ChatGPT is the elephant in the room in the 2023 stock market. The fastest growing app in history has taken the markets by storm. Ever since ChatGPT wowed the world with its text-generation abilities, investors have been clamouring to buy stocks perceived as “artificial intelligence (AI) leaders.” While you can’t invest in Open AI, the makers of ChatGPT, directly, you can invest in stocks that are leading the charge in AI research. In this article, I will explore three stocks that are rallying in 2023 thanks to their AI investments.
NVIDIA
NVIDIA (NASDAQ:NVDA) is the world’s pre-eminent supplier of chips to the AI industry. The company manufactures the A100 graphics card, which is indispensable for running AI applications. More recently, the company built the H100 card, which it said delivered the best performance metrics of any AI graphics card available.
NVIDIA stock is extremely expensive, but the company says that it expects a large increase in revenue next quarter. For the second quarter, NVDA expects $11 billion in sales, which is a 68% increase from the same quarter a year before. If NVDA hits its sales target, then its stock may rally after the release comes out. However, the stock is very expensive, trading at 42 times sales and 230 times earnings. Personally, I’m sitting this one out, but people are making a lot of money on the stock this year.
Kinaxis
Kinaxis Inc (TSX:KXS) is a Canadian supply chain management technology company. It develops software that helps companies keep track of their inputs, inventory, and customers. Using Kinaxis’ software, companies can accurately track customer purchasing patterns, and always order just the right amount of inventory and never more or less than that.
Kinaxis uses AI in order to facilitate the tracking of inventory and customer purchases, identifying trends in these variables. For example, with AI, KXS can accurately identify the probability of an increase in orders in a particular product category on December 15, and identify how much inventory would be needed to fulfill them. This is a very advanced way of using AI so it should come as no surprise that KXS stock is already up 16% this year.
Shopify
Shopify Inc (TSX:SHOP) is a Canadian e-commerce company that is well known for things unrelated to AI. The company is best known for building a shopping cart service that includes a website, payment processing, and some basic advertising features. Basically, it lets businesses sell their goods and services online without having to build their own websites, or pay Amazon’s exorbitant fees. It’s a business model that has worked well over the years. For most of its history as a public company, Shopify has enjoyed 26% to 90% growth in any given year. In the most recent quarter, sales grew at 26%, and free cash flow was positive.
Shopify only started using AI recently, but the use case it came up with is a promising one. It uses generative AI to help vendors write product descriptions. Business owners are reporting a lot of success using AI this way, so having features that do it built into Shopify may help with the user experience.
