Artificial intelligence (AI) generally involves machines or software that demonstrates some level of humanlike judgment, and it's a technological advancement that will change the world. AI implementation has the power to reshape virtually every industry, including retail, healthcare, mobility, and manufacturing. And it will likely create vast fortunes for some in the process.
For investors hoping to cash in on the trend toward AI, NVIDIA (NVDA 1.64%), Pinterest (PINS 0.37%), and Adobe (ADBE 1.30%) look like smart long-term stock investments. Here's why these are three artificial intelligence stocks to consider adding to your portfolio.
1. NVIDIA: The hardware under the hood
Machine learning is a type of artificial intelligence that uses vast amounts of data to "train" algorithms, with the goal of creating a model (the output of an algorithm) capable of making decisions. Put another way, machine learning is the science of teaching machines to be think for themselves using predetermined instructions. Doing this well is both a time-consuming and a costly process.
Image source: Getty Images.
Fortunately, NVIDIA's AI-focused computer chip designs and software make the process faster and cheaper. The company's best-in-class graphics processing units (GPUs) excel at parallel processing, meaning they can process lots of data very quickly. This makes them well suited for teaching AI algorithms and powering machine learning models. In fact, based on recent performance benchmarks, NVIDIA's A100 GPUs were recognized as the world's fastest commercially available products for both training and inferencing AI processes.
NVIDIA also offers AI software through the NVIDIA GPU Cloud (NGC). These tools are designed to help developers and researchers build and deploy AI applications. For example, the NVIDIA Metropolis platform is used to create smart cities with intelligent traffic flow, and smart factories with automated inspections. Likewise, NVIDIA DRIVE software is designed to support autonomous vehicles, and NVIDIA Isaac helps developers build AI-powered robots.
The company's arsenal of AI solutions has made it a major player in data centers. In fact, every major public cloud provider offers access to NVIDIA GPUs, including Amazon, Alphabet's Google, Microsoft, Alibaba, Baidu, and Tencent. And that wide-scale adoption has supercharged revenue growth in recent years.
| Metric | 2017 | Q3 2021 (TTM) | Change |
|---|---|---|---|
| Revenue | $6.9 billion | $14.7 billion | 113% |
Source: NVIDIA SEC Filings. Note: NVIDIA Q3 2021 ended Oct. 25, 2020. TTM = trailing 12 months.
The impact of AI is still in its early stages. But over time, intelligent machines will play an increasingly important role in our daily lives, and that trend should make NVIDIA a winning long-term investment.
2. Pinterest: The social platform for inspiration
Users turn to Pinterest for just about anything, whether they are looking for a tasty recipe, trendy fashion ideas, or tips on rebuilding a transmission (seriously). Even more impressive, user content and context are the power source behind Pinterest.
Users post and curate visual media (called pins), creating titled collections of assorted content (called boards). These boards provide data regarding each user's tastes, but they also help Pinterest's machine learning algorithms make associations. For instance, if a user saves an image of a blue sundress to a board titled Beach Fashion, that tells the platform that other users searching for summer styles may like that content. It's also an opportunity for marketers to show visually similar apparel in accompanying advertisements, allowing users to move from inspiration to action.
Pinterest does this on a large scale. As of December 2019, the company had 240 billion pins across 5 billion boards. Not surprisingly, Pinterest uses NVIDIA GPUs to power its AI-driven taste graph, which allows the company to find complex patterns across prodigious amounts of data. This in turn helps Pinterest provide users with personalized inspiration.
Moreover, as Pinterest collects more data, the platform becomes even more proficient at helping users find what they're looking for. This is called a network effect, and it's one of the company's core competitive advantages.
In the years ahead, as Pinterest continues to collect data, its AI-powered platform should become increasingly valuable to both users and marketers, making it a big growth driver.
3. Adobe: The digital canvas for creativity
Adobe Sensei is an AI toolset designed to enhance Adobe Creative Cloud and Experience Cloud, and it's powered by NVIDIA's RTX GPUs. As part of the company's growth strategy, Adobe is focused on integrating AI across its various software products, and it has introduced some innovative new features recently.
Image source: Getty Images.
Adobe Creative Cloud -- a suite of software tools and services designed for creative professionals -- includes solutions for photo and video editing, visual effects, graphic design, social-media content creation, and numerous other artistic applications.
Recently, Adobe introduced AI-powered neural filters in Photoshop, allowing artists to make dramatic changes in seconds.
Sensei also makes video editing faster in Adobe Premier Pro, and it simplifies complex visual effects in Adobe After Effects. These tools, and many others, help creative professionals work faster and achieve better results.
Adobe Experience Cloud is a suite of marketing software that can handle analytics, campaign management, and content targeting, among other jobs. In 2020, the company launched Intelligent Services, a suite of Sensei-powered AI tools built to help marketers work more efficiently. These tools predict consumer behavior, allowing marketers to target the right customer with the right content. They also help marketers measure campaign performance, allowing them to tweak content to maximize return on investment.
These are just a few examples of Adobe's ability to innovate and create value for its clients. And given the substantial benefits, it's not surprising that over 90% of creative professionals use Photoshop, or that more marketing firms use Adobe software than products from any other vendor.
If Adobe continues to deliver on its AI-based growth strategy, the company should have a very bright (and profitable) future.
