The shares of companies directly associated with artificial intelligence (AI) have soared in 2023. Meta, Nvidia and Tesla have all notched triple-digit gains this year. Meanwhile, many smaller AI stocks have also risen dramatically.
Here, I’m going to look at two FTSE 100 companies that don’t often get associated with AI, but which are already harnessing the technology in powerful ways.
Ocado
First up is Ocado (LSE: OCDO), the online grocer that also builds automated warehouses for large supermarkets around the world.
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Now, I’ll admit that when I see those purple Ocado delivery vans driving about, I don’t immediately think of cutting-edge technology. But the assembly of those grocery orders rests on robotics, artificial intelligence, machine learning, and data science.
As Ocado puts it: “We use AI to make possible in seconds what even many thousands of humans working together can’t.” It specifically uses the technology to manage stock levels and limit food waste.
Plus, its armies of warehouse robots pick the correct grocery orders thanks to an AI-powered ‘air traffic control’ system. This makes hundreds of decisions a second, directing the ‘swarm’ of bots around a 3D grid like a giant game of Tetris.
The result, according to the company, is that a 50-item order is picked in five minutes compared to an hour by a human in a store.
Finally, those delivery vans might be due a futuristic upgrade soon. That’s because Ocado, in partnership with London-based tech firm Wayve, is currently trialling driverless delivery vehicles across London.
These self-driving vehicles use camera technology and artificial intelligence to navigate congested city streets.
After rising 79%, Ocado is the FTSE 100’s top-performing stock over the last three months. However, over a three-year period, the shares are down nearly 60%.
While the company is still losing money, which certainly adds risk, I’m going to invest in the stock this month.
AstraZeneca
When thinking of AI, ‘big pharma’ companies like AstraZeneca (LSE: AZN) probably don’t instantly spring to mind.
Yet data is the fuel for AI, and the pharmaceutical industry is built around data (from research and development to clinical trials). And more data has been created in the past couple of years than in the entire history of humanity.
Currently, it takes more than a decade and typically costs between $1bn and $3bn to discover and make a new drug. Yet 90% of drugs fail in clinical trials. So the opportunity for AI to improve this statistic through superior drug discovery seems significant.
Already AstraZeneca is using sophisticated AI-based computer models to find the most promising molecules. This could get medicines to market much more quickly and cheaply.
Of course, if high-profile clinical trials don’t succeed, the share price can take a hit. This happened recently when AstraZeneca reported mixed results from its phase 3 trial for datopotamab deruxtecan, a potential new drug for lung cancer.
However, the firm has a huge pipeline of 178 projects across the areas of cancer, cardiovascular, kidney, and rare and respiratory diseases. This means it’s incredible well-diversified, with multiple shots at goal.
Plus, the stock is trading on a forward-looking price-to-earnings (P/E) ratio of 18, which I consider reasonable.
If I didn’t already have significant exposure to the healthcare space, I’d add AstraZeneca shares to my ISA today.
