Artificial intelligence has shown its potential to help people become more productive and access relevant information faster, igniting the technology’s adoption across many industries. Some sectors have been changed forever because of artificial intelligence, while others are experiencing gradual shifts.
Many investors immersed in the trend have been accumulating artificial intelligence stocks. Nvidia Corp. (ticker: NVDA), the maker of advanced AI chips and the poster child for the artificial intelligence boom, for example, has seen its stock more than triple over the past year.
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The use of AI in business can lead to better decisions and greater output, says David Garfield, global head of industries at financial advisory and consulting firm AlixPartners. “On the productivity front, the opportunities go beyond simple automation. For example, companies that operate industrial equipment are using AI to predict when their machinery will require maintenance, allowing them to operate their equipment at higher levels of efficiency and achieve more output.”
AI-as-a-Service Companies to Watch
AI-as-a-Service, also known as AIaaS, refers to a cloud computing service offered by a third party that lets businesses access AI technology to enhance their operations and strategies. This way, businesses don’t have to build and manage their own AI systems, saving them time and money. Leading AI-as-a-Service businesses include Amazon.com Inc.’s (AMZN) Amazon Web Services, OpenAI, the Google Cloud AI platform and Microsoft Corp’s (MSFT) Azure. International Business Machines Corp.’s (IBM) Watson, Salesforce Inc.’s (CRM) AI platform, and Oracle Corp.’s (ORCL) AI solutions are also key players in a variety of applications.
AI’s disruption of many areas of business presents opportunities for investors. Here are five of the business sectors that will be most affected by the incorporation of AI tech into systems and processes:
— Education
— Cybersecurity
— Financial services
— Retail
— Marketing
Education
Education has always involved teachers giving lessons to students on various subjects. Artificial intelligence has the potential to make accessing information easier and to aid in the learning process.
“Educators should be excited to use the technology to alleviate the burden of repetitive tasks and to identify trends in student data, enabling them to focus their efforts, and giving teachers more time to interact with their students,” says Sari Factor, chief strategy officer at edtech curriculum provider Imagine Learning.
Teachers can save a lot of time by incorporating artificial intelligence to help with daily tasks, but AI technology also has the capability to help students.
“Over time, AI, coupled with digital instruction and human interaction, will enable students to unlock their potential with personalized lesson plans that cater to students’ needs and interests, producing better results,” says Factor.
Coursera Inc. (COUR) and Duolingo Inc. (DUOL) are at the forefront of educational uses for AI. These corporations use artificial intelligence to improve their education offerings. Coursera offers personalized learning plans, while Duolingo has also been using artificial intelligence to enhance some of its lessons.
Duolingo’s use of AI has contributed to higher profit margins, and its revenue growth hit 44% year over year in 2023. Coursera is a smaller edtech company that is on the verge of being profitable, so it’s riskier but worth watching for a switch to profitability that can lead to meaningful upside for investors.
Cybersecurity
A cyberattack can cost a company millions of dollars and tarnish its reputation. Some attacks can corrupt data or leak it to the dark web. The lucrative nature of online hacking has attracted many bad actors, and cybersecurity firms offer protection.
Cybersecurity companies have always offered platforms and tools designed to detect threats and address them before they become major problems. However, artificial intelligence is changing the industry.
Suresh Vasudevan, CEO at Sysdig, a cloud security firm, shares how hackers and cybersecurity companies are using artificial intelligence: “Cyber warfare is now AI vs. AI: Bad actors are using AI to hack systems and launch more sophisticated and nuanced phishing attacks, while companies are using AI to cloak their security engineers in Ironman suits and thwart AI attacks.” He predicts that 2024 will be the year everyone will be sprinting to optimize AI.
“There will be aspects of security strengthened, but there will also be a lot of damage done by optimizing AI for evil, from calls that claim to be from your bank or insurance provider to AI being used to disrupt elections,” he says.
Crowdstrike Holdings Inc. (CRWD) and Microsoft are two corporations to watch if you want exposure to cybersecurity and artificial intelligence. Crowdstrike, which uses AI for its Falcon platform to help companies stop breaches and smooth performance, reported impressive financial growth throughout 2023. By comparison, many cybersecurity firms offered lukewarm guidance this year and cited headwinds.
