In this article, we will take a look at the 10 best chatbot stocks to buy as ChatGPT gains market share.
The launch of ChatGPT seems to have opened the floodgates of innovation in the AI world. All of a sudden every tech company is talking about AI, LLM (language learning model), conversational AI, generative AI and the list of these buzzwords is never ending. In a matter of weeks almost every mega-cap tech company has revealed its plans on how it’s using AI to transform its business. Companies that recently revealed their AI chatbot plans include Snapchat, Meta, Baidu, Alphabet, in addition Microsoft, which spearheaded this AI mania in 2023.
Generative AI: Future Outlook
The launch of ChatGPT pointed towards years of hard work companies were doing in the generative AI space. In a latest report, Gartner said that VC firms had invested about $1.7 billion in generative AI solutions over the past three years. The areas that received the most funding include drug discovery (a surprise?) and AI software coding.
The report quotes Brian Burke, Research VP for Technology Innovation at Gartner, who believes more than 30% of new drugs and materials will be “systematically discovered” using generative AI technologies and techniques. Burke said the technology has the ability to augment any creative work.
Entire Movies Will be Produced by AI
Gartner shares some more mind-boggling estimates that show the extent of impact generative AI will have on our lives in the years to come. The firm believes by 2025, a whopping 30% of outbound marketing messages from major companies will be “synthetically generated.” As of 2022 this percentage stands at just 2%. What’s more? It expects that by 2030 a major blockbuster movie will be released with 90% of it generated by AI.
Chatbots
Even though the launch of ChatGPT brought chatbots and AI into the limelight this year, market experts know that chatbots have been making their presence felt for years now. Small and large companies have been using chatbots for customer service, emails, calls and even servicing full customer requests. According to a report from Precedence Research, the global chatbot market value touched about $0.84 billion in 2022. This value is estimated to reach $4.9 billion by 2032. The report said that North America generates the highest market share, at around 41%, in this space.
Photo by Levart_Photographer on Unsplash
Our Methodology
Our research for this article was focused on major companies that plan to disrupt their respective markets by launching their AI-based chatbots. Many of these companies were already working on AI chatbots, while others plan to release their LLM-based AI chatbots in the coming months. We first listed the most notable chatbot stocks that are expected to gain value on the back of their AI achievements. We then selected 10 of them which had the highest number of hedge fund investors as of the end of the fourth quarter of 2022. The list is ranked in ascending order of the number of hedge fund investors.
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Best Chatbot Stocks to Buy As ChatGPT Gains Market Share
10. Zhihu Inc. (NYSE:ZH)
Number of Hedge Fund Holders: 9
Zhihu Inc. (NYSE:ZH) is also known as Chinese Quora. Zhihu Inc. (NYSE:ZH) has been getting a lot of attention in 2023 on the back of the leverage it can enjoy from the latest AI boom. Last year, Zhihu Inc. (NYSE:ZH) revealed that it has 485 million questions and answers in its database. Analysts believe this huge database is a treasure trove for AI giants which are looking for large datasets to train their language models for conversational AI. There is a lot of speculation in the market that Zhihu Inc. (NYSE:ZH) could become an M&A target of a big company.
In February, Zhihu Inc. (NYSE:ZH) jumped after Hedgeye gave bullish comments for the stock and said that Zhihu’s fair value is about 70% higher than its current levels. Hedgeye said that Zhihu Inc. (NYSE:ZH) “should start receiving more attention as a M&A target given the frenzy over ChatGPT.”
At the end of the fourth quarter of 2022, 9 hedge funds tracked by Insider Monkey had stakes in Zhihu Inc. (NYSE:ZH). The biggest stakeholder of Zhihu Inc. (NYSE:ZH) was Jonathan Guo’s Yiheng Capital which owns a $4.7 million stake in the company.
