Artificial intelligence (AI) has become the hottest trend in the tech sphere, and investors aren’t hesitant about spending big money to get into the game.
Just take a look at Mistral AI, a French startup founded last month by former AI researchers from Google DeepMind and Meta Platforms Inc. Even though the company hasn’t developed its first product yet, it has already raised €105 million ($113 million) in its seed round.
Sources close to the company said that the first funding round gives Mistral AI a valuation of €240 million ($260 million), the Financial Times reported.
Mistral AI Co-Founder and CEO Arthur Mensch said in a LinkedIn post that this financing round will give the company “the resources and network we need to start rolling out a new model of generative artificial intelligence, combining scientific excellence, an open-source approach and a socially responsible vision of technology.”
Mensch also noted the support of “a consortium of top-tier international investors.”
Mistral AI’s financing round was led by venture capital firm Lightspeed Venture Partners. French public sector investment bank Bpifrance and former Google CEO Eric Schmidt are also shareholders of the company.
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But you don’t have to be a big investor to get in the game. Several publicly traded companies have already launched popular products in the AI arena. Here’s a look at three of them — Wall Street also sees upside in this trio.
Microsoft Corp. MSFT
It’s hard to discuss AI stocks without mentioning Microsoft these days. The company has made notable investments in OpenAI, whose chatbot ChatGPT has taken the internet by storm.
During the company’s latest earnings conference call, Microsoft CEO Satya Nadella said, “The age of AI is upon us, and Microsoft is powering it.”
Indeed, Microsoft Azure — the software giant’s cloud computing arm — is OpenAI’s exclusive cloud provider.
Nadella said that Microsoft will deploy OpenAI’s models across its consumer and enterprise products.
Microsoft shares have climbed 43% in 2023, bringing the company’s market cap to $2.56 trillion.
Mizuho analyst Gregg Moskowitz has a Buy rating on Microsoft and a price target of $360, implying a further upside of 5%.
Alphabet Inc. GOOGL
As the parent company of Google, Alphabet Inc. was created in 2015 to give Google’s wild ideas some room to play. The company boasts a vast array of ventures, from dominating the search engine market to dabbling in self-driving cars and life sciences.
Commanding a market cap of over $1.5 trillion, Alphabet is another tech behemoth. But the stock can still be volatile. Shares plunged 39% in 2022 but have surged 38% so far in 2023.
Some consider the increasing popularity of ChatGPT a threat to Alphabet's business. But Alphabet is not standing still — the company is also advancing its own AI products.
“In March, we introduced our experimental conversational AI service called Bard,” Alphabet CEO Sundar Pichai said in an earnings conference call in April. “We've since added our PaLM model to make it even more powerful, and Bard can now help people with programming and software development tasks, including code generation.”
Morgan Stanley analyst Brian Nowak has an Overweight rating on Alphabet and a price target of $140 — around 14% above where the stock currently sits.
Nvidia Corp. NVDA
One of the biggest beneficiaries of investors’ increasing enthusiasm for AI today is Nvidia.
Shares of the chip-making giant have surged 200% so far this year, allowing the company to cross $1 trillion in market cap.
In the latest earnings report, Nvidia Founder and CEO Jensen Huang said that the computer industry “is going through two simultaneous transitions — accelerated computing and generative AI.”
And that is presenting a major opportunity for the company.
“A trillion dollars of installed global data center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI into every product, service and business process,” Huang said.
Nvidia is well-positioned to capitalize on the AI boom.
“Our entire data center family of products — H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU — is in production. We are significantly increasing our supply to meet surging demand for them,” Huang added.
Bank of America Securities analyst Vivek Arya has a Buy rating on Nvidia and a price target of $500. Considering that Nvidia trades at $430 today, the price target implies a potential upside of 16%.
A Fast-Changing Industry
The AI industry is a rapidly evolving landscape, with both established tech giants and nimble startups vying for dominance. As new breakthroughs and disruptive technologies continuously emerge, it can be challenging to predict who the ultimate winners will be. That uncertainty also means AI stocks can be susceptible to substantial volatility.
If you prefer a bit less uncertainty in your portfolio, you might want to look into reliable income plays — both in and outside the stock market.
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