3 High-Reward Stocks Riding the AI Boom

Stocks to buy

A few recent news stories highlight the tremendous power of artificial intelligence to improve our world and boost business performance. A doctor says that the technology can be a key means of enabling healthcare to become more personalized and making diagnoses earlier. Two fast-food chains are using AI “to boost [the] accuracy, speed, and revenue [of their] drive-thru ordering process.” And finally, the technology is giving robots the ability “to learn and make decisions.” These examples show that AI is allowing businesses to perform better and offer increasingly valuable services. As a result, the technology will greatly boost the bottom lines of the companies that use it most effectively, making AI stocks great investments.

These three companies are pioneers in AI, leaving them well-positioned to become extremely profitable over the long term and making them great stocks to buy for long-term investors.

Schrodinger (SDGR)

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Schrodinger (NASDAQ:SDGR) combines AI and physics to greatly speed up drug discovery. In recent months, there has been a significant amount of positive news about drug candidates initially identified with the help of SDGR’s technology, strengthening SDGR’s position as one of the best AI stocks to buy.

In December, Japanese pharmaceutical giant Takeda (NYSE:TAK) agreed to pay $4 billion to buy a plaque psoriasis treatment from Nimbus. The drug, which is “being evaluated for the treatment of multiple autoimmune diseases,” according to SDGR, was discovered through a collaboration between the latter company and Nimbus. “The acquisition of [the drug] underscores the advantage of leveraging cutting-edge computation at scale, and we are proud to have Schrödinger as a partner,” said Nimbus CEO Jeb Keiper in a statement.

Two Phase 1 studies of Schrodinger’s blood cancer treatment, SGR-1505, have also been launched. At the same time, Schrodinger in January announced a new partnership with Bristol-Myers Squibb (NYSE:BMY) in neurology, expanding upon their previous alliance. And SDGR received a payment in Q1 from BMS due to an anti-tumor treatment that SDGR created in collaboration with the drug giant reaching “development candidate.” status.

Taken together, these achievements indicate that SDGR’s drug discovery program is efficient and effective.

iCAD (ICAD)

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iCAD’s (NASDAQ:ICAD) AI-powered breast cancer detection tool identifies “up to 23% more cancers that might have otherwise gone undetected,” a recent study showed, according to CEO Dana Brown, who was speaking on the company’s earnings call held on May 15. The company’s products also help “evaluate breast density and identify women at high risk of developing breast cancer,” Brown noted.

Under Brown, who became CEO in March, iCAD is launching exciting new partnerships and other initiatives. For example, she mentioned that the company recently participated in a “workshop” that featured GE Healthcare (NYSE:GEHC) “and roadiologists.” This news could foreshadow a significant alliance between iCAD and GEHC.

And iCAD’s prospective alliance with Radiology Partners, “the largest radiology practice in the U.S.,” has been widened, with the latter company looking to license more technology from iCAD, Brown reported.

However, the CEO did clarify that iCAD has not yet signed a deal with Radiology Partners because iCAD was looking to advance the technology that interests Radiology Partners first. However, she indicated a deal between the firms would be signed soon.

Meanwhile, iCAD is considering selling screenings directly to women and allowing large companies to offer iCAD’s screenings to their employees. The company is also considering negotiating with insurers to get them to cover iCAD’s screenings and “expanding [its] cloud-based AI platform to address other cancers and modalities,” Brown noted.

Alphabet (GOOG, GOOGL)

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Alphabet (NASDAQ:GOOG, NASDAQ:GOOGLunveiled additional artificial intelligence tools last week, and Wall Street seems impressed with what it saw, as GOOG stock has surged 12% in the wake of the news.

Indeed, the company’s decision to launch its own “AI-powered chatbot” and release “a more conversational search engine” is certainly positive news.

A statement by Tesla (NASDAQ:TSLA) CEO Elon Musk also bodes well for GOOG stock. In a CNBC interview on May 16, Musk stated that Alphabet’s AI technology was much more powerful than that of OpenAI when the latter firm was launched in December 2015. That news suggests that Alphabet will at least be able to effectively compete with OpenAI’s popular chatbot, ChatGPT.

Also encouragingly, Barron’s was upbeat on Alphabet’s outlook in the AI space after the company’s announcements. The publication states, “Google has effectively erased Wall Street’s fear that Microsoft might have gained the upper hand in AI.”

As of the date of publication, Larry Ramer owned shares of SDGR and ICAD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.

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