Chatbot Space Race: AI Stocks to Watch

ChatGPT is inciting fear and sparking inspiration just about everywhere you look. Figures like Elon Musk can’t seem to make up their minds on the subject, openly signing a letter calling for artificial intelligence labs to completely cease AI training for a minimum of 6 months, while at the same time reportedly to be assembling a team of AI experts to create a substitute for ChatGPT. I suppose as is often the case with enigmatic and eccentric leaders, their contradictions may only make sense within their own heads. Will we see an Elon Musk AI chatbot emerging from the depths of an underground bunker any time soon? Who knows.

However, despite the call for an AI slowdown from Turing Prize winners such as Yoshua Bengio and Apple Co-founder Steve Wozniak, the AI space race is very much on with players like Bloomberg even developing their own AI chatbots. In this article, we will discuss the biggest and brightest in the artificial intelligence chatbot space and the AI stocks that go with them. Traders should note that this article does not constitute as investment advice in any way and is purely educational.

The Biggest

It comes as no surprise to anyone that the biggest players in this AI space race are Microsoft and Google (Alphabet Inc.). I suppose the question remains, in the analogy of the space race, who is the United States and who is the Soviet Union? Only time will tell, but here are how the biggest names entering the chatbot space (pun intended) are faring right now.

Microsoft

Starting with perhaps the most significant mover in the AI and search engine space right now, Microsoft is making big plays with an incredibly deep chequebook at the ready. Microsoft’s ‘Bing’ search engine has always paled in comparison and struggled to keep pace with the enormous looming shadow of the 84% search engine market share Google has enjoyed unchallenged for some time now. However, it seems that Kevin Scott, CTO at Microsoft, is putting his money where his mouth is when it comes to his endorsement of AI and its potential applications. “I think with some confidence I can say that 2023 is going to be the most exciting year that the AI community has ever had,” says Scott. The $10 billion dollar investment from Microsoft into OpenAI certainly does a lot to ratify the general company consensus on the budding technology.

OpenAI's funding is boosted by its investment in OpenAl, which provides cloud computing power to enhance its models. Each OpenAI query costs approximately 0.36, making this investment critical. Microsoft benefits from this investment by integrating ChatGPT technology into its products, such as the new Bing chatbot, Teams, and the rest of the Office lineup. By being an early adopter, Microsoft's Bing gained a competitive advantage over Google's search engine. However, the implementation of chatbot technology has not been without its challenges for Google either.

Alphabet Inc.

Although Alphabet's search engine, Google, has enjoyed market share dominance for many years to maintain its competitive edge, the company must adopt AI technology swiftly. Despite its recent layoffs of 12,000 employees, Google has made progress with the release of its ChatGPT competitor, Bard. Regrettably, the chatbot encountered issues during its initial launch, making an error during its first demonstration. Furthermore, research indicates that Bard can generate misinformation on eight out of ten topics with the right prompts.

Bard operates on Google's LaMDA, the company's Language Model for Dialogue Applications, which has been under development since at least 2021. In light of the recent successes of ChatGPT and even Bing, it is imperative for Google to stay ahead in the AI game. The company also plans to release its Generative Language API for developers soon, further enhancing the field of AI programming. Google heavily relies on artificial intelligence across its business, from spam email filtering to enhancing its YouTube algorithms. The company also owns DeepMind, which is expected to launch its own ChatGPT competitor later this year. Although it is unlikely that the search engine giant will be left in the dust, the recent AI implementation issues underscore the need for continued innovation and improvement for long term success against more fierce competition – even from smaller companies.

The Brightest?

Amongst the larger players, Baidu, C3.ai, and Nvidia may offer some of the most promising AI chatbot prospects right now, with the potential to revolutionize the way businesses interact with their customers. These companies are leveraging their expertise in artificial intelligence and machine learning to create powerful chatbots that can automate customer support, sales, and marketing processes.

Baidu

We have written about Baidu before, and for good reason. While Google dominates the general search engine space Baidu is a major player in the Chinese search market, with a dominant share of over 75%. In addition to its growing cloud business, the company has invested heavily in research on AI-based autonomous driving, with plans to launch "the world's largest autonomous ride-hailing service area" in 2023.

Baidu has also allocated significant resources towards developing a new chatbot service, Ernie, which aims to compete with ChatGPT. However, the initial demonstration of Ernie was pre-recorded, which caused disappointment among users and analysts worldwide, leading to a 10% drop in Baidu's stock. Nevertheless, the company bounced back the next day when it announced that 30,000 businesses had already signed up to test the service.

Nvidia

Nvidia may be a bit of a hidden gem in the AI market. Well, not really. Hardly hidden but a well-regarded and respected chipmaker that produces high-end chips enabling computers and TVs to stream media content and provide financial news. However, Nvidia's chips are also capable of powering the future of artificial intelligence. Its specialized deep-learning chips are already in use across various industries, including healthcare, finance, and social media. Major tech firms such as Meta and Google use Nvidia's GPUs to power both internal and client-facing AI applications.

With the rising number of AI-related initiatives, the demand for specialized processors is expected to increase. It is often said that those who profit the most in a gold rush are the ones that sell the picks and shovels. Nvidia is in the shovel business, providing the necessary tools for companies to develop and deploy AI technologies. All these developments make Nvidia perhaps not the first company you would think of when it comes to AI but may find implementation of these technologies see untapped market value be realised as a result.

C3.ai

C3.ai provides tailor-made AI solutions for businesses across various sectors, making it a potentially attractive and viable alternative to mainstream AI options for traders. The company's AI software suite has the capability to perform tasks such as forecasting supply chain demand, detecting fraud, and monitoring network health. This is achievable due to its specialized AI technology, which focuses on pattern recognition and predictive monitoring abilities.

Major players in the tech industry, including Amazon and Google, have already adopted C3.ai's services to bolster their cloud offerings. In addition, Shell has integrated more than 100 AI applications from C3.ai into production annually. However, despite all this C3.ai continues to experience volatility in the markets bouncing between $30 and $20 valuations over the course of March and April so far in 2023. Volatility can equate to opportunity, but traders are advised to always exercise caution when risking capital on any trades and conduct their own research before opening positions.