A dozen or so companies are well-positioned to reap big profits from the burgeoning market for artificial intelligence (AI), Barron's reports. Among these companies are: semiconductor manufacturers Micron Technology Inc. (MU) and Nvidia Corp. (NVDA); Google parent Alphabet Inc. (GOOGL); database management software developer Oracle Corp. (ORCL); online merchant and cloud-computing leader Amazon.com Inc. (AMZN); computer hardware manufacturer and business solutions provider International Business Machines Corp. (IBM); video streaming service Netflix Inc. (NFLX); and U.K.-based business process automation software developer Blue Prism Group PLC (PRISM.UK).
Deep Blue to DeepMind
In 1997, IBM scored a major milestone in AI history when its Deep Blue program beat reigning world chess champion Gary Kasparov, still considered by many experts to be the best player of all time. IBM's Watson question answering system passed a high-profile test in 2011, beating two top former champs on Jeopardy!, the long-running quiz show on TV. Since then, Watson has been rolled out for general commercial use, most notably to aid doctors in making diagnoses.
Alphabet's DeepMind division has taken on the challenge of developing a program to play the ancient Chinese board game called Go, which is considered to be even more complex than chess. In 2016, the DeepMind program beat a human international champ. Last month, a refined version of this program defeated the 2016 release in each of 100 games, Barron's reports. Alphabet already is adapting the machine learning technology demonstrated by their Go-playing program to other tasks, such as the development of drugs, Barron's notes.
The Innards of AI
AI applications require advanced hardware that facilitates speedy processing. Chips from Nvidia already are the preferred choice for running machine learning software, while Micron manufactures fast memory chips that are well-suited to these applications, Barron's indicates. Meanwhile, since many AI applications are likely to be run over the internet, cloud-computing providers such as IBM and Amazon are likely beneficiaries, Barron's adds. (For more, see also: Microsoft Cloud Sales Show It's Catching Up With Amazon.)
Exploiting AI Internally
Several of the aforementioned companies are using AI to enhance their own core businesses. Improving the quality of search results, including customizing them to match the perceived needs and preferences of the individual user, are applications of AI used by Google, Amazon and Netflix alike. In the cases of Amazon and Netflix, these companies use past buying and browsing behavior to anticipate what the customer may want next, and to customize suggestions accordingly. Amazon's chatbox Alexa is a particularly notable application of AI, according to Ken Sena, a Wells Fargo & Co. (WFC) analyst who focuses on AI, per Barron's.
Robotic Process Automation
One application of AI is to let computers apply well-defined rules to predictable inputs, as Barron's describes robotic process automation. IBM and Blue Prism already are big players in the automation of routine white collar functions. Oracle is both making a push into cloud services and developing "the world's first fully autonomous database cloud service," replacing human database administrators with an AI-driven program. Outsourcing companies located in low-cost countries are most at risk from such developments, Barron's indicates, especially in areas such as IT support and transaction processing. (For more, see also: Oracle's Cloud Strategy to Beat Amazon, Microsoft.)
Ken Sena expects total AI revenue over the next decade roughly to equal the current size of U.S. GDP. Other analysts are projecting that world GDP will increase by a similar amount by the year 2030, as the result of advances in AI. (For more, see also: How Google, Facebook, Amazon Will Ride The AI Wave.)