Some huge winners will emerge from the AI revolution, but it may also disrupt large incumbents. How do you invest in an AI beneficiary, not the disrupted? The question is difficult. However, a company's competitive advantages and history of defending them may reveal indications. Today's tech landscape suggests these three businesses are great sleep-at-night AI portfolio additions.
Microsoft Will AI help or hinder Microsoft (NASDAQ: MSFT)? It seems like the former, given the corporation has large moats across its empire and various AI advantages.
Naturally, Microsoft has an exclusivity deal with OpenAI, ChatGPT's parent firm. That smart cooperation has helped Microsoft dominate the AI cloud computing race, with Azure cloud platform growth outpacing its competitors. Microsoft may gain from AI's increased computational intensity for years to come as one of only three big cloud infrastructure players, where most AI processing will occur.
But Microsoft's AI edge goes beyond OpenAI. Microsoft, a leader in corporate software, has decades-old connections with the world's largest companies. Microsoft will likely employ AI to enhance sales and cut expenses over time due to its strong brand and resources to invest in new technology.
Microsoft just launched AI CoPilot for Microsoft 365 for $30 per person per month. Because Microsoft 365 Office has a large corporate moat, such price rise is achievable. In addition to Azure and Office, AI benefits Microsoft's other business areas, each with their own vast moat brands and network effects. AI targeting on LinkedIn and AI natural language code-writing prompts on Github should benefit users.
AI can also impact Microsoft's consumer operations. Microsoft controls Xbox and other game studios, like Activision-Blizzard, where AI may help create and curate content. As AI advances, AI PCs could allow Microsoft to raise Surface laptop prices. Microsoft should dominate AI with its competitive products and services and advanced AI capabilities.
Meta Platforms AI will certainly benefit organizations with large user bases and private data. Meta Platforms (NASDAQ: META) has that with its Facebook and Instagram platforms and is also constructing AI models. AI can present Reels that users are more likely to like in its primary business. Meta may charge more per ad since AI creates and optimizes advertisements, improving marketers' returns on ad expenditure.
Meta also builds huge language AI models under Llama. Interestingly, Meta has made Llama open-source, offering developers the code. That's unusual and distinct from competitors, but it could work. Third parties may help Llama outperform Meta, and the model's openness may attract elite talent.
Like Facebook, Llama doesn't generate much money presently, but other cloud platforms pay Meta to host the model. If Llama is utilized as a baseline model for many future applications, monetization is greater.
Meta, like other IT giants, launched Artemis AI chips. Meta claims running workloads on Artemis with its optimized software will save money and energy, but it will still acquire millions of Nvidia processors.
Meta has also surmounted several obstacles. The mobile shift, Snap, and Bytedance's TikTok are significant threats. Meta has thrived despite these tech challenges thanks to its incumbent status and technological adaptability. Meta, with its increased dividend, is another long-term stock idea.
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