Artificial Intelligence, Real Returns: Profiting From the AI Revolution

Tech companies like Shopify Inc (TSX:SHOP) are profiting from the AI revolution.

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Artificial intelligence (AI) is the next frontier in technology. Promising to streamline tasks and transform entire industries, it could become a trillion-dollar market. Ever since the launch of ChatGPT in 2022, AI has been making headlines in a big way. In fact, AI hype has gotten so big that some of the world’s tech biggest tech companies are clamouring to get in on the action. These include the following:

  • Microsoft, which invested $13 billion in ChatGPT developers OpenAI and built an AI chatbot into its Bing search engine.
  • Google (NASDAQ:GOOG), one of the early pioneers in large language model (LLM) research, which ultimately led to the invention of apps like ChatGPT.
  • Meta Platforms, which released a 100% free-to-use LLM, LLaMA.

Many of these companies’ shares moved noticeably when their AI efforts were announced. Google suffered a major crash when its LLM made an error at a conference, while Microsoft rallied on news that it was including GPT in its search engine.

The question is, “How do investors get a piece of the action?” Many of the stocks mentioned above have gotten expensive because of their AI efforts. That is to say, some of the future profits accruing from AI have already been “priced in” to their shares. It’s not easy to profit off AI today, as everybody is betting on it already. In this article, I will share some ideas on how to profit from the AI revolution at this late stage in the game.

How to find “under-the-radar” AI stocks

One of the best ways to make money off AI is to find companies investing in the technology that aren’t yet getting a ton of publicity for it. I saw this happen firsthand earlier this year, when I was holding Google stock. Many people saw Google as an “AI loser” at that time, because Microsoft had just incorporated AI into Bing. The idea was that the new ChatBot would take Bing from irrelevant to a Google killer overnight.

I figured the claims of Google’s death were greatly exaggerated and was rewarded when the company’s own ChatBot launch showed impressive results. Since then, GOOG stock has risen to approach new all-time highs.

One Canadian company doing big things in AI

If you’re looking to invest in Canadian stocks that are doing big things in AI, you can consider Shopify (TSX:SHOP). Shopify is one of Canada’s fastest-growing, large-cap companies. It grew its revenue 26% in its most recent quarter and delivered $276 million in free cash flow, up from negative cash flows in the prior-year quarter.

Shopify’s main AI claim to fame is using LLMs to craft product descriptions for customers. After entering a few simple bullet points about their product into a text input box, customers can have SHOP’s AI write a conversion-optimized description. Features like this are already proving popular with Google’s advertisers and others who have used them. They could deliver real business improvements for Shopify’s clients.

Foolish takeaway

AI is the next frontier in technology. Promising to disrupt entire industries, it presents many new opportunities, and new risks as well. Investors who intelligently bet on this revolutionary new technology will likely be rewarded in the future. Who knows who Canada’s big AI winner will ultimately be? However, Shopify is as good a candidate as any.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Andrew Button has positions in Alphabet. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Alphabet, Meta Platforms, and Microsoft. The Motley Fool has a disclosure policy.

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