Artificial intelligence (AI) captured the imagination of investors this year like few other industries. PwC said AI will add $15.7 trillion to the global economy by 203o. Some 45% of all economic gains realized will come from product enhancements driven by AI.
Nvidia (NASDAQ:NVDA) proved to be one of the most popular stocks because its powerful chips easily handle the complex processes AI requires. Shares roared ahead 207% in 2023. And because Meta Platforms (NASDAQ:META) is also using AI to enhance the experience of its massive user base on Facebook, Instagram, and WhatsApp, its shares are 140% higher.
They might have been among the companies investors gravitated towards, but what follows are three more AI stocks to buy before their shares gallop away as well.
Advanced Micro Devices (AMD)
Nvidia may be grabbing headlines, but Advanced Micro Devices (NASDAQ:AMD) offers significant potential in AI chips too. Its Instinct MI300X graphics processing units (GPUs) are set to challenge its rival when the products come out in the fourth quarter. CEO Lisa Su told analysts last quarter that AMD already had “commitments for significant capacity across the entire supply chain” for the new chips.
AMD also saw a seven-fold increase in interest by customers in its AI offerings. Su said, “AI cluster engagements grew by more than seven times” in the quarter “as multiple customers initiated or expanded programs supporting future deployments of Instinct MI250 and MI300 hardware and software at scale.”
That could be because many industry insiders see AMD’s MI300 chip as a superior alternative to Nvidia’s offering. The proof will be in the pudding when it finally comes to market, but there is growing interest in its potential.
The stock could be the better option, too. Nvidia trades at 35 times sales, whereas AMD goes for less than 8. So much potential is priced into Nvidia’s stock already. It’s still a great stock to own, but Advanced Micro Devices could be the real unsung opportunity at the moment.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) isn’t some unknown entity in AI. The company invested $19 billion in ChatGPT developer OpenAI in 2019 and confirmed an additional $10 billion investment in January. The collaboration is transforming the tech giant’s services.
Microsoft integrated ChatGPT into its Bing search engine as it tries to claw market share from Google. Its Microsoft Teams collaboration platform uses ChatGPT to automatically summarize meetings, write out transcripts or take minutes. Arguably, the most exciting application of AI for Microsoft is in its Azure cloud services platform. ChatGPT was integrated into the product, enabling customers to inject AI directly into their own applications.
Azure, of course, is the second largest cloud services provider, with a 22% share of the market. Revenue for the business increased 27% on a currency-adjusted basis in the second quarter. Cloud gross margins grew to 72% as a result.
It’s probably noteworthy to point out that Microsoft is also financially backing AMD’s AI chips. It wants the chipmaker to design the company a dedicated processor for AI applications.
Microsoft’s stock is no slouch this year, with 38% gains. But there remains plenty of AI-enabled growth to come in the quarters and years ahead.
Amazon (AMZN)
If we’re going to talk about AI-driven cloud services, we need to include Amazon (NASDAQ:AMZN) and its No. 1 Amazon Web Services (AWS) unit. While AWS lost share to Azure and Google Cloud, it still dominates with 32% of the market.
AWS has also long been the e-commerce leader’s profit center. Sales soared 12% last quarter to $22.1 billion and generated $5.4 billion in operating income. That is 70% of Amazon’s total operating profits.
CEO Andy Jassy told analysts AI is “going to transform virtually every customer experience that we know.” Yet he also noted machine learning and AI is part of the cloud service’s DNA. It is already driving AWS and has been for several years.
Monetizing it, though, will require applications like Amazon’s Bedrock, an AI model clients can train and customize with their own data. For example, Bedrock lets customers create conversational agents to deliver personalized experiences based on proprietary data. It can then execute actions resulting from its knowledge base.
A number of multinational corporations like 3M (NYSE:MMM) and Travelers (NYSE:TRV) have already deployed Bedrock. Amazon isn’t making money from it yet, but it’s setting the groundwork for the future.
AI, of course, will also inform its core retail operations as well, supplementing the algorithms already in place.
Where analysts focus on slowing e-commerce growth, savvy investors will instead see the bigger picture. Amazon is enabling an AI-enhanced future that will significantly expand its potential going forward.
On the date of publication, Rich Duprey held a long position in MMM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.