Artificial Intelligence, or AI, should not be considered the “next big thing” in the tech sector, because that sentiment may significantly undermine its true potential. AI is more than just a buzzword in the stock market. It’s a compelling phenomenon driving many tangible changes in the world and may continue to do so in unprecedented ways and on an unprecedented scale.
One of the ways it may impact the stock market is by rapidly accelerating the growth of tech stocks that are leveraging AI the right way. Some might as well be called AI stocks now, considering how much their business model is evolving around the AI stack. This kind of growth can take at least some of these companies to the elitist pool in the stock market — i.e., the trillion-dollar giants.
An American AI stock
The U.S. already has multiple trillion-dollar companies, at least three of which are riding the AI wave spectacularly, and there are several new contenders in the wings, including Adobe (NASDAQ: ADBE). Adobe is already a well-known tech giant that still dominates the graphical content-creation space. Adobe Photoshop, InDesign, and Illustrator were the three most extensively used graphics software in 2023.
Adobe has been experimenting with AI for quite some time now, and in addition to some AI-based features, it has launched two full AI-powered products, Adobe Sensei and Adobe Firefly, both based on generative AI. Since it already dominates the market and millions of professionals are familiar with its products, it’s well positioned to dominate the graphics arena of new AI products.
Currently, the company has a market capitalization of about US$ 266.9 billion, and even though its growth in the last five years has been a bit inconsistent, the pace has been quite decent. If its AI tools experience an adaptation surge similar to or at least proportional to tools like ChatGPT, it may easily hit the market value of a trillion dollars in the next few years.
A Canadian AI stock
Calling Shopify (TSX: SHOP) an AI stock may seem like a stretch right now, but considering how rapidly AI-based tools and features are growing in the Shopify ecosystem, it’s not too far from the truth. The company has introduced its own AI assistant (called Sidekick), specializing in e-commerce and designed to assist entrepreneurs around the globe.
The success of this tool and other AI integrations and tools that may make it easier for entrepreneurs to start and manage their e-commerce businesses can forge the path for Shopify’s new era of success, possibly leading to a market valuation of $1 trillion. It’s already at around $137 billion.
Shopify is already on the recovery track after the great fall that started at the end of 2021 and eroded over 80% of the company’s value. But the stock is recovering and growing at a powerful pace and has risen over 118% in the last 12 months alone.
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Foolish takeaway
Buying AI stocks is a good investment strategy, but not all AI stocks may be on a long-term and sustainable growth track. It’s important to learn to separate AI companies that are simply exploding because of market sentiment and those that may have solid fundamentals and breakthrough AI products already in the market or in the pipeline to sustain long-term growth.