9. Snap Inc. (NYSE:SNAP)
Number of Hedge Fund Holders: 38
Snap Inc. (NYSE:SNAP) has jumped into the AI arena with an announcement that it will be launching a chatbot, called My AI, for its Snapchat app. The My AI chatbot service will be powered by, you guessed it, ChatGPT, and initially it will only be accessible for the Snapchat Plus subscribers. The service will allow Snapchat users to talk to the bot and get ideas for content. Reports suggest that Snap Inc. (NYSE:SNAP) trained the My AI service to adhere to some rules to make sure the chatbot doesn’t discuss hate or generate sexually explicit content. Snap Inc. (NYSE:SNAP) plans to eventually roll out the service for all Snapchat users in the future.
As of the end of the fourth quarter of 2022, 38 hedge funds tracked by Insider Monkey reported having stakes in Snap Inc. (NYSE:SNAP). The total value of these stakes was about $896 million. The biggest hedge fund stakeholder of Snap Inc. (NYSE:SNAP) was D E Shaw with a $218 million stake.
8. LivePerson, Inc. (NASDAQ:LPSN)
Number of Hedge Fund Holders: 20
Founded in 1995, LivePerson, Inc. (NASDAQ:LPSN) has been operating in the conversational AI tech space for years now. LivePerson, Inc. (NASDAQ:LPSN)’s AI conversational technology is used by major companies and brands to serve their customers. Recently, LivePerson, Inc. (NASDAQ:LPSN) announced plans to enhance its conversational Cloud platform. LivePerson, Inc. (NASDAQ:LPSN)’s Knowledge AI will add generative capabilities from OpenAI in the coming weeks. LivePerson, Inc. (NASDAQ:LPSN) will also take steps to integrate generative AI with LivePerson’s Conversation Assist system.
As of the end of the fourth quarter of last year, 20 hedge funds tracked by Insider Monkey had stakes in LivePerson, Inc. (NASDAQ:LPSN). The net worth of these stakes was $129 million. The biggest hedge fund stakeholder of LivePerson, Inc. (NASDAQ:LPSN) was Jeffrey Smith’s Starboard Value LP which owns a $71 million stake in the company.
Here is what Artisan Small Cap Fund has to say about LivePerson, Inc. (NASDAQ:LPSN) in its Q4 2021 investor letter:
“LivePerson is a leading provider of mobile and online messaging solutions. We believe customer service and sales centers are shifting from voice to digital communications, and LivePerson is wellequipped to lead this shift. Its LiveEngage cloud-based platform allows brands to engage with customers across digital channels at scale, more efficiently and more effectively. The market opportunity is substantial and goes well beyond digital conversations in service contexts and into areas such as sales, marketing and possibly social media monitoring. A key part of our thesis when we began our investment campaign in 2018 was the arrival of Alex Spinelli as the company’s CTO. Mr. Spinelli came from Amazon, where he was one of the architects and leaders of Alexa. In addition, Mr. Spinelli brought several well-respected technologists to LivePerson with him. Unfortunately, Mr. Spinelli announced his departure from LivePerson in Q3. In addition to this development, our profit cycle thesis has been stalled as the company makes a round of investments into its sales force which will weigh on margins over the near term. We believe Mr. Spinelli’s replacement, Andrew Hamel, carries the credentials to continue leading LivePerson’s technology efforts. Mr. Spinelli worked for Mr. Hamel at Amazon, and the investments in the sales force have the potential to allow the company to scale its business more rapidly. Still, we are in a holding pattern until we gain conviction that the profit cycle we originally invested in can continue to flourish with these changes.”
7. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 40
Chinese internet search giant Baidu, Inc. (NASDAQ:BIDU) joined the AI chatbot race as it announced in February that the company would launch its own AI chatbot. The chatbot is called Ernie, and it will be based on language models like ChatGPT. According to The Register, Baidu, Inc. (NASDAQ:BIDU) said that what makes Ernie stand out from other chatbots is its “ability to integrate extensive knowledge with massive data, resulting in exceptional understanding and generation capabilities.”
