These six stocks offer exposure to the astounding growth of ChatGPT and the expanded use of AI.
OpenAI does not trade publicly, making it difficult for investors to directly buy into ChatGPT’s growth. However, everyday investors have several ways to get indirect exposure to ChatGPT.
OpenAI’s large language model ChatGPT has changed the conversation around artificial intelligence, or AI, offering a glimpse into how far the technology has advanced. The fast-growing ChatGPT platform uses natural language processing to help users access relevant information based on text prompts. Instead of users having to scroll through several pages of search results on Google, ChatGPT provides an instant answer.
ChatGPT doesn’t stop at providing relevant information. Consumers can use the AI tool to create movie plots, fix lines of code and produce meal plans. Studies show that employees can use ChatGPT to perform their jobs more effectively, increase productivity and streamline mundane tasks.
The innovative AI tool also has the potential to improve people’s health. Health care companies can use ChatGPT to provide clear guidance and more effective communication between patients and health care professionals. Some AI tools can even detect diseases during their early stages and conduct robot-assisted surgeries.
Educators may also benefit from using the tool. Khan Academy recently rolled out Khanmigo, which acts as a tutor for students and an assistant for teachers. The app doesn’t provide direct answers to students, but it provides resources that can expand their knowledge and help them discover the right answer. Khanmigo relies on ChatGPT to operate smoothly.
How Fast Is the Use of ChatGPT Growing?
ChatGPT’s usefulness and versatility made it the fastest platform to reach the milestone of 100 million monthly active users. It took only about two months from its launch to reach that number, a UBS study in February showed. OpenAI’s site currently gets 1.8 billion monthly visitors, according to data analytics firm Similarweb.
ChatGPT’s rapid growth in a booming industry has attracted the attention of many investors. OpenAI, the company that developed ChatGPT and launched it in late November 2022, has garnered billions of dollars in venture capital. The company does not trade publicly, making it difficult for investors to directly buy into ChatGPT’s growth. Right now, the opportunity for direct exposure is limited to accredited investors and large firms.
How to Invest in ChatGPT Now
However, everyday investors have several ways to get indirect exposure to ChatGPT. Some publicly traded companies have invested billions of dollars in its developer, OpenAI, while others have positioned their businesses to benefit from the growing adoption of ChatGPT and other AI solutions.
There are also investing opportunities with companies whose AI tech has gotten more attention because of the spotlight cast on ChatGPT or their partnerships involving OpenAI.
Here are six stocks that either stand to benefit substantially from ChatGPT’s growth and the incorporation of OpenAI technologies, or to profit from the laser focus on AI chatbots now:
Microsoft Inc. (MSFT)
Software behemoth Microsoft is one of the best stocks available for exposure to OpenAI’s ChatGPT and other language models. The company recently updated its Bing search engine and Edge browser with a built-in language model from OpenAI that is “more powerful than ChatGPT and customized specifically for search,” according to a Microsoft blog post.
Microsoft and OpenAI’s 2019 partnership, which was extended in early 2023 with a multiyear, multibillion-dollar investment from Microsoft, is a collaboration on new Azure AI supercomputing technologies and large language models. The deal made Azure OpenAI’s exclusive cloud provider.
Microsoft had high-single-digit top- and bottom-line growth in the first quarter of 2023 and a profit margin above 30%. MSFT stock is up by 36.3% so far this year as of June 8. On May 23, Jefferies analysts gave MSFT a “strong buy” rating and a $400 price target, giving it strong upside compared with its June 8 closing price of $325.26.
Google uses artificial intelligence to provide visitors with optimal search results based on text prompts. The tech giant recently launched its own natural language processing tool, Bard, which competes with ChatGPT and has gotten plenty of press as a result.
So, does that make Alphabet an anti-ChatGPT play? Not exactly, because Bard isn’t the only reason Google stands to benefit from the AI boom.
Google and its parent company Alphabet have also invested over $300 million in an AI firm founded by former OpenAI researchers called Anthropic, which gives Alphabet a 10% stake in the company. This may not represent a direct investment in ChatGPT, but it is a direct investment in the researchers who helped launch ChatGPT.
Google also formed research unit DeepMind to help develop new applications and enhance AI innovation. There’s a case to be made that at this point in the nascent AI industry, even competitors are learning from and growing with each other.
