The upcoming AI wave could present investors with enriching opportunities. Artificial intelligence (AI), a technology gradually evolving for many years, has elevated its status thanks to recent breakthroughs. Generative AI, the technology behind advanced chatbots such as ChatGPT, is gaining mainstream popularity, offering investors a chance to make substantial profits.
The future expansion of AI promises far-reaching impacts and enormous returns. According to Goldman Sachs analysts, the opportunity could be worth $7 trillion by 2030, although other estimates place the figure around $6 trillion. The exact scale of AI’s potential impact remains uncertain, but its significance is indisputable.
Several high-profile Wall Street hedge funds and billionaires are enthusiastically acquiring shares in AI-focused companies, eager to capitalize on the ongoing AI surge. Here are two stocks they are investing heavily in.
Alphabet:
A trailblazer in AI, Bill Ackman, a hedge fund manager and billionaire known for making substantial company investments and pushing for changes, is a prominent figure among activist investors. He runs Pershing Square Capital Management, his hedge fund, which oversees over $10.2 billion in assets.
Recently, Ackman placed a large bet on Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). Pershing procured over 10 million tech giant shares, representing over 10.4% of his highly selective portfolio of just seven companies. The investment is worth over $1.27 billion (as of last Tuesday’s market close).
While Alphabet has a strong history of leveraging AI in its search algorithms, it recently detailed its current AI strategy at its 2023 I/O developer conference, further boosting the stock’s performance. Google disclosed that its latest Pathways Language Model (PaLM) had been intensively trained.
The extensive training of the model in multiple languages and scientific domains allows it to “understand, generate, and translate nuanced text — including idioms, poems, and riddles” and achieve “language proficiency exams at the mastery level.”
Although Google’s commanding presence in search, digital advertising, and cloud infrastructure likely contributed to Ackman’s interest, his significant investment in Alphabet implies a stake in the resurgence of the advertising market and the company’s AI endeavours.
Uber:
Propelling ride-hailing advancement David Tepper, a billionaire hedge fund manager and philanthropist hailed as “one of the most successful investors of his generation,” is the president of Appaloosa Management, a hedge fund he founded. With $1.85 billion in assets under management, Tepper has “consistently outperformed his industry peers and the broader global markets since inception,” as per Carnegie Mellon University.
Appaloosa expanded its investment in Uber Technologies (NYSE: UBER), purchasing an additional 4.8 million shares. The total investment in Uber now stands at 6 million shares, valued at more than $248 million and constituting over 10% of Appaloosa’s portfolio.
While Uber may not be a pure-play AI company, its engagement with AI technology is significant. Its DeepETA AI powers ride-hailing customers’ estimated arrival times and supports various business operations, including driver onboarding, route optimization, fraud detection, and safety protocols.
Uber is also introducing self-driving taxis powered by AI technology, hoping they will constitute a substantial portion of its ride-hailing fleet. The company recently applied for a patent for an AI system to better predict rider behaviour and pair drivers with passengers.
Tepper likely sees Uber’s stock as undervalued considering its dominant market share (74% of the U.S. rideshare market), expanding international opportunities, consistent revenue growth, increasing ride numbers, rising take rates, and growing profitability. The company’s affiliation with AI is possibly an additional benefit.
As AI continues to evolve and establish itself in mainstream consciousness, it offers a lucrative field for investment. Whether it’s Alphabet using AI to enhance its tech dominance or Uber implementing it to optimize its ride-hailing business, the possibilities are boundless. Investors, including top billionaires, recognize these opportunities and make significant moves to capitalize on them. As we navigate the AI revolution, these two stocks garner considerable attention, indicating their potential to yield impressive returns.
