By Lubomir Lekov
Artificial intelligence (AI) is currently the fastest growing segment of global markets, expected to reach $2 trillion by 2030 or an annual growth of 37%. However, these growth expectations will likely turn out to be conservative, as according to some analysts (such as ARK invest), in 2030, the artificial intelligence market will reach $14 trillion.
The reason for these over-expected growth in the AI sector is due to the success of ChatGPT. This success has led most CEOs to make it a top priority to integrate some form of AI product. Since the beginning of the year, this shift in attitudes has led to unprecedented investment in AI-related hardware and software. This was confirmed in the statements of the head of Nvidia, who stated during the announcement of the last quarterly results that there is a strong increase in orders for the next quarter (and this was the reason for the company's shares to shoot up by nearly 200% in the last 6 months). Another winner of the ChatGPT phenomenon seems to be Palantir. If the company's president, Alex Karp, is to be believed, Palantir has had a big increase in orders for their products. Investors seem to believe him, as the stock is up 150% year-to-date.
Palantir has made a name for itself in the AI sector, but in order to succeed it has to fight off Microsoft and Alphabet (Google), which currently have the most recognizable AI products. In addition to these two giants, Amazon, Meta (Facebook) and Apple are also expected to play a leading role in the AI market. Apple is not yet a recognizable AI player, but it is clear that it will have a key role in this market as well. On the other hand, Tesla, the leader in self-driving cars, could turn out to be the biggest player in the AI sector if it succeeds with the introduction of robo-taxis.
The problem is that if we now decide to invest in the companies listed above, all of them already have a huge increase in market capitalization since the beginning of this year, which for Nvidia, Tesla, Palantir, Meta is significantly over 100%. Apple, Microsoft and Alphabet also saw huge increases over this period. These companies (minus Palantir) are huge for the market, preventing their shares from continuing to rise at their current rates. This is because they become too big for the world economy, i.e. the growth of their market capitalization is limited by the growth of the world economy.
In fact, the current estimates, according to many analysts, are too optimistic, which logically leads many investors to believe that the price does not correspond to the realities, or to put it in other words - in 2023, a new bubble will "inflate" on the stock market. Therefore, it is good to look for companies that are positioned to benefit from the AI revolution, and their market capitalization allows for significant growth in the next 5-10 years. Such a company, for example, is Teladoc Health Inc., which has a huge array of data on more than 50 million users using the company's platforms, which is key to the development of a successful AI platform.
The Teladoc company was established in 2002 with the business of providing virtual medical consultations: it allows patients to remotely connect with healthcare providers via phone, video or online chat, eliminating the need to visit a healthcare facility. Teladoc has experienced rapid growth and operates in over 175 countries, with partnerships with major healthcare organizations and a network of licensed healthcare professionals. The company generates revenue through consulting fees, subscription fees and corporate partnerships.
Teladoc's value proposition lies in the company's provision of affordable and convenient healthcare services delivered through its platforms. The goal is to revolutionize healthcare by providing each patient with easy access to medical care anytime, anywhere.
Teladoc is a fast-growing company, and in 2021 its revenue exceeded $2 billion, or 86% growth on an annual basis. But this growth has a price, and its achievement is accompanied by quite a few wrong steps - such as the acquisition (with own shares) of the competitor Livongo Health Inc. for $18.5 billion in 2020, which in the following years led to huge losses. The mistake affected the company's valuation, which has fallen tenfold over the past two years, and Teladoc's market capitalization is now just $4.19 billion. This decline also opens up new opportunities for investors if the company can capitalize on its leadership positions and is able to effectively use the data accumulated by its millions of customers. First and foremost here is artificial intelligence, which in the coming years is expected to play a leading role in the medical services sector.
Using the capabilities of artificial intelligence, Teladoc has several development paths:
Improvement of the diagnostic accuracy: AI algorithms can analyze patient data, including symptoms, medical history and test results, to help doctors make diagnoses. AI-powered diagnostic tools can help identify patterns, detect anomalies, and understand problems, which increases diagnostic accuracy and efficiency.
Virtual care programs: AI can be used to develop virtual care programs that provide personalized and efficient healthcare services. AI-based chatbots and virtual assistants can interact with patients, provide basic medical advice, offer guidance on symptom management and case triage, improving access to healthcare resources and reducing the burden on healthcare professionals.
Remote patient monitoring: AI-enabled remote patient monitoring systems can continuously collect and analyze patient data such as vital signs, activity levels and medication adherence. AI algorithms can detect trends, identify potential health risks and alert healthcare providers to proactively intervene, leading to improved patient outcomes and reduced readmissions.
Predictive analytics: By applying AI algorithms to patient data, Teladoc can develop predictive models that predict disease progression, identify high-risk individuals and provide personalized recommendations for preventative care. Predictive analytics can help identify potential health problems before they escalate, leading to early intervention and improved patient outcomes.
Natural language processing for transcriptions: these technologies can be used to transcribe and analyze patient-physician communication during virtual consultations. This enables easier documentation, conversation analysis and retrieval of relevant medical information, improving workflow efficiency.
Integrating AI into Teladoc's services can improve efficiency, accuracy and patient experience while optimizing healthcare delivery. It is critical to ensure patient privacy, data security, and ethical considerations when implementing AI technologies in healthcare settings.
The listed AI capabilities for Teladoc are an example of how a company can be "preemptively" analyzed in the age of artificial intelligence. In other words, if Teladoc manages to take advantage of the business development opportunities provided by AI, we can expect a big growth in the shares. However, if Teladoc fails to adapt, it is clear that nothing good can await the shareholders of this company, because some younger company will be able to make an AI breakthrough in virtual medical services and Teladoc will remain in history.
In conclusion: The integration of AI products is a priority for most companies, leading to significant investments in hardware and software. "Giants" such as Microsoft, Alphabet, Amazon, Meta, Nvidia and Apple are expected to play a leading role in this key industry and are likely to bring good income to their investors.
However, the current valuations of these companies are too high - the combined market capitalization of these six companies is $10.2 trillion (or 27% of all SP500 companies), and this limits the growth of their share prices.
Therefore, if we want to take advantage of the revolution in artificial intelligence more aggressively, but with greater risk, we should look for undervalued companies (like Teladoc) that in the coming years have the opportunity to achieve high revenue growth if they integrate successfully artificial intelligence in their products.