Investing in machine learning is often thought to be synonymous with investing in artificial intelligence (AI). In fact, many of the most popular AI stocks are also good machine learning stocks.
But there is an important distinction. Simply put, artificial intelligence requires machine learning. The opposite is not true. Machine learning is a key element that companies need to develop their AI applications.
In 2022, the global machine-learning market was valued at $19.2 billion. In 2023, that’s supposed to increase to $26 billion. And by 2030, this market is expected to reach $225.9 billion. That’s a compound annual growth rate (CAGR) of 36.2% in that time.
And when you consider that machine learning will be needed in critical areas like cybersecurity and healthcare, you can see why now is a great time to invest in machine learning. Here are three companies that have explosive potential in 2023 and beyond.
Alphabet (GOOGL)
Alphabet (NASDAQ:GOOGL) was one of the early adopters of machine learning. Investors may be most familiar with how machine learning is used with the company’s search engine. However, machine learning is also key to several aspects of the company’s business, notably its cloud infrastructure, Google Cloud, one of the fastest-growing platforms among big tech.
The company’s leadership in machine learning was on display when ChatGPT launched early in 2023. Google was long rumored to have a generative AI solution of its own. That allowed Alphabet to quickly launch Bard, which early reviews suggest is a viable competitor to ChatGPT.
Among tech stocks, Alphabet appears to have room to grow. When ChatGPT burst on the scene, Alphabet was just beginning to emerge from its 2022 slumber. From November 2021 through December 2022, GOOGL stock plunged nearly 40%. But 2023 has been a much better story, with the stock up 35% as of the market close on July 7.
Palantir (PLTR)
Palantir (NYSE:PLTR) has been one of the most compelling stocks for investors looking to profit from AI. But Palantir is also a choice if you’re interested in investing in machine learning. The company came onto the scene with cloud-based customizable platforms (Gotham, then Foundry) that make it possible for governments and private companies to efficiently aggregate big data as a way to improve decision-making.
Coming into 2023, one of the lingering knocks against Palantir is that it was not profitable. That’s changed in the last two quarters, and so has the price of PLTR stock. That’s great news for long-suffering PLTR shareholders, but should you be looking to take a new position now?
The answer will largely depend on the company’s ability to continue to obtain new business on both the government and commercial sides of the business. With rising earnings and no debt to speak of, the company can afford to be aggressive.
Snowflake (SNOW)
While there’s no such thing as a sure thing, when it comes to investing in machine learning, Alphabet and Palantir look to be about as close to can’t-miss choices as you can get. The same can’t immediately be said about Snowflake (NYSE:SNOW).
A key to machine learning is the ability to aggregate data frequently coming in from different areas of the company. That’s what Snowflake, a cloud-based storage company, provides for its customers. The company also has its own integrations and built-in systems for machine learning.
Since becoming a publicly traded company in 2020, the company has reported rising revenue every quarter. However, that’s not reflected in the SNOW stock price. And a key reason for that is that the company is not yet profitable.
That’s a good reminder that the company and its stock are two different things. If the company continues to increase revenue at its current pace, the stock price should align with its performance in due time.
On the date of publication, Chris Markoch had a LONG position in PLTR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.