Microsoft
Tech giant Microsoft (MSFT) has been aggressively expanding its lead in several key technologies over the past decade. Its acquisition of Github in 2018 cemented its position within the software development community. The acquisition of Activision Blizzard and Minecraft makes it a key player in the gaming industry too.
Perhaps the company’s best strategic move was acquiring a significant stake in OpenAI. It now has a claim over 75% of OpenAI’s profits from ChatGPT and other artificial intelligence products for the foreseeable future.
The company also recently launched its own custom-built semiconductor chip focused on AI applications. These investments are a key reason why Microsoft’s stock has surged over 900% since Satya Nadella took over.
The company spent $26.6 billion on R&D in 2022, an increase of 19.7% on the previous year, according to fDi Intelligence.
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Meta
Meta (META) has had a difficult few years. The stock has surged almost 160% year to date but is still trading below its all-time-high of $382.18 reached in 2021. The company has faced growing pressure from regulators in the U.S., European Union, Canada and Australia, which has kept a lid on its growth potential.
This has pushed the company to focus on internal development instead of acquisitions. In recent years, Meta has released an open-source competitor to OpenAI’s ChatGPT as well as an augmented reality headset that dominates the nascent industry. The company announced its focus on the metaverse in 2021, but last year said its “single largest investment” is in advancing AI. These efforts demonstrate its commitment to being at the bleeding edge of technology.
The company increased its R&D spending by 43% to $35.3 billion last year, according to fDi Intelligence.
Meanwhile, the firm is robustly profitable. It generated $11.6 billion in net income in its most recent quarter. At the same time, the stock is undervalued. Meta trades at 29.32 times earnings per share while Microsoft and Tesla trade at 36.67 and 78.45, respectively.
Tesla
Elon Musk’s ambitious targets for clean energy and electric vehicles have made Tesla (TSLA) a Wall Street darling. Not only was the company early to the EV race, but it also understood the value of collecting data to train its self-driving AI ahead of the competition.
Tesla’s self-driving features now rely on a wealth of data collected from its fleet over the years. Despite this, the company seems to have fallen behind. While Musk has been promising robotaxis since 2019, Waymo and Cruise already have driverless cars on the roads in some cities. Even Tesla admitted it lost the lead here.
Meanwhile, the car maker is on course to lose its EV market dominance too. Last quarter, Chinese automaker BYD was just 3,000 units short of becoming the world’s biggest seller of EVs.
This is why Tesla’s stock has lost 41% of its value from its peak in November 2021. At the start of this year, valuation expert Aswath Damodaran, a professor of finance at New York University, estimated the stock was worth just $130. If Musk can address these challenges and deliver on his ambitious promises, it could see a strong rebound.
Tesla's spending on R&D in 2022 was at $3.08 billion, according to fDi Intelligence. This translates to less than 4% of its annual revenue.
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