Since the advent of the Internet three decades ago, numerous forward-looking investment trends have come and gone. But none of these trends has changed the arc of growth for American businesses as much as the artificial intelligence (AI) revolution.
AI involves using software and systems to perform tasks that would normally be supervised by humans. What’s special about AI is the ability of software and systems to become more intelligent over time without human intervention (e.g. machine learning). The ability to evolve over time and become better at their tasks makes AI-driven software and systems useful in almost every sector and industry.
According to a report published last year by analysts at PwC, productivity gains and consumption co-benefits directly linked to AI can add $15.7 trillion to the global economy by 2030. Such a large number is difficult for investors – And Members of Congress – to be ignored.
Based on data compiled by Unusual Whales in its Congressional Trading 2023 report, members of Congress can’t stop buying four artificial intelligence stocks. Interestingly, you won’t find it Nvidia on this list, despite being a favorite of former House Speaker Nancy Pelosi (D-CA) and her venture capitalist husband!
alphabet
The first AI stock legislators were enthusiastic buyers of it alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG)the parent company of the internet search engine Google, the streaming platform YouTube and the cloud infrastructure service platform Google Cloud, among others.
Members of the House and Senate bought a total of $1.49 million worth of Alphabet Class A shares (GOOGL) last year. One of the biggest buyers was House. Rep. Michael McCaul (R-TX), who made numerous purchases in the $50,000 to $100,000 range, as well as House Representative Daniel Goldman (D-NY), who purchased $50,000 to $100,000 worth of Alphabet shares at the end of January 2023 US dollar added based on trading activity compiled by Capitol Trades.
What makes Alphabet such an attractive investment is its world-leading search engine. In March, Google accounted for more than 91% of global internet search share. As the clear choice for advertisers, Google tends to have strong ad pricing power in most economic climates. Longer periods of economic growth are also positive for advertising-financed companies.
However, Alphabet’s biggest growth driver appears to be Google Cloud. Alphabet has been busy integrating generative AI solutions into Google Cloud to help merchants tailor ads to consumers.
Last year, Google Cloud achieved full-year operating profit for the first time. Since enterprise cloud spending is still in its early stages and cloud margins are in line with advertising margins, Alphabet should see a significant increase in its operating cash flow over time.
Apple
A second artificial intelligence stock that members of Congress have pounced on is the tech titan Apple (NASDAQ:AAPL). With the exception of oil and gas companies ConocoPhillipsIn 2023, no stock was purchased more by lawmakers than Apple ($2.4 million).
Although Apple’s future doesn’t depend on AI as much as the other companies on this list, its voice assistant Siri is an example of how the company has been integrating AI solutions into its iPhone for more than a decade.
Apple’s biggest buyer in Congress last year was none other than S&P 500-Outperformer Nancy Pelosi. A regular transaction report from the former Speaker of the House of Representatives noted a purchase of $500,000 to $1 million worth of Apple shares in March, which was followed by the purchase of additional shares worth $250,000 to $500,000 in June.
Innovation continues to be the driving force behind Apple’s long-term outperformance. Its iPhone controls more than half of the US smartphone market share. Meanwhile, CEO Tim Cook is overseeing Apple’s continued evolution into a platform company. The focus on subscription services should increase the company’s operating margin over time and smooth out the revenue fluctuations that often accompany large iPhone upgrade cycles.
I would be remiss if I didn’t also mention Apple’s market-leading stock repurchase program. Since the start of 2013, the company’s board has overseen $651 billion in buybacks.
Amazon
The third AI stock that convention traders can’t stop buying is e-commerce giant Amazon (NASDAQ:AMZN). The Unusual Whales report concludes that lawmakers bought $1.06 million worth of Amazon stock last year.
The big buyers of Amazon stock were the aforementioned Michael McCaul and House Representative Ro Khanna (D-CA). McCaul and Khanna are the two most active traders in Congress, with 1,826 and 4,253 completed transactions, respectively, last year.
Most people know Amazon for its premier online marketplace, which accounted for nearly 38% of U.S. retail sales last year. However, the operating margins in e-commerce are rather low. When it comes to cash flow generation and long-term growth potential, Amazon Web Services (AWS) is the company’s shining star.
According to Canalys, AWS is the world’s leading cloud infrastructure services platform with an estimated global share of 31% as of September 30, 2023. With enterprise cloud spending still in its infancy, AWS should have no trouble maintaining a double-digit growth rate and generating the majority of Amazon’s operating revenue.
Amazon is also aggressively deploying generative AI solutions within AWS to enable its customers to develop applications that can better serve their consumers.
Tesla
A fourth AI stock that members of Congress can’t stop buying is none other than North America’s leading electric vehicle (EV) maker. Tesla (NASDAQ:TSLA). According to Unusual Whales, the House and Senate bought $840,000 worth of Tesla shares in 2023.
The congressional “whale” that has been busy pushing the buy button on Tesla is Daniel Goldman. Although Goldman has been active as both a seller and a buyer – behind Khanna and McCaul – he is the third most active trader in Congress with 1,306 trades in 2023 – buying $100,000 to $250,000 worth of Tesla shares on March 6, 2023 On February 3rd, March 1st and April 10th, $15,000 to $50,000 stand out.
The appeal of Tesla for lawmakers lies in its advantages as a first-mover in the field of electric vehicles. Tesla has successfully moved from the ground up to mass production, generating four consecutive years of generally accepted accounting principles (GAAP) profits. Tesla’s electric vehicles use cameras and sensors to support the split-second decision-making needed to overcome obstacles.
But among the four stocks that congressional traders can’t stop buying, Tesla is the one most at risk of falling. Weakening demand for electric vehicles has forced Tesla to cut prices for Models 3, S, X and Y more than half a dozen times since the start of 2023. The company has also dramatically reduced the price of its fully autonomous driving software from $15,000 to $8,000. Despite this significant price cut, Tesla’s operating margin has fallen from 17.2% to 5.5% over the past six quarters and inventory levels have virtually doubled.
Tesla’s attempts to become more than just a car company also failed. Its services segment offers gross margins in the low to mid-single digits, while revenue growth in its once red-hot energy generation and storage segment has slowed to single digits. Tesla’s once-lauded growth story appears to be officially dead.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Sean Williams has held positions at Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Nvidia and Tesla. The Motley Fool has a disclosure policy.
4 Artificial Intelligence (AI) Stocks Members of Congress Can’t Stop Buying (And Nvidia Isn’t One of Them!) was originally published by The Motley Fool