Amazon (NASDAQ:AMZN) has more skin in the AI game than many people would like to think. Of course, the first thing that would spring to mind is the company’s AWS cloud division. But it’s important to also remember that Amazon has invested $4 billion into a company called Anthropic. Anthropic was founded by former members of OpenAI, Daniela Amodei and Dario Amodei.
If you haven’t heard about it yet, this company is behind an AI model called “Claude.” It is essentially a ChatGPT competitor, and I believe it is leaving OpenAI in the dust. Indeed, this model is much better at coding and understanding humans.
Anthropic’s Claude 3 dominated benchmarks this year, and while OpenAI took the crown back with GPT-4o, I believe we can safely say that Claude 3.5 Sonnet has taken the crown back again. This model features a huge jump in performance. Most impressively, it now has a feature called “Artifacts.” People can build websites, play games, and run code on a separate side window on Claude itself.
I think it is a good idea to see how well this model does when it comes to stock-picking. So, I asked Claude 3.5 to list some stocks it thinks could turn “$1K into $1M.” Here are three it picked.
Recursion Pharmaceuticals (RXRX)
I usually stay away from biotech and startup pharma stocks, but again, these are Claude’s choices. Recursion Pharmaceuticals (NASDAQ:RXRX) is an AI-enabled drug discovery company that’s using technology to revolutionize how we find and develop new medicines. The company has built an impressive pipeline spanning diverse therapeutic areas and has partnerships with leading biopharma players.
Recursion is probably the best-positioned player in the AI drug discovery space, given its unique industrialized approach. CEO Chris Gibson thinks their strategy positions the company to achieve “TechBio escape velocity” in the coming years. This subtle but critical distinction between TechBio and traditional biotech likely drove Nvidia’s (NASDAQ:NVDA) recent $50 million investment.
However, we can’t ignore the risks with this stock. Like any pre-revenue biotech company, Recursion faces daunting cash burn and dilution risks. The stock could face a significant pullback if the market’s enthusiasm for AI cools. That said, based on my analysis of their cutting-edge platform and robust data assets, I see huge potential upside for the stock.
Key catalysts to watch in the second half include Phase 2 readouts for REC-994 in Q3 and REC-2282 in Q4. Positive data could supercharge another surge in its share price. But for now, Recursion remains a high-risk, high-reward bet on the future of drug development. I would only invest if you can afford to lose the money you put into this stock.
Lilium (LILM)
Lilium (NASDAQ:LILM) is developing electric vertical takeoff and landing (eVTOL) aircraft for regional air mobility. I believe Lilium is a high-risk, high-reward play in the eVTOL space that could deliver explosive returns if it executes. The company has a business model targeting the most profitable parts of aviation.
While Lilium currently generates minimal revenue, analysts expect sales to inflect sharply higher starting next year, potentially reaching $5 billion in 2032 if eVTOL adoption goes mainstream. Profitability could arrive by 2027. However, these projections remain highly speculative given the unproven nature of the eVTOL sector.
On the positive side, Lilium has $215 million in cash, which management believes provides sufficient runway to reach commercialization. This cash pile should also allow the company to avoid highly-dilutive funding if they deliver on their milestones. I’d agree with Claude saying this is a buy. But again, that’s only if you can stomach the potential downside risk.
Beam Therapeutics (BEAM)
Beam Therapeutics (NASDAQ:BEAM) is a biotech company developing precision genetic medicines through base editing. The company made progress across its pipeline in Q1 2024, but this speculative stock still has a long way to go. Beam completed dosing for the sentinel cohort in its Phase 1/2 trial of BEAM-101 for severe sickle cell disease and advanced BEAM-302 with CTA clearance in the U.K. for alpha-1 antitrypsin deficiency.
While these are positive steps, Beam is still in its early innings of development, and is burning cash. Revenue declined 69% to just $7.4 million, missing estimates by more than $7 million. Additionally, the company posted a loss of $1.21 per share. However, on the plus side, Beam has a robust balance sheet with $1.1 billion in cash available to fund operations into 2027.
I’m skeptical that this is enough runway, and that Beam’s sales potential is strong enough. I would not rate this a buy with the current level of losses the company is bringing in. Notably, gene editing and related therapies must take off for Beam to succeed. I believe CRISPR Therapeutics (NASDAQ:CRSP) is a much better bet in this speculative space.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
