Five AI stocks in focus amid ChatGPT frenzy

Over the last couple of weeks, the buzzword around the tech world seems to be ChatGPT. From writing code to language translation, from writing blogs to creating animations, ChatGPT appears to be doing everything. And with the chatbot reaching 100 million users in two months, the limelight is on AI stocks.

Microsoft's (MSFT) multi-billion multi-year investment in OpenAI, the creator of ChatGPT, is an attempt to capitalise on the alluring growth prospects in the generative AI market.

Further, OpenAI's efforts to innovate ChatGPT, reflected in the launch of its next-generation chatbot technology called GPT-4 on March 14. The new language model is multi-modal, implying that it accepts not only text but also speech, images, and video as inputs.

Increasing use of machine learning (ML) across various business verticals and rising investments could help propel the generative AI market.

Generative AI push attracts Big Tech

What is generative AI?

Generative AI is based on algorithms that generate new outputs based on the data they have been trained on. Unlike traditional AI systems designed to recognise patterns and make predictions, generative AI creates brand-new content in images, text, audio, computer code, and more.

What are the market prospects?

According to the latest report from Brainy Insights, the global Generative AI market is expected to hit $188.62 billion by 2032, at a CAGR of 36.1 per cent during the forecast period 2023-2032.

Gartner expects 30 per cent of outbound marketing messages from large organisations to be synthetically generated by 2025, up from less than two per cent in 2022.

Be it the rise of ChatGPT, and the talks over the rollout of Alphabet’s BARD, Baidu's ERNIE; the AI space makes for an interesting watch.

Given the recent initiatives, Microsoft, Alphabet, NVIDIA, Micron and Adobe deserve a place in the watchlist for stock market investing enthusiasts closely following this space. Here’s why:

AI stocks that are a must watch

Microsoft (MSFT)

Share Price*: $272.23

YTD Performance*: 13.6 per cent

Microsoft’s strength in cloud computing and expanding Azure clientele holds promise for the stock. Moreover, the company aims to democratise AI or make AI technology universally accessible on its Azure cloud computing platform.

Since 2019, the tech giant has been making investments in OpenAI with an initial investment of $1 billion. Recently, Microsoft invested $3 billion in ChatGPT's startup and is currently in talks to invest an additional $10 billion.

This could be a 'game-changer' as Microsoft could integrate OpenAI capabilities into its business intelligence software and disrupt established industries like internet search. It is expected to help the company lead the race in AI-enabled enterprise use cases.

NVIDIA (NVDA)

Share Price*: $259.00

YTD Performance*: 80.9 per cent

NVIDIA stands to benefit from the AI hype cycle as its A100 AI chip powers the ChatGPT service.

According to New Street Research, NVIDIA takes 95 per cent of the market for graphics processors that can be used for ML.

The A100 is tailored for the kind of ML models that power tools like ChatGPT, Bing AI, or Stable Diffusion. It’s able to simultaneously perform many simple calculations, which is vital for training and using neural network models.

Be it big firms or startups that are working on software like chatbots and image generators would require hundreds or thousands of NVIDIA’s chips, lending the company an edge over its rivals in the semiconductor industry.

Micron Technology (MU)

Share Price*: $57.64

YTD Performance*: 14.4 per cent

— Vijay Valecha is the chief investment officer at Century Financial.