Artificial intelligence (AI) is all the rage these days, and given how rapidly the field is advancing, it's probably going to keep being the rage for quite some time -- potentially forever, if the evangelists are to be believed!
While it's a bit tough to predict exactly what changes AI tools will bring about in our society, there are already quite a few businesses that are poised to benefit tremendously, and you've probably heard of some of them already.
Let's examine two such companies to see how AI could power their future returns and help them compete.
Image source: Getty Images.
1. 23andMe
Most people know 23andMe (NASDAQ: ME) as a consumer genetics company that lets them see their ancestry and their disease risk, but it's also one of the healthcare stocks that stand to benefit the most from advances in artificial intelligence.
For those who aren't familiar, the company gets people to pay to have their genes sequenced using its order-by-mail test kits, and then it charges them a monthly fee for access to a series of reports describing their genome. As it gets regulatory approval to issue more reports on critical health risks and genetically linked ways of increasing their well-being, such as by consuming certain foods or avoiding others, subscribers get new and personally relevant genetic information before they can find it anywhere else.
23andMe doesn't yet brand itself as being AI-enabled, but it's already using machine learning to trawl its massive data set of 13 million genotyped customers to predict people's chances of developing conditions like asthma and Hashimoto's disease, among many others. That means as AI becomes more embedded in the healthcare sector, it's already equipped with both the data and workflow to turn new insights into new revenue, which should accelerate its growth. Expect 23andMe to start talking about an AI strategy more explicitly this year.
Wall Street analysts are calling for a price target of around $5.68, on average, which implies that its shares could rise as much as 123% in a year. That makes sense given that management recently raised its full-year revenue guidance for 2023 to a range between $290 million to $300 million due to better-than-expected adoption of its consumer subscription service and new income from its telehealth service. That would top 2022's haul of $271.8 million. But even that gain could be small potatoes in the long run if 23andMe can put AI-based solutions to use.
Its existing set of machine-learning approaches to its genetic data set has enabled the company to compete as a drug developer more effectively than many other biotechs, with management claiming faster times from pre-clinical work to clinical trials, compressed overall development times, and fewer failures along the way. If those capabilities remain true beyond the two immuno-oncology programs it's in clinical trials with right now, it could make 23andMe a biopharma powerhouse stock, both in terms of its in-house pipeline as well as its desirability as a collaborator.
And that'll almost certainly make those who invest today quite pleased, even if it takes a few more years for the positive impact of AI tools to show themselves.
2. Apple
Apple (NASDAQ: AAPL) may sound like an improbable leader in the AI space as the company has long had a reputation for being somewhat of a laggard in the field. In fact, its annual report for 2022 doesn't mention artificial intelligence or machine learning even a single time. But as clunky as Siri, its digital user assistant, may be, there's reason to believe that Apple is already going full-bore on AI, just not in ways that users interact with directly.
In April of 2021, it announced plans to build a massive new campus worth $1 billion in North Carolina and invest $430 billion over the following five years. The North Carolina site is slated to employ a minimum of 3,000 people to work on artificial intelligence and machine learning. Expect Apple to become a quiet AI leader over the next few years as a result.
And while Apple hasn't made anything similar to OpenAI's ChatGPT or Microsoft's Bing, it's already commercializing a few AI-enabled features. Early in 2023, it launched several AI-generated narrations for audiobooks, and it's already using machine learning techniques to understand what's going on in photos that users take with their iPhones. And with more than $7.7 billion in research and development (R&D) expenditures in its first fiscal quarter of 2023 alone, it's unlikely that it'll suffer from a poor reputation in AI for much longer.
Finally, in February of this year, Apple CEO Tim Cook said unambiguously that AI would be one of the company's primary focuses moving forward and that AI would likely impact all of its products and services. That means investors should expect it to start stacking even more profits from the new efficiencies and market opportunities in its future, whether it's in its software subscription products or with its phones or computers. Be on the lookout for more major announcements about AI, as they're sure to come.
10 stocks we like better than 23andMe
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and 23andMe wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of February 8, 2023
Alex Carchidi has positions in Apple. The Motley Fool has positions in and recommends Apple and Microsoft. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