Jefferies analyst Brent Thill gave Alphabet’s stock a “buy” rating and raised his price target from $130 to $150 on May 23. GOOG stock closed at $122.67 on June 8 and is up by 38.3% in 2023.
JPMorgan Chase & Co. (JPM)
The big bank is working on its own version of ChatGPT to reduce costs and give clients another reason to use JPMorgan instead of its competitors. Dubbed IndexGPT, JPMorgan’s artificial intelligence chatbot will help people select assets and can potentially offer an alternative to financial advisors. JPMorgan aims to save money on fees and streamline the client experience.
All the media attention on ChatGPT has pulled IndexGPT front and center, and JPMorgan’s trademark application for the financial “clone” of ChatGPT on May 11 certainly drew headlines. The filing with the U.S. Patent and Trademark Office indicated that IndexGPT would be used for advertising and marketing services, compiling and updating an index of securities values, and investment consulting.
JPMorgan’s entrance to AI remains speculative, but the company has enough financial clout to create a robust generative pre-trained transformer, or GPT. While waiting for IndexGPT to emerge, investors can enjoy a forward dividend yield of 2.8% and a profit margin above 30%. Morgan Stanley rated JPMorgan as a “strong buy” on May 23, giving JPM a $160 price target. This target implies a 13.7% upside from the stock’s closing price of $140.73 on June 8.
Nvidia Corp. (NVDA)
Nvidia is a dominant force in the AI industry that recently hit a $1 trillion market capitalization. The company has a higher valuation than most of its peers, with a price-earnings ratio, or P/E, of 200. While the valuation may be a concern, growth isn’t a problem. Leadership at the company projects total revenue in the second quarter will reach $11 billion. This guidance caused the stock to soar recently, as it was well above the widely held expectation of $7.2 billion in revenue for the quarter. That represents 60% year-over-year revenue growth compared to the second quarter of 2022, and profit margins have also been growing.
Nvidia is riding the AI wave because AI applications need Nvidia’s AI-specific chips to function effectively and work at high speeds. They’re also the bedrock for ChatGPT. OpenAI used thousands of Nvidia graphics processing units, or GPUs, to train ChatGPT, according to a Microsoft blog post.
OpenAI will have to obtain more Nvidia GPUs to fulfill the rising demand for ChatGPT, and other AI tools may latch onto Nvidia as well. The chip company has a firm grasp on the GPU market, a special type of chip that ChatGPT and other AI tools need to function. As ChatGPT and other tools become more popular, the companies creating and maintaining those AI tools will have to purchase additional chips from Nvidia for their data centers.
UBS rated NVDA stock a “strong buy” on May 25, with a $475 price target. NVDA shares closed at $385.10 on June 8 after a huge run-up from this time last year. Nvidia stock is up 163.6% year to date.
Palantir Technologies Inc. (PLTR)
Palantir is a $32 billion software company that was using AI long before ChatGPT became mainstream. The firm’s chatbots and big data analytics have attracted interest from multiple governments that want to make better decisions for their militaries.
Palantir is making enhancements to its chatbots to give guidance to business owners. This shift allows Palantir to serve more companies and business verticals instead of relying on government business. Granted, the governments that use the technology tend to stick around, due to the difficulty of switching to another resource.
Palantir’s share price has more than doubled since the first week of May as more people and organizations incorporate chatbots into their businesses. Palantir has respectable double-digit revenue growth and strong earnings that have more than doubled year over year. It has suddenly become a profitable company with rapidly expanding margins.
Most analysts set their price targets before the recent May surge, and while some aren’t confident about the stock’s current price, the company can make ground if the strong earnings continue.
Shopify Inc. (SHOP)
Shopify is a hyper-growth e-commerce company that uses ChatGPT for customer communication. The “shop assistant” can answer questions for potential customers and help increase the number of people who use the platform. Current clients can also use Shopify’s solution to better serve their own prospects and increase sales.
The company has returned to profitability after a successful round of cost-cutting initiatives, recently reporting 25% year-over-year revenue growth. Loop Capital recently maintained a “hold” rating on the stock but raised its price target from $60 to $69, which implies a 16.4% upside to its June 8 closing price of $59.28. The stock has been on a tear, having already jumped 70.8% year to date after a challenging 2022.
Original Article: https://money.usnews.com/investing/articles/can-you-invest-in-chatgpt-and-openai
