As AI continues to reshape industries, investors should consider Netflix and Apple as underrated stocks. Both companies leverage AI to improve content production and device usability, positioning themselves for significant future growth despite their challenges. Their market opportunities and innovative strategies make a compelling case for investment.
In today’s fast-paced investment market, some AI stocks are grabbing headlines while others remain under the radar. While giants like Nvidia, Microsoft, and Amazon bask in the glow of artificial intelligence advancements, two companies that might surprise investors are Netflix and Apple. These titans are not traditionally seen as leaders in AI, yet they are poised to benefit from the technology in the long run, and they stand out as potential investment opportunities.
1. Starting with Netflix, the streaming service is eyeing generative AI to revolutionize content production. It’s not hard to imagine how this could reshape Netflix’s future. The company has created a vast array of successful shows and films, racking up awards and viewer numbers, but it’s treading thoughtfully with AI. CEO Ted Sarandos indicated that AI could enhance movie quality by about 10%. That’s no small feat when it comes to attracting viewers.
With advances in special effects becoming more cost-effective due to AI, Netflix can potentially churn out high-quality films without inflating production budgets. Over time, this strategy could mean better financial results for the company. Increased engagement from superior content could lead to stronger free cash flow as well. Sure, the competition is fierce — especially from free ad-supported services — but Netflix is learning to navigate this landscape more shrewdly.
And then there’s the ad-supported streaming option, also a recent move to lure subscribers. Netflix enjoys a hefty economic moat — its brand strength combined with a unique data advantage shapes its content strategy, enhancing its value proposition. The streaming titan estimates a staggering $650 billion market opportunity while reporting trailing revenue of $40.2 billion. An incredible stat if you consider they only grab less than 10% of total viewing time in connected households.
2. Shifting gears to Apple, this year has had its share of challenges, especially with the trade issues stemming from Trump’s policies. But that backdrop threads through an exciting AI initiative by the company. Apple introduced “Apple Intelligence,” a suite of features primarily focused on its latest iPhones, not too long ago. Even amid external pressures, Apple is quietly advancing its AI capabilities, which could lead to a wave of device renewals and consequent revenue upswing in the coming years.
The company has developed its proprietary large language model for Apple Intelligence, showcasing its commitment to this technology. Admittedly, Apple often doesn’t rush to be first with innovative products — the iPhone wasn’t the pioneer smartphone, and AirPods weren’t the first true wireless earbuds either. But what Apple does right is refine and elevate existing technologies, creating massive consumer appeal.
On top of that, there’s the growing services segment of Apple, which accounted for just 28% of its revenue by the last fiscal quarter. With over 2 billion devices in circulation and a billion-plus paid subscriptions, the potential here is immense. Apple’s track record of introducing new monetization initiatives suggests that these figures can climb further. Compounded with plans to invest $500 billion in U.S. manufacturing, the financial flexibility to pivot production is there.
Despite temporary setbacks, both Netflix and Apple stand to gain as they integrate AI into their business models. Their strategies may evolve with tech advancements, but the fundamental strength of these companies and their focus on innovation makes them enticing for any investor looking to make savvy choices in the AI space.
In summary, while Nvidia, Microsoft, and Amazon often steal the spotlight when it comes to artificial intelligence, Netflix and Apple deserve a closer look. Both companies are integrating AI into their processes, aiming to enhance content and device features, respectively. With significant market opportunities ahead and a robust user base, they present a unique investment prospect worth considering.
Original Source: www.fool.com
