3 Artificial Intelligence Stocks You Shouldn’t Miss

Artificial intelligence (AI) is gradually becoming a big part of our lives. From automatic photo tagging on social networking platforms to scheduling a cab by simply speaking to a virtual assistant, AI has already started making certain tasks easier. Not surprisingly, there's a lot of money to be made in this space and annual worldwide AI revenue will grow to nearly $90 billion by 2025, according to Tractica.

Let's look at three technology companies that are aggressively integrating AI into their offerings to take advantage of this massive opportunity: software giant Microsoft (NASDAQ: MSFT), cybersecurity specialist Palo Alto Networks (NYSE: PANW), and cloud communications company Twilio (NYSE: TWLO).

Microsoft

The battle for AI superiority in the cloud is heating up, and Microsoft is trying to stay ahead of the curve through its mission of democratizing the technology. The company wants to provide software and service support to developers, in the cloud, so that they can create AI applications.

To achieve this goal, Microsoft has created an entire stack of AI tools, services, and infrastructure that help improve the productivity and lower development costs for data scientists and developers. For instance, its recently launched Azure Machine Learning tools are meant to help developers quickly develop, deploy, and experiment with AI models using any type of data at any scale across both public and private cloud infrastructure.

This brings down the development time and costs for creating AI applications, increasing the appeal of Microsoft's Azure cloud platform for enterprise customers who will choose the same to host their AI applications. The bottom line is that Microsoft wants to provide AI-as-a-service through its Azure cloud service, and the good news is that the strategy is already working.

Last quarter, Microsoft's Azure cloud revenue shot up a whopping 90% year over year, easily outpacing the 42% growth in Amazon's Web Services unit. This shouldn't be surprising as the e-commerce giant's Amazon Web Services (AWS) platform has lacked the AI tools that Microsoft has offered. Of course, Amazon is now catching up by rolling out AI services in the cloud, but Microsoft has an early mover advantage.

Analysts estimate that Azure pulled in $1.3 billion in revenue for Microsoft during the last-reported quarter, which translates into an annualized figure of $5.2 billion. Looking ahead, UBS forecasts that Azure's annual revenue could jump to $23 billion over the next five years.

It won't be surprising if Azure hits this ambitious estimate as Microsoft is targeting fast-growing areas such as autonomous cars with its AI-enabled connected vehicle platform.

Palo Alto Networks

Hackers are getting better. Cybersecurity didn't used to involve much complexity as enterprises and corporations could simply put all their critical data in secure data centers protected by firewalls. But the concept of cybersecurity has evolved as hackers have found ways to steal data across a wide range of industries.

For instance, numerous corporations and enterprises were prey to ransomware attacks such as WannaCry and Petya this year, which locked users' screens and encrypted files and demanded a ransom to unlock them. Palo Alto sees a lot of opportunity in this evolving cybersecurity scenario, so it has equipped its offerings with artificial intelligence.

For instance, its Traps endpoint protection platform has been updated with machine learning capabilities. This allows the different endpoints on a network, such as computers and mobile devices, to "quickly learn, make instant decisions, and enable rapid response to prevent threats rather than dealing with them during execution or after the fact."

Additionally, Palo Alto is bolstering its presence in the lucrative cloud security market, which presents another multibillion-dollar opportunity for the company. The bottom line is that Palo Alto's focus on intelligent threat detection and prevention is helping it take business away from the likes of Cisco, allowing the company to achieve rapid growth in recent quarters.

Twilio

Twilio has underwhelmed investors since going public in mid-2016, falling from nearly $70 a share to the mid $20s as Wall Street seems to have misunderstood what it really does. Analysts believe that Twilio, which hosts text messages, voice calls, videos, and other app-related content in the cloud, could run into bigger cloud computing rivals such as Amazon, while its customers such as Uber and Facebook could phase out Twilio by replacing it with their in-house platforms.

But investors are missing the big opportunity that Twilio enjoys in automated speech recognition. Markets and Markets forecasts that the global speech and voice recognition market could hit $18.3 billion in revenue by 2023 as compared to $5.15 billion in 2016, thanks to the deployment of AI-based systems that will increase adoption of this technology.

Twilio doesn't want to miss this gravy train, and it recently launched its automated speech recognition solution that allows users to convert speech to text, while also analyzing the intent of the caller's words. Companies can use Twilio's speech recognition capabilities to do things like enable customers to navigate menus by voice rather than keypad, log snippets of information such as an account number, and have bots, rather than human agents, talk to customers.

More importantly, Twilio's speech recognition works in 119 languages and dialects, so it can be deployed by a wide range of companies across the globe. Twilio's already impressive base of customers includes Amazon, Facebook, and others.

While these three companies could benefit big time by deploying AI in their products and services, investors shouldn't expect quick gains. AI is just getting started and Microsoft, Palo Alto, and Twilio are trying to attack different niches with the help of this technology. So, investors need to be patient.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Facebook. The Motley Fool recommends Cisco Systems, Palo Alto Networks, and Twilio. The Motley Fool has a disclosure policy.