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Artificial Intelligence (“AI”) has become an integral part of the technology revolution that we have been witnessing over the years on an accelerated shift toward automation to increase efficiency or handle complex data sets and calculations. The COVID-19 pandemic last year gave a push to digital transformation as the world shifted to a remote working model to curb the spread of the virus, in turn, boosting the need for AI. Notably, per a report by SG Analytics, the global market size of AI is estimated to witness a CAGR of 42.2% between 2020 and 2027.

The report mentioned that certain trends will be important to look forward to in 2021. This includes trends like robotic process automation, which allows monotonous tasks to be carried out efficiently in large volumes by AI. Other trends like natural language processing, which teaches computers to understand what is being written or spoken about a process, with the help of a machine learning model, is also becoming important. Notably, this particular trend is rapidly decreasing the need for users to type on a device’s screen, thereby increasing convenience. Meanwhile, the digital transformation has also led to an increased need for cybersecurity in order to better protect important data and information. The report mentioned that AI will assist security departments in organizing a “digital shield to protect data from malicious attacks.” Separately, Internet of Things is another area where AI is set to gain prominence as it helps to monitor "the performance of various interconnected gadgets.”

In fact, per a report by the International Data Corporation (“IDC”), global spending on artificial intelligence is estimated to reach $110 billion in 2024 at a CAGR of 20.1% from 2019 to 2024. Notably, the report mentioned that the main drivers behind the adoption of AI will be delivering a better customer experience and helping employees improve at their jobs. Moreover, the report mentioned that retail and banking are set to spend the most on AI solutions during the forecast period. While the retail industry will focus on improving customer experience through chatbots and recommendation engines, the banking sector will focus on fraud analysis and investigation, among others. Notably, IDC stated that the United States is set to deliver more than half of all the spending on AI during the forecast period.

4 Stocks to Keep an Eye On

AI looks set to continue disrupting the technology sector and in turn, influence the ways in which businesses and users function as it is becoming increasingly present in varied activities that we engage in. From automation to delivering personalized recommendations and chatbots, leading to higher customer satisfaction, AI is becoming indispensable. Hence, this makes it a good time to watch out for companies focused on AI that can make the most of this continued upswing. We have selected four such stocks that carry a Zacks Rank #2 (Buy) or 3 (Hold).

Microsoft Corporation (MSFT Quick Quote MSFT - Free Report) develops, licenses, and supports software, services, devices, and solutions worldwide. Notably, businesses can use the company’s Azure AI platform for the development of AI solutions. Moreover, in 2019, the company invested $1 billion in San Francisco-based research lab OpenAI, for the development of artificial general intelligence. The company also has its own virtual assistant named Cortana. Microsoft currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 8.9% over the past 60 days. The company’s expected earnings growth rate for the current- year is 27.4%.

Alphabet Inc. (GOOGL Quick Quote GOOGL - Free Report) provides online advertising services and operates through Google Services, Google Cloud, and Other Bets segments. Notably, Google has a division dedicated to AI, called Google AI which focuses on research and developing tools to ensure further accessibility of AI. Moreover, the company’s Google Assistant, which uses speech recognition AI, is also becoming increasingly important for users owing to its convenience. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 9.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 16.1%.

Micron Technology, Inc. (MU Quick Quote MU - Free Report) designs, manufactures, and sells memory and storage products worldwide. Notably, the company’s products like high-capacity memory and multichip power packages are used to power AI training and inference engines whether in cloud, or embedded in mobile and edge devices. It currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 11.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 36.4%.

Amazon.com, Inc. (AMZN Quick Quote AMZN - Free Report) engages in the retail sale of consumer products and subscriptions in North America and internationally. Notably, the company has its own AI voice assistant Alexa which brings customers increased convenience. Moreover, the company also has its Amazon Web Services platform which offers tools for businesses in order to create machine learning solutions. Amazon currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 8.4% over the past 60 days. The company’s expected earnings growth rate for the current year is 16.1%.