Since the advent of the Internet thirty years ago, countless next-big-thing investment trends have come and gone. But none of these trends have changed the growth curve for corporate America as much as the last one artificial intelligence (AI) revolution.
AI involves the use of software and systems to perform tasks that would normally be overseen by humans. What makes AI special is the ability of software and systems to become smarter over time without human intervention (machine learning). By being able to evolve over time and become more proficient at their tasks, AI-powered software and systems become useful in virtually every sector and industry.
According to a report published last year by PwC analysts, productivity gains and consumption side effects directly related to AI could add $15.7 trillion to the global economy by 2030. Such a large figure is difficult for investors — And members of Congress – to ignore.
Based on data collected by Unusual Whales in its “Congressional Trading 2023” report, members of Congress can't stop buying four artificial intelligence stocks. Interestingly enough, you won't find it Nvidia despite being on this list being a favorite of former House Speaker Nancy Pelosi (D-CA) and her venture capitalist husband!
Alphabet
The first AI stock legislators were avid buyers of is Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG)the parent company of internet search engine Google, streaming platform YouTube and cloud infrastructure service platform Google Cloud, among others.
Members of the House and Senate purchased a total of $1.49 million worth of Alphabet Class A (GOOGL) shares last year. House was among the biggest buyers. Rep. Michael McCaul (R-TX), who made numerous purchases in the $50,000 to $100,000 range, as did House Rep. Daniel Goldman (D-NY), who added between $50,000 and $100,000 worth of Alphabet stock in late January 2023, 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 the global Internet search share. As a clear choice for advertisers, Google tends to have strong ad pricing power in most economic climates. Long periods of economic growth are also positive for advertising-driven 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 marked the first time that Google Cloud generated full-year operating profit. With enterprise cloud spending still in its early stages and cloud margins hovering around advertising margins, Alphabet should see healthy increases in operating cash flow over time.
Apple
A second artificial intelligence stock that members of Congress have jumped on is tech titan Apple (NASDAQ: AAPL). With the exception of the oil and gas company ConocoPhillipsIn 2023, no more stock has been purchased by lawmakers than Apple ($2.4 million).
While Apple's future isn't as reliant on AI as the other companies on this list, voice assistant Siri is an example of how Apple has been integrating AI solutions into its iPhone for more than a decade.
Apple's biggest buyer during Congress last year was none other than Apple S&P500-outperformer Nancy Pelosi. A periodic transaction report from the former Speaker of the House of Representatives noted a $500,000 to $1 million purchase of Apple stock in March, followed by the purchase of $250,000 to $500,000 in additional shares in June.
Innovation remains the driving force behind Apple's long-term outperformance. The iPhone has more than half of the US smartphone market share. Meanwhile, CEO Tim Cook is overseeing Apple's steady evolution into a platform company. Focusing on subscription services should increase the company's operating margin over time, smoothing out the revenue stream that often accompanies major iPhone upgrade cycles.
I'd be remiss if I didn't also mention Apple's market-leading stock buyback program. Since early 2013, the company's board of directors has overseen $651 billion in buybacks.
Amazon
The third AI stock that traders in Congress can't stop buying is the massive e-commerce giant Amazon (NASDAQ: AMZN). The Unusual Whales report shows 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 Rep. Ro Khanna (D-CA). McCaul and Khanna are the two most active traders in Congress, with 1,826 transactions and 4,253 transactions completed last year, respectively.
Most people are familiar with Amazon for its premier online marketplace, which accounted for nearly 38% of U.S. retail sales last year. However, operating margins associated with e-commerce are quite low. When it comes to cash flow generation and long-term growth potential, Amazon Web Services (AWS) is the company's shining star.
AWS is the world's top cloud infrastructure service platform, with an estimated 31% of the global share, as of September 30, 2023, according to Canalys. With enterprise cloud spending still in its infancy, AWS should have no trouble maintaining double-digit growth and generating the bulk of Amazon's operating revenue.
Amazon is also aggressively deploying generative AI solutions within AWS to enable its customers to build applications that can better serve their consumers.
Tesla
A fourth AI stock that members of Congress can't stop buying is none other than the largest electric vehicle (EV) manufacturer in North America. Tesla (NASDAQ: TSLA). According to Unusual Whales, $840,000 worth of Tesla stock was purchased by lawmakers between the House and Senate in 2023.
The congressional “whale” who was busy pushing the buy button on Tesla is Daniel Goldman. Although Goldman was 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 — purchases of $100,000 to $250,000 worth of Tesla stock on March 6, 2023 also amounted to $15,000 to $50,000 on February 3, March 1 and April 10.
The attraction for lawmakers at Tesla is its first-mover advantage in electric vehicles. Tesla successfully built itself from the ground up to mass production and has posted four consecutive years of profit under Generally Accepted Accounting Principles (GAAP). Tesla's EVs use cameras and sensors to aid in the split-second decision-making needed to navigate obstacles.
But of the four stocks that congressional traders can't stop buying, Tesla is the most at risk of plummeting. Declining demand for electric vehicles has forced Tesla to cut the price of Models 3, S, X and Y more than six times since the start of 2023. The company has also drastically reduced the price of its full self-driving software. from what was once $15,000 to $8,000. Despite these substantial price cuts, Tesla's operating margin has fallen from 17.2% to 5.5% over the past six quarters and inventory levels have practically doubled.
Tesla's attempts to become more than a car company have also failed. The Services segment offers gross margins in the low to mid single digits, while revenue growth for the once exciting Energy Generation and Storage segment has slowed to single digits. Tesla's once vaunted growth story appears to be officially dead.
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Suzanne Frey, a director 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 positions in Alphabet and Amazon. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Nvidia and Tesla. The Motley Fool has one 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
