In a recent podcast episode, we explored the impact of AI on our future and had the opportunity to speak with futurist author Bernard Marr about the potential opportunities in this field.
As AI takes center stage in the news, let's take a closer look at three businesses across different sectors that could benefit from this evolving technology.
Before we proceed, it's important to note that this article does not provide personal advice. If you're uncertain about an investment, seek professional advice. Investments and their returns can fluctuate, and there's a possibility of receiving less than what you initially invested. Past performance is not indicative of future results, so it's important to consider multiple factors rather than relying solely on ratios.
Investing in individual companies carries risks. If a company fails, there's a chance of losing your entire investment. If this level of risk is not suitable for you, investing in a single company may not be the best option. It's crucial to thoroughly understand the companies you invest in and their associated risks. Additionally, ensure that any shares you own are part of a diversified portfolio.
Darktrace, a newcomer to the public markets, has AI at the core of its business model. It utilizes AI technologies to help businesses combat cybersecurity threats. With the increasing importance of robust cybersecurity, the market for such services has reached $200 billion, and demand is expected to rise. Darktrace's annual recurring revenue is projected to grow by approximately 30%, although short-term headwinds may impact new customer additions. The company's self-learning AI platform, which detects and responds to threats in real-time, generates 99% of its revenue through subscriptions, creating a stable revenue stream.
Nvidia, a prominent player in the chip industry, has been a major beneficiary of the AI revolution. Its shares have more than doubled in 2023. Nvidia's chips, traditionally used for gaming, have found a lucrative new application in powering AI and machine learning systems. The demand for AI tasks has made these specialized chips 10 to 20 times more expensive than those used for traditional purposes. Industry giants like Amazon, Microsoft, and Meta rely on Nvidia's latest chips to drive their AI infrastructure. Nvidia's significant lead over competitors positions it to potentially capture a 90% market share in this segment by 2024. However, the company's valuation, currently at 48 times forecasted earnings, is above its long-term average, indicating potential volatility.
RELX, a provider of essential data solutions, plays a vital role in various industries such as finance, insurance, law, and academia. AI integration has been a part of RELX's operations for some time, but as AI becomes more powerful, the quality of the underlying data becomes crucial. RELX possesses vast proprietary data sets derived from both public and internal sources, giving it a competitive edge. This advantage allows RELX to offer cutting-edge products as AI and machine learning continue to advance. The company's stable revenue streams, including a significant portion from recurring subscription models, contribute to its appeal. However, the valuation is currently above its longer-term average, at 21 times forecasted earnings, which adds pressure on the company to consistently deliver.
Please note that these assessments are not personalized financial advice, and it's important to conduct thorough research and consider your individual circumstances before making any investment decisions.