CASH IN ON AI EVOLUTION

Here’s where to find the winners as artificial intelligence transitions from an emerging technology to an adolescent one.

- BY ADAM SHELL

IF the stock market’s artificial intelligence winners were in a police lineup, the usual suspects would not be hard to identify. AI chip designer Nvidia would jump out. So would data center operators and machine learning infrastructure plays such as Microsoft, Amazon.com and Alphabet. Software providers Oracle and Salesforce, which offer AI-powered features, would stand out, too. The problem? They've been analyzed to death by Wall Street. And to borrow from the theme song of the TV sitcom Cheers, everybody knows their name. “This cast of characters is pretty well understood,” says Andrew Choi, manager of the Parnassus Core Select exchange-traded fund.

But an emerging group of AI stocks doesn’t fit the typical profile and are flying under the radar. It’s possible to invest in the artificial intelligence-amplified digital revolution via less-obvious companies, such as so-called adopters, or beneficiaries of AI automation. “You have to think a little bit out of the box,” says Robert Ruggirello, chief investment officer at Brave Eagle Wealth Management.

A good example is language-learning platform Duolingo (symbol DUOL, $390), which uses an AI-powered chatbot and app-friendly purple-haired teen character named Lily to help people learn up to 40 languages by having interactive, real-time chats with her. Or HVAC systems maker Trane Technologies (TT, $383), which uses AI to identify performance issues, better predict servicing needs and energy usage, and help systems work more efficiently. (Prices are as of April 30; names we recommend are in bold.)

AI, at its core, is a business productivity enhancer. So-called “reinvention-ready” companies that use generative AI (a type of artificial intelligence that enables machines to respond naturally to human conversation) show 2.4 times greater improvement in productivity and 2.5 times higher average revenue growth, according to a study by consulting firm Accenture.