Three AI stocks that might outperform the market in 2023

All facets of the economy are being impacted by artificial intelligence (AI).

To that end, a group of Motley Fool writers recently identified three AI-related stocks that might beat the market in 2023 and beyond: Apple (AAPL 0.25%), Revolve Group (RVLV -2.89%), and Nike (NKE 0.04%).

The value of Apple resides in its software capabilities.

Apple’s John Ballard Apple is among the most valuable companies in the world, and artificial intelligence is essential to improving the use of its products for consumers.

The electrocardiogram (ECG) and crash detection capabilities of the Apple Watch are powered by artificial intelligence (AI), which has been employed by Apple since the debut of the Siri personal assistant in 2011. AI is presently the core technology of the Apple Watch.

Yes, [AI] is a key area of interest for us. In terms of how it can improve consumers’ lives, it is amazing.

Apple made $95 billion in profit last year off of $387 billion in sales. By the end of 2022, the installed base of active devices will have reached a record 2 billion.

The corporation may increase sales of its goods, which will subsequently fuel growth in Apple’s profitable services sector, by including more AI-powered capabilities across its product portfolio.

Since the stock has already quadrupled the return of the S&P 500 index so far in 2023, it should continue to beat the market in the near future.

AI’s use to upend the fashion sector

Most people definitely don’t think of fashion when they first think of artificial intelligence or technology, according to Jennifer Saibil of the Revolve Group. Due to the potential created by this, Revolve’s innovative disruptors are revolutionizing their sector. While sales have been declining at many clothing and fashion businesses for years, Revolve Group’s unique business strategy has led to amazing growth and offers great potential.

However, it was still able to post 10% double-digit revenue increase in the third quarter of 2022. It also continued to be lucrative, with a net income of $12 million, albeit that was down from more than $16 million in the previous year. It earned more than $8 million in free cash flow, and it has no long-term debt and a cozy cash position of $244 million.

Its marketing is supported by artificial intelligence, which is used across the company’s operations, including product curation, social media development, and back-end technology. To reach its millennial and Gen Z target clients, Revolve mainly relies on celebrities and other influencers. The search and purchase data they provide feeds the AI algorithms that help Revolve spot trends and keep its product assortment up to date. This promotes a high conversion rate of full-price sales, which results in net profitability.

In addition, its online presence provides a size that cannot be matched by little shops.

Sales and net income, which are both under pressure, are not the only measures that convey the tale of growth. The number of active consumers is continuing to rise, and the average order value in the third quarter increased by 34% year over year to $320.

According to Statista, the global fashion business is anticipated to increase from $1.53 trillion in 2022 to $1.94 trillion in 2027. Revolve is in a good position to profit from rising garment sales as it gains market share during these difficult times, while competitors are experiencing sales reductions. Growth should resume once the economy is more solid.

Finally, Revolve stock is currently trading at a very fair 25 times trailing-12-month earnings valuation.

Unknown tech behemoth

Jeremy Bowman (Nike): Nike is widely known for being a leader in the field of sportswear and having one of the most recognizable brands.

However, the firm now focuses just as much on consumers as it does on technology. In fact, John Donahoe, the current CEO, formerly served as CEO of ServiceNow, a well-known provider of cloud software.

The corporation has used a variety of technologies to fuel its expansion in fields including demand forecasting, marketing, and customer experience.

To aid it with demand forecasting and predictive analytics, for instance, the firm purchased AI start-up Celect in 2019. These technologies have been essential to the company’s drive into the direct-to-consumer channel.

Nike also employs AI to assist consumers in finding the perfect fit, reducing returns and enhancing the user experience. In fact, Nike claims that 60% of individuals wear the incorrect size shoe, and the company developed the Nike Fit tool to address this issue. Customers may see how the shoe will appear on their foot using Nike Fit’s augmented reality, artificial intelligence, and data science techniques.

In a similar vein to Celect, the firm is enhancing the digital user experience on its website and applications by leveraging AI for data mining.

While it won’t appear on the financial accounts, technology like AI provides Nike a competitive edge. It also helps to build entry barriers against smaller sportswear firms and is a major driver of the company’s development in the direct-to-consumer channel.

Nike should continue to provide stable growth for investors and strengthen its competitive edge as it increases its use of technology and artificial intelligence.