In the midst of the ongoing pandemic, several companies are working to further develop their artificial intelligence technologies, known as AI, to aid in a variety of different fields. These companies include Nvidia Corp. (NASDAQ:NVDA), Salesforce.com Inc. (NYSE:CRM), Amazon.com Inc. (NASDAQ:AMZN), Twilio Inc. (NYSE:TWLO) and Tencent Holdings Ltd. (TCEHY).
Through the pandemic, companies have rapidly moved their employees to remote work to avoid contact and reduce the spread of the virus. This move has spurred on the development of AI technologies as an aid to human workers. The pursuit of AI technology covers a wide range of applications, from deep data analytics to more effective agriculture. While the AI of science fiction movies is yet to be seen, the technology has progressed in leaps and bounds in recent years.
AI spending on the rise
A recent forecast from International Data Corp. (IDC) predicts that global spending on AI technology will rise from $38.4 billion in 2019 to $96.3 by 2023. This massive increase in spending will allow companies with their foot in the door to maximize the impact that their existing technologies have and further progress their initiatives. Alongside the progression of AI, these companies have the potential to see existing growth numbers expand at untold levels.
Nvidia is a leading designer of graphics processing units that enhance the experience on computing platforms. The firm’s chips are used in a variety of end markets, including high-end PCs for gaming, data centers and automotive infotainment systems.
In recent years, the firm has broadened its focus from traditional PC graphics applications such as gaming to more complex opportunities, including artificial intelligence and autonomous driving, which leverage the high-performance capabilities of the company’s graphics processing units. Nvidia’s existing technology is also being put to use across the fields of meteorology and manufacturing to aid in severe weather detection and building custom vehicles.
As of June 23, the company’s stock was trading well above its intrinsic value according to the Peter Lynch chart.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 1 out of 10. The company currently boasts operating and net margin percentages that beat out at least 94% of competitors. Their return on invested capital significantly outweighs the weighted average cost of capital, indicating stable growth moving into the future.
Salesforce.com provides enterprise cloud computing solutions, including Sales Cloud, the company’s main customer relationship management software-as-a-service product. The company also offers Service Cloud for customer support, Marketing Cloud for digital marketing campaigns, Commerce Cloud as an e-commerce engine, the Salesforce Platform, which allows enterprises to build applications, and other solutions, such as MuleSoft for data integration.
Recently Salesforce.com has integrated its AI, named Einstein, into the platform. The technology focues on learning and identifying patterns within businesses. This allows the AI to predict outcomes, recommend next steps and automate workflows. This type of technology allows the company using it to persoanlize client interactions.
June 23 saw Salesforce.com trading at $191.65 per share with a market cap of $172.68 billion. The Peter Lynch chart suggests the stock has been trading above its intrinsic value for many years.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 2 out of 10. The company has seen debt levels fluctuate over the last several years while revenue has increased significantly. It is well into the safe zone based upon an Altman Z-Score of 5.89, but the operating margin of 2.71% places it lower than the competition.
Amazon is among the world’s highest-grossing online retailers, with $281 billion in net sales and roughly $365 billion in estimated physical/digital gross merchandise volume (GMV) in 2019. Online product and digital media sales accounted for 50% of net revenue in 2019, followed by commissions, related fulfillment and shipping fees and other third-party seller services (19%), Amazon Web Services’ cloud computing, storage, database and other offerings (13%), Prime membership fees and other subscription-based services (7%), product sales at Whole Foods and other physical store retail formats (6%) and advertising services and cobranded credit cards (5%).
Amazon Web Services has been pushing for the implementation of AI, specifically deep learning, on the data side of things. This provides the ability for companies to utilize their data more effectively to identify relationships within their data sets. These companies are then able to utilize this type of deep data analysis to further impact their customers.
As of June 23, Amazon was trading at $2,713.82 per share with a market cap of $1.35 trillion. According to the Peter Lynch chart, the stock has been trading above its intrinsic value since 2013.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 1 out of 10. They currently see a severe warning sign of assets growing faster than revenue. In recent years, Amazon has continued to issue high levels of debt, but the cash-to-debt ratio still beats 60.92% of cyclical retail companies.
Twilio is a cPaaS company that allows software developers to integrate messaging and communications functionality into existing or new applications. The firm’s Programmable Communications Cloud addresses several use-cases, including Programmable Voice to make and receive phone calls, Programmable Messaging for SMS and MMS delivery and Programmable Video that allows developers to embed video functionality in mobile and web applications.
Twilio has begun to implement their Autopilot bots based upon AI. These bots examine and learn from pre-existing conversations to work within a company’s business logic. These bots can then be used to automate service conversations with customers. Thanks to the ability to learn from conversations the bots are able to function in any industry.
June 23 saw the company trading at $215.51 with a market cap of $30.29 billion. Currently there is not enough financial data to display a Peter Lynch chart.
GuruFocus gives the company a financial strength ratio of 7 out of 10 and a profitability rank of 3 out of 10. The company’s cash-to-debt ratio of 2.89 is lower than 56.16% of interactive media companies. The weighted average cost of capital significantly outweighs the return on invested capital meaning that value will be destroyed as the company grows.
Tencent is a Chinese internet giant with businesses and investments in a wide variety of internet services and contents. Major services include communication and social networking (Weixin/WeChat and QQ), online PC and mobile games, content (news, videos, music, comics, and literature), utilities (email, app store, mobile security, and mobile browser), the cloud and financial technology. Tencent has an aggregate monthly active user base of over 800 million for QQ and 1 billion for Weixin/WeChat.
Key research areas include machine learning, natural language processing, computer vision and speech recognition. The company believes that its AI technology will have impacts in the medical, agricutlural, industrial and manufacturing fields. Overall, Tencent’s mission with AI is to enhance the quality of human life through internet services.
On June 23, shares were trading at $64.10 with a market cap of $593.70 billion. According to the Peter Lynch chart, the stock was overavalued at the end of 2019.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 3 out of 10. Recent debt levels have decreased the company’s financial strength while the Altman Z-Score of 6.28 indicates they are still completely safe from bankruptcy in the next two years. The operating and net margin percentages place them well above 80% of the industry.
Disclaimer: Author owns no stocks mentioned.
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This article first appeared on GuruFocus.