Microsoft co-founder Bill Gates knows a thing or two about the transformative power of technology — he played a crucial role in making personal computing accessible to millions through his company’s software. And as Microsoft helped bring computers into homes and businesses, transforming industries across the board, it also made him one of the richest people on earth.

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Now, Gates has identified something he believes could have an even greater impact: artificial intelligence.

During a recent appearance on “The Late Show with Stephen Colbert,” Gates made a bold statement about AI, saying, “It's the first technology that has no limit.”

Gates explained how AI stands apart from previous inventions, stating, “When you invent a tractor or even a cellphone, you kind of figure out how that's going to change life. Here, where the AI is very intelligent, and when you put it in robotic form, it can do a lot of both blue-collar and white-collar jobs.” He added that AI has the potential to do “super good” things, such as providing personal tutoring for children and improving healthcare access.

As AI continues to transform industries, businesses are increasingly adopting AI-driven solutions to enhance efficiency and innovation. For investors, this presents an exciting opportunity. Here’s a look at three AI stocks positioned to benefit from this transformative shift — Wall Street already sees major upside for this trio.

Microsoft (MSFT)

For many, the recent surge in interest around AI was sparked by the release of ChatGPT in late 2022, and Gates shares a similar experience.

“Two years ago when I first saw this Chat GPT, and it was kind of mind blowing, because that came kind of all of a sudden,” Gates told Colbert.

He expressed amazement at ChatGPT’s ability to learn from vast amounts of information and provide 24/7 support, comparing it to having "your mental health advisor there 24 hours a day" or a personal tutor offering instant feedback.

While OpenAI, the company behind ChatGPT, remains private, Microsoft — the very company Gates co-founded — has invested nearly $14 billion into it. According to The Wall Street Journal, the two firms are "facing off in a high-stakes negotiation" over how much equity Microsoft should have when OpenAI becomes a for-profit corporation. "In addition to figuring out how big a piece of the restructured artificial intelligence company Microsoft will own, the two sides must figure out what governance rights it will have," says the report.

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This close relationship makes Microsoft a name worth watching for AI-focused investors. Beyond its financial ties, Microsoft is leveraging OpenAI’s technologies across its own platforms, such as Azure and Microsoft 365, positioning itself at the forefront of AI integration in everyday business solutions.

Goldman Sachs analyst Kash Rangan has a “Buy” rating on Microsoft and a price target of $500, implying a potential upside of 21%.

Nvidia (NVDA)

Nvidia has emerged as one of the top performers in the stock market. Shares have climbed almost 200% in 2024 and are up a staggering 2,680.23% over the last five years.

Investor’s insatiable appetite for AI helped fuel that boom. Nvidia is a leading provider of the graphics processing units (GPUs) that power much of the AI industry. Its GPUs are essential for training and running large-scale AI models, including those used by OpenAI's ChatGPT and other advanced machine learning applications. As AI demand continues to accelerate across sectors like healthcare, automotive, and cloud computing, Nvidia is well-positioned to capitalize on this shift.

In the fiscal quarter ending July 28, Nvidia reported record quarterly revenue of $30.0 billion, a 122% year-over-year increase. Founder and CEO Jensen Huang emphasized the revolutionary potential of AI, stating, “Generative AI will revolutionize every industry.”

Wells Fargo analyst Aaron Rakers has a “Overweight” rating on Nvidia with a price target of $165 — 16% above the current levels.

Alphabet (GOOGL)

In 2019, Microsoft CTO Kevin Scott sent an email to Bill Gates and CEO Satya Nadella, stating that he was “very, very worried” about Google’s growing AI capabilities. That same year, Microsoft made its pivotal investment in OpenAI.

It’s no surprise, then, that Google’s parent company, Alphabet, is also a name worth watching in the AI arena.

Google has been at the forefront of AI research and development with initiatives like DeepMind, one of the world’s leading AI labs responsible for breakthroughs such as AlphaGo and AlphaFold.

Its latest innovation is Gemini, a next-generation large language model (LLM) designed to rival OpenAI's Chat GPT. Gemini improves upon Google’s prior LLMs, offering more complex reasoning, better understanding of context, and enhanced problem-solving abilities. It is set to power a wide range of applications, from search and cloud services to personalized content and enterprise solutions, making Google a key player in the future of generative AI.

Google is also integrating AI across its flagship products. In the latest earnings conference call, CEO Sundar Pichai noted that “all six of our products with more than 2 billion monthly users now use Gemini.” Moreover, more than 1.5 million developers are utilizing Gemini in Google’s developer tools.

BofA Securities analyst Justin Post has a “Buy” rating on Alphabet and a price target of $206 — roughly 25% above where the stock sits today.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.