The era of artificial intelligence (AI) is well underway, proving to be a lucrative opportunity for early-bird investors who recognized its potential. Tech giants like Nvidia (NASDAQ:NVDA) have seen their stock prices multiply manyfold in a short span, underscoring the appeal of staying invested in the tech sector despite the possibility of rising interest rates.
Rather than fixating solely on a handful of AI trailblazers that have dominated recent quarters, investors should broaden their perspective. While the “Magnificent Seven” of mega-cap tech corporations warrant attention, it’s equally important to identify undervalued segments of the market where the long-term influence of AI technology remains underestimated.
Nvidia’s extraordinary growth has made it a prominent AI player. However, considering its remarkable surge, it’s reasonable to speculate whether Nvidia’s prime opportunity has already passed. For those keen on anticipating the next big thing, Apple (NASDAQ:AAPL) and Spotify (NYSE:SPOT) emerge as noteworthy contenders with untapped AI potential. Interestingly, both companies are fierce rivals in the realm of music streaming, a landscape that could evolve significantly with the ascent of generative AI.
Apple, known for its cutting-edge devices, experienced a substantial correction in its stock value following a quarterly earnings report that revealed a shortfall in iPhone sales. Despite its market cap no longer towering at $3 trillion post-slump, it’s premature to dismiss a company capable of emerging as a major AI innovator in the decade ahead.
Apple isn’t often the first stock that springs to mind in AI discussions, especially compared to its peers in the “Magnificent Seven.” Admittedly, Apple’s AI assistant Siri trails far behind the capabilities of ChatGPT. Although Apple hasn’t generated attention-grabbing AI revelations on par with other tech giants, and despite Siri’s current limitations—criticized even by Microsoft’s CEO Satya Nadella as being “dumb as a rock”—Apple remains a force in AI innovation.
Rather than trumpet each AI advancement, Apple’s modus operandi is subtler. It doesn’t need to court an audience of enthusiastic investors; it’s Apple, the world’s foremost corporation. In fact, Apple might prefer to temper its stock price surge, given its penchant for significant stock buybacks.
Recently, Apple discreetly introduced its Discovery station on Apple Music to outshine its primary competitor, Spotify. As Apple capitalizes on AI to cater better to its service users, the scales could continue tipping in Apple’s favor.
Spotify, too, invests substantially in AI to enhance user experiences, a crucial strategy in the face of escalating competition in the music streaming sector. The company’s adept music discovery algorithms have garnered a loyal user base, making it increasingly challenging for rivals to entice Spotify Premium users to switch.
Despite a notable decline in the past month following its second-quarter earnings release on July 25th, I believe this setback is a temporary blip and presents a “buy the dip” opportunity.
Looking ahead, AI might guide the Swedish music streaming giant into uncharted territories. Spotify recently unveiled plans to expand its AI-driven DJ feature to 50 countries, a move that could pique significant interest. However, whether this will be enough to entice Apple Music users to jump ship remains uncertain.
Meanwhile, I’m optimistic about Spotify’s AI journey. Earlier this year, the company discreetly acquired Sonantic, an AI startup specializing in text-to-speech technology. Such a purchase could potentially transform an AI DJ into a resounding success.
In conclusion, both Apple and Spotify, despite their rivalry in the music streaming arena, are harnessing AI’s potential to enhance and diversify their premium services. With their stock prices retreating alongside the Nasdaq 100 Index ($IUXX), the current dip seems like a prudent opportunity for investors to consider buying in.
Featured Image: Freepik @ rawpixel.com
Author Faith Yakubu 
