Market researchers at PwC estimate that the greatest economic gains from artificial intelligence (AI) will occur in China and North America, with an economic value that could exceed $10 trillion. PwC sees AI as having the potential to not only enhance its products, but also make them more affordable and stimulate consumer demand.
While many businesses across industries will benefit from this technology, the Motley Fool’s team of contributors sees an especially bright future. JD.com (JD -1.77%), walmart (WMT 0.60%)and Amazon (AMZN -0.66%). Let’s see why they believe now is the perfect time to buy these top stocks.
AI is boosting profits for this e-commerce giant
John Ballard (JD.com): JD is one of China’s leading e-commerce platforms, with over $150 billion in revenue in the last 12 months. But the stock is down 66% from its all-time high. A weak Chinese economy weighed on sales growth in 2022, but the stock could be cheap given the improvements JD.com is making to boost its profit margins with AI.
AI helped JD forecast demand and optimize inventory, reducing inventory turns by 30 days. So it’s not surprising that profits improve. He nearly doubled adjusted net income to $1.1 billion, while first-quarter sales were down 1.4% year-over-year.
At the company’s first-quarter earnings call, CEO Lei Xu hinted that further earnings growth awaits, while pointing out the company’s advantage in delivering the returns investors expect. “In addition to our continuous efforts to optimize cost and efficiency, we strive to provide our users with best-in-class product offerings, prices and shopping experiences, and to excel in all aspects of product selection, speed, quality and value. We are fully committed to meeting user demand,” he said.
With a low price-to-sales ratio of 0.38, the value of this leading e-commerce platform appears to be greatly underestimated.
AI helps this retail heavyweight manage inventory
Jeremy Bowman (Walmart): Walmart is probably not the first company that comes to mind when you hear AI stocks. The retail giant has a dull reputation, but has evolved with the times, embracing omnichannel retail and leveraging technology to drive its advertising business and third-party marketplaces.
Walmart also has some big ideas when it comes to AI. The company has more data on shopper habits than virtually any other company, so leveraging artificial intelligence gives it an advantage, and even more so as the size of the dataset increases. . The company uses machine learning algorithms to reduce out-of-stock items, and Sam’s Club warehouses use autonomous floor scrubbers fitted with inventory scanners that transmit current inventory levels. Scanners can read items hidden behind shelves.
Walmart is also applying AI to its shopping app to help it recognize when a customer last ordered an item and if it’s still appropriate. For example, for things like diapers, the customer may need a new size. Walmart also has a research arm called the Intelligent Retail Lab, which has developed AI-enabled cameras, interactive displays and massive data centers.
The ability to invest in technologies such as artificial intelligence also contributes to Walmart’s competitive advantage as it has the economies of scale to leverage such investments to differentiate itself from smaller retailers. .
As Walmart continues to diversify into revenue streams such as e-commerce and advertising, we expect to see more of these investments in artificial intelligence. While these moves will largely take place behind the scenes, Walmart has the capital and scale to leverage new technology in ways few other retailers can.
Amazon sees AI opportunities in all its businesses
Jennifer Sybil (Amazon): Amazon may not have started the AI boom, but it has been investing in its own AI capabilities for decades. Use AI to recommend products to your customers and get your products to them faster.
CEO Andy Jassy announced in his 2022 letter to shareholders that Amazon is working on its own large language model for Amazon Web Services (AWS). Large language models are powering his generative AI like ChatGPT, and Amazon is investing in AI for AWS customers by generating code and other services.
It also uses AI to power Alexa, the voice-activated assistant. Just a few weeks ago, Amazon excited investors once again by releasing several new Alexa-enabled devices from his Echo range.
These measures were enthusiastically welcomed by investors, not only because they could transform Amazon’s business in the new AI-powered world, but also because investors have been funking Amazon recently. It is also because they regard it as With slowing sales growth and an unusual net loss in 2022, there wasn’t much to look forward to in the near term. Amazon’s stock has lost 50% of its value in 2022 as it struggles to rack up profits and cut unnecessary expenses from the pandemic.
But things are changing, largely due to the adoption of AI, and Amazon stock is gaining momentum. It has risen 49% to date in 2023, accounting for a significant portion of its lost value.
Amazon is one of the best stocks to ever own, and we have good reason to believe that it can continue to reward investors for decades. AI is just one of many reasons to be confident in Amazon’s stock price. Stocks have been fairly flat over the past year, and now is a great time to buy.
John McKee, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Jennifer Cybill has no positions in any of the mentioned stocks. Jeremy Bowman has positions at He’s Amazon.com and He’s JD.com. John Ballard has a position at Amazon.com. The Motley Fool has positions on Amazon.com, JD.com and Walmart and recommends Amazon.com, JD.com and Walmart. The Motley Fool has a disclosure policy.
