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Artificial intelligence technology is certainly among the most disruptive trends in the market for investors to consider. Most companies have touted their AI integrations and product developments on earnings calls, in a bid to see some sort of valuation boost, or at least benefit in some indirect way from the powerful movement we're seeing in the overall economy.
And while it's clearly great that so many companies are looking to improve efficiency by leaning on this technology, it's also true that many companies with AI ambitions may be investing capital in the wrong places. Accordingly, deciphering which companies truly will gain an edge from their AI ambitions, and which are wasting capital, is going to be an important factor investors are likely to hone in on in the coming quarters.
The three companies on this list are each AI beneficiaries I think have plenty to gain from the rise of AI. These companies support the AI revolution, and are seeing this trend flow through to their top and bottom lines as we speak.
Without further ado, let's dive in!
Key Points About This Article:
- The rise of artificial intelligence technology is likely to create a bifurcated market, with some companies benefiting disproportionately, and others likely wasting time and resources.
- These three companies are clear winners in the AI mega trend (at least currently), and appear to have plenty of room to ride this wave higher over time.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features a software stock we’re confident has 10X potential.
ASML Holdings (ASML)
ASML Holdings ( NASDAQ:ASML ) is among the leading providers of lithography equipment used in the production of chips. Indeed, for investors looking for a picks and shovels way to play the semiconductor revolution, and in particular the development of new high-performance chips used in the AI race, ASML is a top option to consider.
Delivering EUV lithography equipment to major chip manufacturers involved in the chip production process, ASML plays a vital role in driving forward the sort of innovation many expect from this space. In order for chips to get smaller and more powerful, ASML's consistent capital expenditures in its core technology is going to be critical as more companies shift to making more efficient and powerful semiconductors.
The company's share price of around $800 per share its roughly 33% below analyst forecast price targets for the stock, who still view ASML as a consensus strong buy.
Until demand for the company's high-end chipmaking technology wanes, this is a top stock I think is worth considering on any future dips.
Amazon (AMZN)
Amazon.com ( NASDAQ:AMZN ) has expanded from being viewed as primarily an e-commerce company to much, much more. The logistics giant obviously dominates the world of online retail. But Amazon's AWS cloud division has erupted as one of the largest cloud businesses in the world, enabling incredible cash flow generation which the company has used to invest in other highly-profitable verticals.
One such vertical many investors are watching closely is Amazon's Claude AI. The goal is to integrate this model via a partnership with Anthropic, allowing Amazon to develop in-house AI services. Indeed, the company's focus on developing its own AI chips, foundational models and applications could mean the e-commerce giant becomes even more of a household AI name moving forward. In many respects, I view Amazon as a company with some of the best AI-related upside right now.
Recently, Amazon’s CEO Andy Jassy revealed that the company's generative AI assistant Amazon IQ has dramatically reduced software upgrade times, cutting the average upgrade from 50 developer days to just hours. This efficiency has saved Amazon about 4,500 developer-years of work and generated $260 million in annualized gains. Jassy noted that 79% of AI-generated code reviews required no changes, enhancing security and reducing costs.
If there's one company that can potentially benefit in an outsized way from the rise of AI, one can certainly bet that Amazon will find a way to do so. After all, this company has among the deepest pockets in the space, and can use that army of capital to dominate almost any business it sets its sights on.
Costco (COST)
Last, but certainly not least, we have a rather surprising pick on this list of AI beneficiaries - Costco ( NASDAQ:COST ). Known for its core direct-to-consumer wholesale shopping model, where consumers traverse a vast warehouse-like atmosphere to buy goods in bulk, Costco has built a rock-solid business model that produced a level of cash flow other companies would blush at. Of course, on a standalone basis, this company remains among my top growth stocks to buy (particularly in the grocery space) for this reason.
However, the company's AI possibilities remain relatively undersold or under appreciated by the market, with some analysts suggesting that multiple waves of AI innovation could lead to efficiency gains among stocks that many view as non-AI names. I'd certainly put Costco in this bucket.
The company could integrate AI technology into its product pipeline, its sales process, as well as its tracking abilities for who enters its locations and what products they choose to buy. That could be increasingly important for the retailer which currently maintains razor-thin margins and relies on membership fees for roughly half its profit. This model enables Costco to offer high-quality goods like luxury jewelry at discount prices, setting it apart in the retail sector. The company’s efficient inventory turnover and strong customer loyalty, evidenced by over 90% membership renewal rate s, support its competitive edge. With inflation easing, Costco saw a 6.5% increase in comparable store sales for the fiscal third quarter, with July sales accelerating to 7.2%.
With Costco, another company with very deep pockets, I think there's plenty to come in future quarters in the form of AI innovation. I don't know how such innovation will inevitably roll out. But this is a stock I think is a buy regardless of this trend, and that's why COST stock made it to this list.
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