One of the most profitable strategies over the past decade has been to buy companies that are in growing industries. This strategy has paid dividends for areas such as social media, ecommerce, enterprise software, and fintech.
A growth area for the next decade is certainly virtual reality (VR) and augmented reality (AR). Just like the Internet disrupted so many parts of life and continues to do so like communications, business, work, and play, VR and AR will likely have similar impacts.
Another similarity to the Internet is that we are aware that it's going to be a big deal, but unaware of how exactly it will take shape. Some of the gains in high-growth stocks over the past decade is because the market didn't completely understand how big these markets would eventually become which also seems plausible for AI and VR stocks.
Here are three AI and VR stocks with promising outlooks:
Snap
Snap has evolved from more a chat app for young people into a VR and AR platform. The company is consistently pushing out new features and a new API for developers to build apps integrating these features. It's one reason why Snap has higher multiples than its competitors.
In the last two years, Snap has launched 15 new AR-based products for businesses utilizing AR such as letting people try on clothes or shoes or physically scan a product to get more detailed information. Remarkably, Snap is probably the most advanced company in the world in terms of creating revenue streams and opportunities for businesses to engage with customers using VR and AR.
C3.ai
Another major opportunity is the application of AI to businesses that could lead to automation of tasks, improved decision making, and better resource allocation. Over the last couple of decades, enterprise software has made companies more profitable and leaner.
AI represents the next phase of this evolution, and it would have multiple implications. Currently, companies are producing so much data that it's a challenge to organize and process all of it. AI would solve this problem and derive meaningful insights from it.
Nvidia
Obviously, AI and VR require considerable computing power. The best chips for serious computing are graphical processing units (GPU) which is Nvidia's specialty.
As this market grows, Nvidia will benefit and see increased sales and revenue. In some ways, Nvidia is providing the "picks and pans" for the AI and VR gold rush. Thus, this is probably an investment option with less upside but also more downside as picking winners and losers is always challenging.
