AI’s Next Leap: Investing in Tomorrow’s Technologies

Lessons from the Past: The Revolutionary iPhone

I clearly remember the first time I encountered an iPhone. A college friend excitedly showcased his new device to anyone who would listen. Initially, many of us found the phone impressive but not extraordinary. The 2007 iPhone was comparatively slow and clunky, with web pages taking what seemed like an eternity to load. Even on Wall Street, reactions were muted. On the iPhone’s launch date in June 2007, Apple Inc. (AAPL) shares traded at a split-adjusted price of $4.35, only increasing by 15% over the next two months.

However, the iPhone marked a significant turning point. By transitioning internet access from desktop computers to handheld devices, Apple ignited a technology crossover moment. Over the years, Apple transformed how people engage with the internet and secured its position as the world’s most valuable company. An investment of $10,000 in Apple back in 2007 would now be worth approximately $543,460.

Apple isn’t alone; other technologies have similarly reshaped industries and rewarded early investors:

• The steam engine, initially used in mining, ignited a revolution when applied to railroads.
• Radio waves, once solely for Morse code, evolved into broadcasting mediums for radio and television.
• Transistors began in telephones before paving the way for personal computers.

Each crossover moment generated massive opportunities for those who got in early. Today, we stand on the brink of another transformation with artificial intelligence (AI).

The AI Crossover: What Lies Ahead?

This week, InvestorPlace Senior Analyst Louis Navellier will hold a special broadcast detailing how AI is set for a transformative crossover. AI’s scope is expected to expand beyond narrow applications like ChatGPT, paving the way for substantial changes in various industries.

In essence, AI’s capabilities are soon to evolve far beyond simple chatbots, creating new opportunities for savvy investors.

While I can’t share all the insights Louis will provide, I can reveal two promising stocks illustrating how AI is approaching this pivotal moment and how these companies could see growth of 50% or more as technology advances.

Diving into AI-Powered Education

The emergence of AI poses a significant challenge for online education platforms. Tools like ChatGPT can replace tutors and provide high-quality homework assistance. Even prestigious schools are grappling with how to effectively incorporate AI into their curricula.

One company appears to have successfully navigated this challenge: Duolingo Inc. (DUOL).

Based in Pittsburgh, Duolingo leverages AI to enhance learning experiences. Its AI model, “Birdbrain,” tailors exercise difficulty, and products like Explain My Answer and Roleplay provide innovative support. Recently, Duolingo introduced video calls, allowing users to interact in real-time with an AI bot — even using this bot for public statements during earnings calls.

The results have been notable: In the last quarter, Duolingo’s paid subscribers surged by 47% year-over-year to 8.6 million. Revenues grew by 40%, with net income ballooning to $23.4 million. Many may know someone who excuses themselves to keep their Duolingo streak alive.

Duolingo’s success has earned it an “A” rating from Louis’s Stock Grader system, reflecting strong sales growth and high institutional interest. With less than 50% of revenue derived from students studying English, there’s room for significant growth to match the broader language-learning market. Additionally, Duolingo’s successes could lead to teaching other subjects or licensing technology to educational institutions in the future.

The AI Revolution in Sports

The concept of using data analytics in sports isn’t new, sparked by Michael Lewis’s 2003 book Moneyball: The Art of Winning an Unfair Game. The narrative follows how Billy Beane, GM of the Oakland A’s, built a competitive team on a limited budget of $44 million through a data-driven approach.

Today, AI is revolutionizing how professional sports teams analyze performance. Many leagues now employ machine learning to optimize pitches, suggest improvements, and even shift defensive players. Major League Baseball recently banned defensive shifts, adapting to AI predictions that were making games less dynamic.

The benefits of AI extend to various sports, enhancing decision-making in everything from soccer to gymnastics. How can investors capitalize on this trend? Consider companies like DraftKings Inc. (DKNG) that benefit indirectly through enhanced customer data analytics, leading to improved engagement and profits.

A more direct investment opportunity lies with Sportradar Group AG (SRAD). The Swiss company, partly owned by MLB, supplies real-time sports data to companies like DraftKings and high-frequency traders.

Sportradar has exclusive access to the MLB’s official ultra-low latency data stream, and the recent contract renewal ensures its data capabilities through 2032. The firm also collaborates with numerous professional leagues worldwide, including the NBA, NHL, FIFA, and the International Olympic Committee. With its extensive data handling, Sportradar generates over 10 billion live odds changes annually, serving hundreds of betting operators and tech firms. Analysts predict a 14% revenue boost in 2025 and a 71% rise in earnings per share.

Recently, Sportradar achieved an “A” rating in Louis’s Stock Grader, reflecting its solid growth metrics and positive investment outlook.

Embracing the AI Frontier

Generative AI once faced skepticism regarding its capabilities. In late 2023, a U.S. National Science Foundation study highlighted concerns about AI consistently producing garbled information and the risks associated with AI-driven decisions.

Despite these early missteps, AI has evolved significantly and is now expanding into sectors like education and sports betting.

The next wave of AI development is anticipated to be even larger. Nvidia Corp. (NVDA) CEO Jensen Huang recently called this crossover “AI’s next frontier,” projecting a $100 trillion opportunity.

Louis will elaborate on this crossover moment in his AI Crossover Summit, sharing insights on seven companies poised for substantial growth as AI transitions to new applications.

Don’t miss Louis’s free broadcast for more insights.

Note: Our offices, including Customer Service, will be closed this Monday in observance of Presidents’ Day. Wishing everyone a great long weekend!

Tom Yeung

Markets Analyst, InvestorPlace

Thomas Yeung is a market analyst and portfolio manager of the Omnia Portfolio, the top-tier subscription at InvestorPlace. He previously served as editor of Tom Yeung’s Profit & Protection, a free newsletter focused on smart investing strategies.

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