We have entered the age of generative artificial intelligence (AI), and as a result, machine learning stocks are suddenly much more important. Machine learning is the process by which computers adapt without following explicit instructions. Instead, finding patterns within algorithms and drawing conclusions. In other words, machine learning is a predicate of artificial intelligence and is essentially used synonymously to mean AI.
Both fields have come to the fore in 2023. We are in the early stages of a paradigm shift that makes all things AI and machine learning interesting to investors. Costs should fall drastically, and efficiency should increase with advances in machine learning and AI. In turn, profits should increase — perhaps by leaps and bounds.
Palantir Technologies (PLTR)
Palantir Technologies (NYSE:PLTR) has been one of the biggest winners among machine learning stocks this year. The company posted its first profitable quarter early in the year. Then, it topped expectations in May while simultaneously announcing a push into AI. Then came defense contracts, in part because of its AI push. The company went from a stock that had been counted out to begin 2023 to one of the biggest beneficiaries of AI so far. By the beginning of August, PLTR shares had nearly tripled on a year-to-date basis.
It’s been an impressive turnaround to witness. The firm posted $45 million of net income in the first half of 2023, $28 million of which occurred in Q2. Revenues reached $533 million in the quarter, exceeding the upper end of the guidance range. The success prompted the company to initiate its first-ever stock repurchase program. It’s not too bad for a company that began trading publicly back in 2020. That success has allowed Palantir to raise revenue guidance for the remainder of the year.
Advanced Micro Devices (AMD)
Advanced Micro Devices (NASDAQ:AMD) is the also-ran in the machine learning/AI chip stock battle thus far. Nvidia (NASDAQ:NVDA) is winning simply because it has more powerful chips that benefit from higher demand. Build something better, and customers will want it.
However, AMD should not be counted out, especially regarding machine learning. I’ve mentioned this idea so many times recently that it’s become a case of beating a dead horse, but AMD’s chips aren’t that far behind Nvidia’s — not per a comparison test undertaken by MosiacML, a machine learning-focused firm, anyway.
Q2 earnings were slightly better than anticipated, and revenues came in just above levels Wall Street had predicted. But it was a comment by Chief Executive Officer (CEO) Lisa Su that AI engagement increased more than sevenfold in the quarter, which really matters. That’s a strong signal to the street that firms believe in AMD and its chips as it relates to AI. That’s all investors need at this point to establish a long position in AMD shares.
Snowflake (SNOW)
Snowflake (NYSE:SNOW) is a machine-learning stock that has fallen drastically since the first inklings of inflation issues emerged. It tracks incredibly well: Since November 2021, SNOW shares have dropped from about $400 to $150. It’s one of the best examples of what happens to growth stocks in a rising rate environment.
Snowflake’s revenues continue to experience hypergrowth, but it simply isn’t enough to trump the effects of losses that run into the hundreds of millions of dollars on a quarterly basis. However, market cyclicality is going to favor Snowflake at some point in the future. That point could occur soon, given that interest rates are nearing their high. Anyway, that’s the general bullish narrative favoring Snowflake overall.
Let’s consider machine learning and AI. Remember, Snowflake is essentially a piece of software that grants access to a massive repository of data. Users derive actionable insight from that data, giving Snowflake value. Machine learning and AI will likely increase the quality and quantity of data users derive through Snowflake. Once the company signals that losses are reaching an inflation point, SNOW shares are going to rise very quickly. That point will occur faster with the advances in AI over this year.
On the date of publication, Alex Sirois 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.
