The top ASX-listed AI stocks to watch

The latest advances in generative artificial intelligence (AI) have created tremendous excitement in the world's investment circles, given the potential of related technologies to expedite the creation of digital content.

Generative AI refers to algorithms that are capable of creating entirely new content across a range of media, including text, code, audio, images and even video footage.

The one generative AI program that has drawn the greatest amount of media attention is no doubt OpenAI's ChatGPT – essentially a chatbot trained on the near limitless amount of textual data that is accessible via the Internet.

ChatGPT is not just capable of passing the Turing test by convincing users that they are interacting with another human being – it's also capable of passing tertiary and vocational tests in the fields of law, accounting and medicine with flying colours.

The program can generate detailed, in-depth textual content at the prompting of human operators, which could have major implications across a range of sectors and professions, including advertising, copywriting, coding, legal drafting and screenwriting.

Generative AI has made dramatic strides in other areas, including visual art and music production. Midjourney and DALL-E can create high-quality, artistic images in response to verbal cues from users, while Amper and AIVA can do similar when it comes to the composition of songs.

The excitement created by advances in the field of generative AI has already had an impact on corporate business models and the performance of capital markets.

AI-related excitement has helped the Nasdaq Composite to convalesce rapidly from the Covid pandemic, with a year-to-date rise of over 35%.

Tech giants around the world are also placing big bets on the potential of generative AI, with AWS, Google, Microsoft and Meta all investing heavily in related applications. Across the Pacific, Chinese Internet giants including Alibaba, Baidu and JD are pursuing similar initiatives in the field of generative AI.

While the ASX is renowned for hosting stocks in the finance and resource sector, as an advanced economy Australia is also host to a thriving tech sector, including listed companies that could benefit from the buzz surrounding generative AI.

Here is a list of three of the companies that stand to potentially benefit from excitement over generative AI's potential.

1. Appen Ltd (ASX: APX)

2. Bigtincan Holdings Ltd (ASX: BTH)

3. Brainchip Holdings Ltd (ASX: BRN)

1. Appen Ltd (ASX: APX)

APX bills itself as a provider of a full-stack suite of data tools and services to global enterprise clients. Major brands that make use of its services to drive AI initiatives include Amazon, Google, Oracle, Adobe, Microsoft and Salesforce.

APX recently saw its share price plunge on disappointing half-year results, including a 24% drop in revenue to US$138.9 million and an underlying net loss after tax of US$24.2 million.

According to management, challenging external and macroeconomic conditions have hampered APX's operations, with a 27.4% drop in Global Services revenue to $100.1 million and a 13.7% decline in New Markets revenue to $38.9 million.

APX nonetheless remains confident that it can bounce back from these adverse conditions by the end of the financial year, by means of major cost reductions and the release of new products focused on generative AI applications.

2. Bigtincan Holdings Ltd (ASX: BTH)

BTH makes use of AI technology to enhance the sales operations of corporate enterprise clients. These companies include Nike Inc. and Guess?, who use BTH's sales enablement software to help their customer-facing teams improve the buying experience.

The company has recently received a number of takeover offers, including a $485 million bid from US investment firm Siris Capital Partners in May 2023, and a $442 million bid from California's SQN investors in December 2022.

3. Brainchip Holdings Ltd (ASX: BRN)

BRN's flagship product is the Akida Neuromorphic Processor – a neural network capable of artificial intelligence reasoning and analysis based on sensory data inputs.

According to BRN, the Akida is far more efficient than its peers, which means it can achieve a higher performance at a much lower power budget and negligible thermal footprint.

BRN could benefit from growth in the market for Artificial Intelligence of Things services and solutions over the upcoming decade, where the Akida Neuromorphic Processor is likely to find strong applications. BRN itself forecasts that this market could be worth over US$1 trillion by 2030.

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