Analysts at Next Move Strategy Consulting expect the global artificial intelligence (AI) market to grow 20-fold to $2 trillion by 2030 as the technology improves and large companies build their offerings. The tech giant Nvidia It is one of the undisputed winners in this megatrend as it supplies the advanced chips needed to power and train AI models.
But investors should also look at other companies tackling different sides of the opportunity. Let’s explore the efforts of Amazon (AMZN 1.84%) And Meta platform (Meta -0.17%) can reward investors handsomely.
First an online bookstore, then a global e-commerce giant, and now a diversified technology — Amazon has a long history of reinventing itself through new business verticals. This trend allowed the company to continue expanding even as its older ventures matured. AI can help power the next phase of long-term growth.
According to Amazon CEO Andy Jassy, generative AI is “the biggest technological transformation of our lifetime.” But instead of chasing the hype of consumer-facing chatbots like ChatGPT (which has begun to see its usage decline), Amazon has focused on substance — providing the background infrastructure needed to support the industry.
To pull off this strategy, Amazon launched Bedrock, an AI model that AWS clients can train and customize with their own data. If successful, the platform could prove to be a valuable tool for numerous start-ups aiming to develop their own AI applications. Amazon’s pick-and-shovel approach to AI complements its enterprise-focused cloud computing business and shields it from some of the competition and uncertainty involved in targeting the consumer side of the opportunity.
Investors should note that Amazon’s AI ambitions are not limited to AWS and enterprise clients. AI technology can also improve other aspects of business such as search functionality, customer support and Alexa (Amazon’s virtual assistant technology). The company appears to be at the beginning of another major transformation.
Like Amazon, Meta Platform is another big tech company looking to reinvent itself as its core business (social media advertising) matures. But while its metaverse ambitions leave a lot to be desired, AI may soon catalyze the company’s transformation.
Facebook changed its name to Meta Platform in 2021, but its efforts to create an immersive virtual world were far from over. Horizon Worlds, its flagship virtual reality (VR) gaming platform, reported 200,000 users by the end of 2022 — well below its original target of 500,000. That said, Meta’s shares rose nearly 150% in 2023 as investors grew more optimistic that AI technology could soon save the day.
Following the launch of OpenAI’s ChatGPT, Meta Platforms began investing heavily in its AI initiatives to improve existing products and services. There’s plenty of low-hanging fruit — for example, imagine text-to-speech photo editing for AI-powered chatbots on Instagram and Facebook or WhatsApp that can converse with users like humans and collect new kinds of data. But Meta also has the potential to use AI to create new revenue streams.
The company is building new AI-related platforms like AudioCraft, which is designed to allow users to create music based on text prompts. These efforts can spur development and diversify the meta’s top line.
Amazon shares trade with a price-to-earnings (P/E) multiple of 42 S&P 500 average of 26, and this probably reflects the company’s blue-chip status and the relative safety of its AI strategy. On the other hand, Meta Platform’s P/E is only 19, which is lower than the market average.
Investors may be concerned about Meta Platform’s Metaverse flop and the weak moat of its AI projects compared to alternatives. That said, the company’s low price tag leaves more upside potential if its efforts are successful, making the stock still look like a buy.
John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of Amazon subsidiary, The Motley Fool. Randy Zuckerberg, former director of market development and Facebook spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Will Ebifung does not have a position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon.com, Meta Platforms and Nvidia. Motley Fool has a disclosure policy.