Three US AI stocks to watch in June

Motley Fool US Headquarters, post from June 16, 2019

For tech stock investors, artificial intelligence (AI) is the next frontier.

Below we introduce IBM (NYSE:IBM), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and Amazon.com (NASDAQ:AMZN) AI stocks currently drawing attention.

IBM: AI development is only just beginning

With $78.7 billion in revenue and $17.9 billion in EBITDA (earnings before interest, taxes, depreciation and amortization), IBM is already globally leading in AI efforts.

IBM's Watson AI platform is at the core of its business.

Watson is part of more than 16,000 IBM projects across 20 different industries.

However, according to the company’s management, this is only the beginning.

IBM senior vice president Arvind Krishna says, "We're in the early stages, like perhaps one or two innings in baseball."

This is because current AI is mainly "narrow AI," functioning for a single task.

Eventually, AI will mimic human intelligence and solve a variety of problems.

"It will take time to reach that stage," Krishna notes.

IBM aims to be a pioneer in the next step of AI development as well.

Therefore, it has sold off its low-margin hardware division in recent years, concentrating resources on long-term growth drivers, with AI at the center.

Alphabet: AI development for autonomous driving

AI is being applied in many fields, but the most attention is on its use in autonomous vehicles.

Autonomous cars use sensors and AI software to handle road conditions that are difficult for humans to manage.

Once autonomous driving is established, about 90% of traffic accidents are expected to be eliminated.

Because of this, Alphabet's autonomous driving subsidiary Waymo plays a crucial role.

Waymo has logged over 10 million miles of autonomous driving on public roads and more than 7 billion miles of test driving in total.

Waymo is a leader in autonomous driving, and its AI system underpins the advanced, practical ride-hailing service "Waymo One."

Waymo One currently operates a limited ride-hailing service in parts of Phoenix, Arizona.

Waymo One is considering expansion and licensing technology to other companies.

Some investors are critical of Alphabet's autonomous driving business diverging from its core operations.

However, according to Intel, the autonomous driving-related market is expected to reach $7 trillion by 2050.

Given this scale, investors should monitor Alphabet's AI progress closely.

Amazon: Don't forget AI alongside e-commerce, cloud, and digital ads

Amazon is already a mega-cap stock, yet over 90% of analysts maintain a "buy" rating.

This is because long-term growth is expected in e-commerce, cloud computing, and digital marketing.

However, analysts seem to underestimate Amazon's AI potential.

Amazon's AWS (Amazon Web Services) cloud computing directly benefits from AI.

In cloud computing, vast accumulations of computing and storage power are required, and AI helps supply those capabilities.

Amazon is a leader in cloud computing and is expected to continue rapid growth in this market by leveraging AI.

Additionally, using AI to collect and analyze consumer information underpins Amazon's e-commerce and digital advertising businesses.

For example, AI enables effective advertising proposals to advertisers.

As a result, AI is expected to contribute to Amazon's long-term return improvements.

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