ChatGPT may have drummed up the market’s excitement for artificial intelligence stocks, but the AI industry itself is much broader than chat bots and large language models. It also includes technologies like intelligent automation, machine learning, self-driving cars, machine vision and more. At its heart, AI is about machines being able to perceive, synthesize and infer information, and provide some sort of output, whether that be a response or an action.
To help identify opportunities in the AI sector, GuruFocus has created the Artificial Intelligence stock comparison table, which includes the AI stocks that count gurus and institutional funds among their investors (according to the latest 13F reports for the fourth quarter of 2022). The stock comparison table is a useful tool that can help compare a list of stocks based on fully customizable criteria; you can read more about it here.
Investors should be aware 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Using this comparison table, I sorted the stocks based on their business predictability ranks, and the top results were Nvidia Corp. (NVDA, Financial), Intuitive Surgical Inc. (ISRG, Financial) and Micron Technology Inc. (MU, Financial). While past results do not guarantee future success, what I like about the more predictable AI stocks is that they have had more than a decade of steady growth in which they have been accumulating data. Ownership of data will likely provide a huge competitive advantage to companies aiming to develop AI technologies, as AI is generally built upon a foundation of machine learning and data analytics.
Nvidia
Nvidia (NVDA, Financial) is primarily known for designing graphics processing units and system on a chip units. It has a strong presence in the mobile computing and automotive markets and is a leader in artificial intelligence and internet of things chip designs.
The company has a GuruFocus business predictability rank of four out of five stars. A total of 18 gurus own the stock as per their most recent 13F reports, including Baillie Gifford (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Philippe Laffont (Trades, Portfolio).
Along with close competitor Advanced Micro Devices (AMD), Nvidia is at the lead of the AI chips race, though one could argue the company has the advantage for now as it controls approximately 80% of the GPU market. GPUs are able to handle the kind of computing required for AI very efficiently, making them preferred for AI applications over CPUs, which can perform a broader range of computing tasks by sacrificing efficiency.
As more technology companies invest in AI, they will need to buy more GPUs, directly benefiting Nvidia as the industry leader. In 2020, GPUs made up less than 3% of data center chips, but due to the higher computing workloads necessary for AI applications, Gartner expects that share to rise to 15% by 2026. Nvidia is taking full advantage of greater market interest in AI by offering the Nvidia AI platform for developers to train deep neural networks with large datasets.
Intuitive Surgical
Intuitive Surgical (ISRG, Financial) is a leading developer and producer of robotic products for minimally invasive surgery. Based in Sunnyvale, California, it is particularly famous for its da Vinci Surgical System platforms, which altogether have performed more than 10 million procedures worldwide.
Intuitive Surgicial’s business predictability rank is four out of five stars. As per their most recent 13F reports, there were 12 gurus who held the stock, with the biggest positions belonging to Fisher, Baillie Gifford (Trades, Portfolio) and the Harbor Capital Appreciation Fund (Trades, Portfolio).
With more than two decades of usage data compiled, Intuitive has a unique opportunity to leverage its data with AI and machine learning to provide insights that may help surgeons learn from low and high complexity cases alike. These efforts could help to improve the da Vinci system by reducing surgical variability and providing better outcomes with fewer errors.
The da Vinci system still has no true competitor, giving it an enormous head start. Intuitive is working toward not only using AI to assist surgeons and improve best practices, but also to eventually train systems to complete general repetitive tasks entirely with AI.
Micron Technology
Micron Technology (MU, Financial) is a semiconductor company that produces a variety of computer memory and data storage products, including DRAM, NAND and NOR. It markets its consumer products under the brand names Crucial and Ballistix.
Micron has a business predictability rank of two and a half out of five stars. The most recent 13F reports show that 24 gurus own the stock, most notably Primecap Management, Li Lu (Trades, Portfolio) and Andreas Halvorsen (Trades, Portfolio).
Unfortunately for Micron’s near-term prospects, the PC market is in a cyclical downturn, and new applications in AI likely will not be able to make up for that for the time being. Micron did recently gain technology leadership for 1alpha process, but again the effects of this on profitability likely will not be realized in 2023.
However, memory is necessary for the vast global technology infrastructures that make artificial intelligence possible. High-performance, high-capacity memory and multi-chip packages are used to power AI training and inference engines, whether it be in the cloud or on mobile or edge devices.
