In this article, we will take a look at the 10 best chatbot stocks to buy as ChatGPT gains market share. To see more such companies, go directly to 5 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.”
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Disclosure: None. 10 Best Chatbot Stocks to Buy As ChatGPT Gains Market Share is originally published on Insider Monkey.
