5 Companies You’ve Probably Missed When AI Investing

With much of the artificial intelligence hype centered around Nvidia, it’s been easy to miss other beneficiaries of the AI boom. AI investors looking to potentially diversify their exposures beyond the vaunted AI chipmaker should consider these five overlooked opportunities.Nvidia reported a second-quarter beat in both profits and revenue this week, but by a smaller margin than previous quarters. Investors appeared unimpressed as the company’s stock sank over 6% in trading Thursday. While some investors weigh the longevity potential of an AI boom, others hold to the long-term, revolutionary potential of the technology. Those investors looking for opportunities beyond just the big names should consider these five companies for their longer-term positioning. There are a number of beneficiaries of AI that are considered “more of a ‘next phase’ of AI,” according to Zeno Mercer, Senior Research Analyst at VettaFi. You can find these beneficiaries in “areas such as computer vision, big data and analytics areas, and cybersecurity.”Something Different for AI Investors Within SemiconductorsFor those investors looking for a company that designs semiconductors but with an alternative spin, Ambarella is one to consider. Ambarella works in vision applications, both human and computer. These include video security, autonomous driving, vehicle driver and cabin monitoring, electronic mirrors, as well as a host of robotics applications. The company works to make cameras more intelligent through its use of high-resolution, low-power image processing, video compression, and neural network processing. Their chips are used in most broadcast television encoding and compression, in most of the police cams used globally, and helped to revolutionize next-gen AI video security according to the company’s website. Ambarella may be a “key, under looked beneficiary of AI” according to Mercer. The company reported earnings August 27th that beat market expectations across the board, although came in at a loss. Its edge AI products reached new highs in the quarter, with third-quarter expectations of continued momentum and strong sales growth. It closed up nearly 10% in trading Wednesday.AI Demand Within Cybersecurity“In Cybersecurity, companies like Cyber-Ark are positioned well for a ‘machine’ forward economy,” Mercer explained. He points to the company’s acquisition of Venafi, who focuses on machine identity management, as an example. Machine identity management entails managing all the authentications and credentials that machines (aka devices) use to communicate and grant system access within an enterprise. Cybersecurity remains a deep well of opportunity for AI, given increasing adoption as well as the natural evolution of technology. As new AI iterations come to market with new capabilities, AI cybersecurity technologies must develop alongside them to ensure continued digital security. Additionally, artificial intelligence programs moving further out on their adoption curve leads to broader demand over time. More users across a growing number of platforms only heightens cybersecurity needs. “Companies like Varonis are seeing positive momentum with strong demand for data security solutions due to increasing enterprise AI usage, hybrid cloud deployments, and growing cybersecurity threats,” Mercer noted. This in turn leads to “solid revenue growth and improved financial metrics.”The AI Proliferation Benefits HealthcareThe healthcare sector also benefits enormously from AI developments and drives continued AI demand. From administrative applications to disease detection, pharmaceutical development, and surgery assistance, AI proliferation continues in the healthcare industry. Companies like Illumina stand out as “a pioneer and leader in DNA sequencing and related technologies”, Mercer noted. The biotech company is based out of San Diego, California and offers both genomic sequencing and array-based technologies. These have broad applications in furthering advances in consumer and translational genomics, life science research, as well as molecular diagnostics according to their website. Specific areas include cancer research, genetic as well as rare disease research, reproductive health, and more. “Another company, Veracyte, uses machine learning and novel field-of-injury techniques, such as non-invasive nasal swabs, for detecting and diagnosing cancers,” explained Mercer. Veracyte met or beat its quarterly guidance every quarter since 2020 while raising its full-year total revenue guidance most quarters.Capture Overlooked AI Opportunities With THNQThe ROBO Global Artificial Intelligence ETF (THNQ C+) invests in AI companies globally. It also invests in companies developing the infrastructure and technologies that AI relies upon. These include data and cloud-services, as well as companies that use AI in their business. It currently sits in buy territory heading into fall months, above both its 50-day Simple Moving Average as well as its 200-day SMA.The fund seeks to track the ROBO Global Artificial Intelligence Index and provides exposure to the artificial intelligence global value chain. The Index contains between 50-100 constituents whose business or revenue is significantly derived from AI. These companies demonstrate growth potential within their respective areas either through innovation or market adoption of their services or products. THNQ offers exposure to all five companies investors may miss when AI investing. Ambarellais is carried at a 2.24% weight, Veracyte at 2.18% weight, and Illumina at 1.99% weight in the fund.  Meanwhile, THNQ holds Varonis at a 1.96% weight and Cyber-Ark at 1.71% weight, all as of 08/28/24. For more news, information, and analysis, visit our Disruptive Technology Channel. VettaFi LLC (“VettaFi”) is the index provider for THNQ, for which it receives an index licensing fee. However, THNQ is not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of THNQ.