Even as markets take a brief breather from a record run of gains, most investors are ignoring a hugely profitable trend. Stocks from the artificial intelligence (AI), robotics and machine learning arenas have been providing handsome returns through the year, in several cases significantly superior to the broader market. Tech bellwethers have caught onto this emerging trend and are making massive investments in these areas.
Future demand for the industry is projected to rise exponentially given that a broad spectrum of industries is rapidly integrating such technologies into their core operations. Investing in stocks from the artificial intelligence and robotics domain would allow you to cash in on an exceedingly profitable trend.
AI, Robotics Stocks Well Ahead of Broader Markets
The success of such stocks can be gauged from the performance delivered by the Global X Robotics & Artificial Intelligence ETF BOTZ and the ROBO Global Robotics and Automation Index ETF ROBO . While BOTZ is up 33.9% year to date, ROBO has gained 26% over the same period. In comparison, the S&P 500, the Dow and the Nasdaq are up 10.5%, 11.6% and 18% year to date, significantly behind the performance of these sector focused ETFs.
In fact, a section of analysts believe that these sectors could outperform there larger peers in the long run, even beating the much-vaunted FANG stocks. In fact, Facebook FB , Amazon.com AMZN , Netflix NFLX and Alphabet GOOGL , all of which have gained between 20 to 50% this year, are expanding their footprint in the AI domain. This is why market watchers believe that the robotics-automation-AI trend is likely to be the next FANG-like trading opportunity.
Prospects of a $50-Billion Market Brighten
The idea of artificial intelligence germinated in the 1960s, but only now has it become a lucrative investment proposition. Two catchphrases have caught the imagination of investors and companies at the moment, deep learning networks and machine learning. Both these concepts aim to make successful predictions after mining through large masses of data, a task which several intelligent humans would be incapable of.
It comes as no surprise, therefore, that a Goldman Sachs GS report released in November 2016 claims that companies from sectors as diverse as banking and healthcare are more or less likely to raise their AI expenditure levels. Such investments are essentially being made in pursuit of higher productivity levels which will lead to a smaller workforce. Also in the offing is an elusive strategic edge over competitors, gained from new insights delivered by AI enabled systems and processes.
Such a trend could lead to a massive market for products and services from the artificial intelligence, technology and robotics domains. One estimate from research company Tractica puts revenue from artificial intelligence from AI at $59.8 billion by 2025. If such an optimistic forecast does come true, it would be a quantum leap over 2016's level of a mere $1.4 billion.
Though several of the BOTZ and ROBO components are foreign stocks, several home grown companies are forces to reckon with the in the AI-automation space. With the attention this investing trend is receiving from tech heavyweights, what is now a niche investing theme could soon become a hugely popular investment trend.
Buying stocks from these domains are likely to deliver strong performance, likely well in excess of the broader markets. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.
Brooks Automation, Inc. BRKS delivers automation solutions to the global semiconductor and related industries. In July, the company acquired California-based biological sample storage and cold chain provider Pacific Bio-Material Management for $33 million in cash.
Brooks Automation has a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 6.9% over the last 30 days.
Cognex Corporation CGNX develops, manufactures and markets machine vision systems that are used to automate a wide range of manufacturing processes where vision is required. In May 2017, the company announced it would be buying back $100 million worth of common stock via open market transactions.
Cognex has expected earnings growth of 42.5% for the current year. Its earnings estimate for the current year has improved by 17.3% over the last 30 days. The stock has a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .
Intel Corporation INTC recently launched its new data center platform called Xeon Scalable. The new platform accelerates inference throughput for Artificial Intelligence (AI), High Performance Computing (HPC) and Virtual Reality (VR). Notably, the company has already delivered 500,000 units of Xeon Scalable to over 30 customers.
Additionally, Intel announced that it has been selected by the US Defense Advanced Research Projects Agency (DARPA) to collaborate on developing a powerful new data-handling and computing platform, which will leverage machine learning and other AI techniques.
Intel has a Zacks Rank #2 (Buy). The company has expected earnings growth of 9.5% for the current year. Its earnings estimate for the current year has improved by 4.1% over the last 30 days.
NVIDIA Corporation NVDA and Baidu BIDU recently announced a partnership, wherein the latter will use the former's AI technology in three different areas. This partnership will help Baidu to bring in the best AI technology in its cloud computing services, self-driving vehicles and AI home assistants.
NVIDIA has a Zacks Rank #2. The company has expected earnings growth of 19.9% for the current year. Its earnings estimate for the current year has improved by more than 0.1% over the last 30 days.
Advanced Micro Devices, Inc. 's AMD server GPUs have secured a position on Google's Cloud Platform as well as associated Machine Learning services. Also, AMD has recently launched the Radeon Open Compute project (ROCm), an open source coding language for AI systems.
Additionally, AMD launched its Radeon Vega Frontier Edition processor in June, which it describes as the "world's fastest graphics card for machine learning development". It also claims that this new processor can render graphics 172% faster than any of NVIDIA's best GPUs, which makes the launch a crucial step for its foray into AI.
AMD has a Zacks Rank #2. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by more than 100% over the last 30 days.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Brooks Automation, Inc. (BRKS): Free Stock Analysis Report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Netflix, Inc. (NFLX): Free Stock Analysis Report Baidu, Inc. (BIDU): Free Stock Analysis Report Facebook, Inc. (FB): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis Report Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report Goldman Sachs Group, Inc. (The) (GS): Free Stock Analysis Report ROBO GR&AI (ROBO): ETF Research Reports Intel Corporation (INTC): Free Stock Analysis Report NVIDIA Corporation (NVDA): Free Stock Analysis Report Cognex Corporation (CGNX): Free Stock Analysis Report GLBL-X ROB&ART (BOTZ): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research