Microsoft’s recent announcement of Copilot for Security strengthened its position in the cybersecurity industry, as the product helps businesses detect threats and outpace adversaries.
Financial Services
Artificial intelligence has created a ripple effect across the entire financial industry. Consumers can use the technology to construct personalized portfolios, receive financial guidance and find loans, for example. Some loan marketplaces use artificial intelligence to pair borrowers with financial products based on their credit score, debt-to-income ratio and other factors.
However, it’s not just consumers that are benefiting from AI’s impact on the financial services industry. Financial institutions and corporations can also make better decisions based on the data they receive from AI.
“AI is transforming parts of the risk management landscape. It is able to discern patterns of behavior that represent risk — such as the risk of defaulting on a loan — and it allows financial institutions to ‘tune’ their risk management models in more dynamic and detailed ways,” Garfield explains.
Better risk management models can also make lenders feel more confident about giving their money to a qualified borrower. Many financial firms are incorporating artificial intelligence, but investors may want to monitor Moody’s Corp. (MCO) and SoFi Technologies Inc. (SOFI) in particular.
Moody’s is an economic analysis, risk assessment and ratings firm that has handily beaten the S&P 500’s return over the past five years. The corporation is using generative AI to strengthen its product line and attract new clients.
SoFi offers financial products for consumers and business owners. The online bank recently reported a profitable fourth quarter and has shown it can expand its profit margins quickly. Artificial intelligence helps SoFi make loan decisions, offer robo advisors and enable automatic transfers.
Regarding the fintech’s fourth-quarter results, CEO Anthony Noto said that SoFi “generated record adjusted EBITDA of $181 million, representing 159% year-over-year growth and a 74% incremental adjusted EBITDA margin, with all three segments profitable on a contribution basis. This equates to a 30% adjusted EBITDA margin, in line with our long-term target.”
Retail
The retail sector operates under tight profit margins, and many corporations are looking for ways to trim costs. Chatbots are a viable solution that can reduce redundant jobs and increase productivity among customer service teams. Artificial intelligence can process simpler questions and move the more complicated questions to representatives.
“In retail, AI is disrupting customer service by offering the potential for hyper-personalized support — where an AI service ‘representative’ can learn and adapt to each individual consumer’s priorities and preferences for service … and then provide that service 24/7, with continuous improvement,” Garfield says.
Artificial intelligence also provides data that helps retailers decide which items to put on their shelves. Meanwhile, physical AI-powered robots can streamline logistics by carrying products through a warehouse to their intended destinations. These bots have the potential to speed up shipping times, allowing customers to receive their products sooner.
Investors may want to take a closer look at Symbotic Inc. (SYM) and ServiceNow Inc. (NOW) to capitalize on AI’s impact on retail businesses. Symbotic has an expanded partnership with Walmart Inc. (WMT) to deploy its AI-powered robotics and software automation system to make the retail giant’s warehouses more efficient. ServiceNow helps organizations produce chatbots and has a 99% renewal rate among its customers.
Marketing
Businesses are using artificial intelligence to create more personalized messages for their audiences. Adding a personal touch has helped companies increase conversion rates. Artificial intelligence also helps marketing and advertising companies offer better targeting options for paid campaigns.
Artificial intelligence can also assist with creating marketing assets, such as creative content and email scripts. Some marketers are turning to resources such as OpenAI’s ChatGPT to become more efficient.
Alphabet Inc. (GOOG, GOOGL) and Amazon are uniquely positioned to benefit from artificial intelligence in the ad world. Alphabet uses AI to offer better advertising results for its customers. Artificial intelligence also allows Alphabet systems to display relevant and high-quality search results via Google and YouTube.
Amazon uses artificial intelligence to make product recommendations and display advertisements for relevant keywords. Better advertising results will entice business owners to invest more money into Amazon Ads.
The two tech giants are trillion-dollar corporations and are members of the Magnificent Seven, and they carry a significant amount of weight in the S&P 500 and the Nasdaq 100. So any enhancement AI brings to their businesses will have far-reaching implications for the major indexes and the stock market as a whole.
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