Later in February, Baidu, Inc. (NASDAQ:BIDU)’s CEO Robin Li said in a letter to company employees that Baidu will integrate its conversational chatbot across all its operations, including AI Cloud. The letter said that this initiative would bring “fundamental” changes in product offerings of Baidu, Inc. (NASDAQ:BIDU).
At the end of the fourth quarter of 2022, 40 hedge funds tracked by Insider Monkey reported having stakes in Baidu, Inc. (NASDAQ:BIDU). The total value of these stakes was about $1.7 billion. The most notable hedge fund stakeholder of Baidu, Inc. (NASDAQ:BIDU) during this period was John W. Rogers’ Ariel Investments which owns a $326 million stake in the company.
Ariel Investment made the following comment about Baidu, Inc. (NASDAQ:BIDU) in its Q3 2022 investor letter:
“China’s internet search and online community leader Baidu, Inc. (NASDAQ:BIDU) also weighed on relative results in the quarter. Continuing macro headwinds driven by China’s Zero-Covid policy are resulting in sluggish advertising trends. Looking ahead, the company remains committed to sustainable, profitable growth as management works to improve overall operational efficiency, executing on its strategic commitments around technological innovation and the transition to a green economy. We also continue to be enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”
6. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 113
Alibaba Group Holding Limited (NYSE:BABA) shares jumped in February after the company told CNBC that it is working on a ChatGPT-like technology. Alibaba Group Holding Limited (NYSE:BABA) reportedly said that it is already testing the technology. Alibaba Group Holding Limited (NYSE:BABA) said that it has been working on generative AI since 2017. CNBC said that Alibaba Group Holding Limited (NYSE:BABA) did not give any timeline on the possible release of this AI product.
Alibaba Group Holding Limited (NYSE:BABA) isn’t new to AI or chatbots. Alibaba Group Holding Limited (NYSE:BABA) has already proved its mettle when it comes to chatbots. Its AI-based chatbot, called AliMe, launched in 2015, helps customers on its platforms during shopping and product search. Alibaba Group Holding Limited (NYSE:BABA)’s chatbot has helped the company save millions of dollars in costs if not billions. For example, during the Single’s Day even of 2019, AliMe answered a whopping 300 million questions.
As of the end of the fourth quarter of 2022, 113 hedge funds tracked by Insider Monkey reported owning stakes in Alibaba Group Holding Limited (NYSE:BABA).
Polen Capital made the following comment about Alibaba Group Holding Limited (NYSE:BABA) in its October investor letter:
“Alibaba Group Holding Limited (NYSE:BABA) is the leading e-commerce company in China. The stock was weak over the quarter as they reported a quarterly revenue decline. The company has been heavily impacted by the continued covid-19 lockdowns throughout China and the aggressive rate increases and deteriorating outlook for China’s economy have weighed heavily on the stock. The share price has also been under pressure due to the U.S. Securities and Exchange Commission’s plans to delist Chinese tech stocks in 2024 if they do not provide access to audit files.”
5. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 117
CRM company Salesforce, Inc. (NYSE:CRM) is known for its Einstein AI technology which is primarily used by companies for improving their customer experience. At its core, Salesforce Einstein Bot is a natural language processing (NLP) and natural language understanding (NLU) chatbot.
At the end of the last quarter of 2022, 117 hedge funds reported owning stakes in Salesforce, Inc. (NYSE:CRM). The biggest hedge fund stakeholder of Salesforce, Inc. (NYSE:CRM) was Natixis Global Asset Management’s Harris Associates which had a stake worth about $1.1 billion.
Aristotle Atlantic made the following comment about Salesforce, Inc. (NYSE:CRM) in its Q3 2022 investor letter:
“We sold Salesforce, Inc. (NYSE:CRM) to reduce our weighting in the Information Technology sector. Salesforce held their investor day, and the company reiterated their organic Fiscal Year 2026 revenue target of $50 billion. This target remains more back-end loaded based on current slowing macroeconomic conditions and requires new annual contract growth well ahead of what the company has been averaging for the past few years. We are skeptical that the company will be able to achieve this revenue target organically and see Merger & Acquisitions (M&A) being key to achieving the growth. While we believe Salesforce has shown good success in growing its non-CRM clouds, we do see more competitive pressures emerging for the Marketing and Customer Service Clouds, specifically on the pricing side during a global economic slowdown.”
4. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 194
In the AI race where giants like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN) are running, how can Meta Platforms, Inc. (NASDAQ:META) stay behind? Mark Zuckerberg made headlines recently when he announced that Meta Platforms, Inc. (NASDAQ:META) is releasing its own AI-based language model, called LLaMA, which stands for Large Language Model Meta AI. Like other AI language models, LLaMA takes a sequences of words as an input and predicts a next word to recursively generate text. Meta Platforms, Inc. (NASDAQ:META) said that its language model was trained from 20 different languages.
As of the end of the fourth quarter of 2022, 194 hedge funds had stakes in Meta Platforms, Inc. (NASDAQ:META).
ClearBridge Large Cap Value Strategy made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its Q4 2022 investor letter:
“We also initiated and subsequently added to a position in Meta Platforms, Inc. (NASDAQ:META) following a 70% year-to-date decline in its shares. Meta shares derated materially in 2022 as revenue growth slowed due to tough comps versus a strong e-commerce environment during COVID-19, privacy changes put in place by Apple, and the meteoric rise of rival social media platform TikTok. The company’s valuation declined to a compelling 10x consensus 2023 earnings, which in our view materially undervalued its long-term earnings and free cash flow generation potential. Despite current revenue headwinds, we believe Meta’s massive platform reach should allow it to continue to attract engagement, a metric that appears to be accelerating with the launch of its short-form video product “Reels”. The company’s ability to target potential customers is also set to improve, driven by large investments in artificial intelligence and improved analytical tools to navigate Apple’s privacy policies. We also welcome the company’s increasing financial discipline, including reining in both capex and opex, which should sustain the company’s high underlying profitability and gain back investor confidence. Meta has also done a good amount of work to improve its social media platforms Facebook and Instagram and has best-in-class practices designed to reduced hate speech and improve privacy.”
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 209
Alphabet Inc. (NASDAQ:GOOG) was clearly rattled after Microsoft Corporation (NASDAQ:MSFT)’s partnership with OpenAI. For years Alphabet Inc. (NASDAQ:GOOG) was known to have world-class AI technologies but it couldn’t take a lead in shipping a viable AI product for the masses due to several reasons. After ChatGPT, Alphabet Inc. (NASDAQ:GOOG) was quick to launch its own AI-based chatbot, called Bard, which went through some initial hiccups, causing huge losses for the company amid public embarrassment. However, Alphabet Inc. (NASDAQ:GOOG)’s AI is extremely advanced and developed due to its years-long experience in the industry and its DeepMind technologies. BofA recently said that Alphabet Inc. (NASDAQ:GOOG) stands to benefit from the AI space due to its DeepMind Sparrow LLM and its recent Bard chatbot.
Insider Monkey’s database of 943 hedge funds shows 209 hedge funds had stakes in Alphabet Inc. (NASDAQ:GOOG) at the end of 2022.
Baron Opportunity Fund made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q4 2022 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) remains the second largest position in the portfolio, and we continue to be positive on its growth opportunities with search, YouTube, and cloud computing, but we decided to slightly reduce the position size to fund other investments in software, semiconductors, and digital media, and because ChatGPT and/or similar AI-based services present a hard to measure risk to Google’s virtual search monopoly.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 240
Amazon.com, Inc. (NASDAQ:AMZN) is no stranger to AI. From AWS to its smart home systems and warehouses, Amazon.com, Inc. (NASDAQ:AMZN) uses AI everywhere. Amazon.com, Inc. (NASDAQ:AMZN)’s Alexa is one of the smartest AI-based assistants used by millions of people around the world. Being a giant in the Cloud computing and e-commerce space Amazon.com, Inc. (NASDAQ:AMZN) could leverage its dominance and join the AI wars to rival companies like Microsoft Corporation (NASDAQ:MSFT) and Alphabet Inc. (NASDAQ:GOOG).
