
While Alexa is certainly the most visible way AMZN harnesses AI, it’s likely not nearly the most profitable. Bezos is quick to remind the public that most of the company’s uses for AI focus on streamlining and improving operations. Search results, product rankings, product recommendations, fraud detection and even the company’s delivery drones all rely on AI.
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Netflix. Due to Netflix’s business, which fundamentally depends on simply paying less for content than its customers pay, NFLX doesn’t benefit as much as other FANG stocks from an obsessive focus on AI.
That doesn’t mean Netflix ignores artificial intelligence entirely, though.
“Netflix is using AI in very narrow ways, like optimizing image compression to save on bandwidth costs without compromising picture quality and continually fine-tuning its recommendation engine,” Randall says.
By giving users personalized recommendations, Netflix keeps subscribers more engaged than they’d otherwise be, which ultimately keeps users on the platform and reduces the churn rate, or the percentage of customers that don’t re-subscribe.
The payoffs from this relatively simple application of AI have been huge: A 2016 paper by two Netflix executives revealed the company saved $1 billion a year as a result of its AI efforts.
Google. “Google is applying advanced AI to more than 2,500 internal projects, ranging from managing its ad auctions to controlling power use in its data centers. These applications are generating and saving the company hundreds of millions of dollars per year at a minimum,” Nicholson says.
It’s impossible to say how much money AI is saving and making Google — the company now technically lives under a holding company called Alphabet after a reorganization — but it’s likely in the billions.
Google Brain and Google DeepMind are two large-scale AI projects going on within the company, and they’ve become absolutely essential to the way GOOG conducts business.
“Brain probably touches every single one of our main projects, ranging from search to photos to ads to … everything we do,” Google co-founder Sergey Brin said at the Davos 2017 World Economic Forum.
Other applications include encryption, translation technology and the analysis of health data.
While, like Amazon, Google prominently uses AI to streamline behind-the-scenes operations, consumers can also see it at work in a number of highly publicized consumer-facing products.
First off, Google has been working on autonomous driving technology since 2009, and any such tech by definition has to use machine vision and machine learning to see the road, differentiate between objects, inform its choices, etc.
The Echo competitor Google Home uses AI as well in its Google Assistant software, which also comes standard in Google Pixel phones, the company’s first Google-branded smartphone.
We have a winner… So, which of the FANG stocks is currently the leader in artificial intelligence?
There seems to be a consensus between people closely following the field: Google.
“Google’s efforts tend to be the most fundamental and far-reaching” of the FANG stocks, says Olly Downs, the CEO and chief data scientist of Amplero. “Think of Google’s AI investments as potentially creating revolutionary impacts to humanity.”
Nicholson agrees, chalking up Google’s success to “the work of Google DeepMind and Google Brain.”
But while Google may be the clear AI leader today, the other FANG companies — particularly Facebook and Amazon — are nothing to scoff at.
On top of that, just because Google is crushing it today doesn’t guarantee its AI dominance two or three years from now, and even co-founder Sergey Brin acknowledges this.
[Read: Artificial Intelligence Stocks: 10 Companies Betting on AI.]
“I think it’s impossible to forecast accurately,” Brin says.
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FANG Stocks: Which One Is Leading in AI? originally appeared on usnews.com