At the end of the fourth quarter of last year, 240 hedge funds tracked by Insider Monkey had stakes in Amazon.com, Inc. (NASDAQ:AMZN). The total value of these stakes was over $27 billion. The biggest hedge fund stakeholder of Amazon.com, Inc. (NASDAQ:AMZN) was Natixis Global Asset Management’s Harris Associates which had a $1.6 billion stake in the company.
Baron Opportunity Fund made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) is the world’s largest retailer and cloud services provider. Shares of Amazon were down in the quarter, as the company guided to relative weakness in margins and its cloud business, due to the same macro headwinds and optimization trends impacting Microsoft Azure. We believe that Amazon is well positioned to improve profitability back to historical levels, particularly in its core North American retail division. We have already seen some of this play out with reports of Amazon’s increased cost discipline and broad-based layoffs. Particularly within the internet and software sectors, we believe Amazon can sustain premium growth compared to the rest of the market, given its competitive strengths and scale. Longer term, Amazon has substantially more room to grow in e-commerce, where it has less than 15% penetration in its TAM, and cloud, where it is a clear leader in the vast and growing cloud infrastructure market.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) is of course one of the most notable AI and chatbot stocks to buy now since the company has huge plans to tap into the AI sector and disrupt several industries. Microsoft Corporation (NASDAQ:MSFT)’s CEO Satya Nadella has been relentless when it comes to AI. Microsoft Corporation (NASDAQ:MSFT) is brining ChatGPT-based language learning models to power Bing search. It is rolling out updates to make it easy for Windows 11 users to access the Bing chatbot from task bar. Microsoft Corporation (NASDAQ:MSFT) is bringing a new AI-based Cloud platform for telecom companies, called Azure Operator Nexus.
Recently, BofA analysts listed 15 companies that stand to benefit from the AI wave. As expected, Microsoft Corporation (NASDAQ:MSFT) made it to the list, as the firm believes the Redmond software company is well positioned in the space due to its OpenAI integration.
At the end of the fourth quarter of 2022, 259 hedge funds had stakes in Microsoft Corporation (NASDAQ:MSFT).
Baron Opportunity Fund made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2022 investor letter:
“Shares of mega-cap software company Microsoft Corporation (NASDAQ:MSFT) outperformed despite a mixed fiscal first quarter due to macro challenges that negatively impacted results and guidance, including foreign exchange headwinds, weakening PC demand, and a cyclical slowdown in advertising spending. Total revenue beat Street expectations at 16% constant-currency growth (vs. estimates of 14%), but its Azure cloud computing business missed analyst projections by 1% for the second straight quarter, though it still grew a robust 42% year-over-year, as Microsoft helped its customers optimize existing workloads due to the macro backdrop. While the optimization of workloads is a short-term headwind, we believe it is the right thing to do and should help drive more consumption with customers over time. Our research continues to indicate that the longer-term secular trend of cloud computing remains healthy and intact. For example, in its fourth quarter CIO survey report, Morgan Stanley showed, among other things, that cloud computing was the second highest CIO spending priority (behind only security software), that cloud application workloads were expected to increase from 27% of total workloads today to 46% by the end of 2025, and that Azure was listed as the preferred cloud vendor and likely to take share over the short and long term.9 Additionally, Microsoft is positioned to be a prime beneficiary of ChatGPT. Microsoft invested $1 billion in OpenAI in 2020 and is rumored to be considering investing an additional $10 billion for a 49% stake in the company. Moreover, ChatGPT runs on Microsoft’s Azure platform, and Microsoft recently announced the general availability of its Azure OpenAI Service enabling Azure customers to access advanced AI models, including ChatGPT itself soon. We remain bullish on Microsoft’s long-term opportunity in the cloud, and believe AI has the potential to be additive to growth for years to come.”
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Disclosure: None. 10 Best Chatbot Stocks to Buy As ChatGPT Gains Market Share is originally published on Insider Monkey.
