3 companies quietly amassing treasures of data
In the past, investors relied on managers to make good trading decisions based on their extensive personal experience. But we are now living in the early days of the big data trend. Artificial intelligence (AI) can analyze data sets much larger than those of more experienced managers, resulting in better informed and actionable insights.
For proof of the big data trend, consider that only 2 zettabytes (i.e. more than 2 billion terabytes) of data were created around the world in 2010, according to Statista. But in 2020, data creation was estimated at 59 zettabytes. And it’s expected to continue growing at a compound annual rate of 26% by 2024, reaching 149 zettabytes of data created globally in that year alone.
This wave of data creation doesn’t just come from uploading photos and videos to social media. Many of our devices also create their own data. However, much of the 59 zettabytes is still unstructured data and therefore we cannot draw any useful conclusions from it yet. That’s part of why data analytics and artificial intelligence are such hot tech trends.
Overall, I think companies with large datasets will have an advantage as data analytics and AI improve and grow from here. In this context, here are three companies that are quietly amassing treasures of data.
Image navigation platform Pinterest (NYSE: PINS) made 10 predictions in early 2020. For example, the company predicted that people would decorate their homes with inspiration from all over the world. Last year, there was a 160% year-over-year increase in searches on the Pinterest platform for Indian-inspired living spaces. There was also a 120% year-over-year increase for Japanese bathtubs.
How did Pinterest predict this trend and others? He simply watched how related research topics were evolving on his platform and ultimately predicted which trends would become mainstream. Now, the company applies the same criteria used to predict trends for 2020 to predict even more trends for 2021.
This is important for two reasons. First, Pinterest generates its revenue by displaying advertisements. Second, the company is increasingly integrating with e-commerce portals. By knowing the current trends, he can better inform brands of what people want, guide product development and the effectiveness of advertising. In short, Pinterest could be a good sneaky choice for AI titles.
Have you noticed how PayPal funds (NASDAQ: PYPL) is expanding into new business verticals? From launching cryptocurrency services to adding buy it now, pay later options, the company has been very busy lately. During the conference call to discuss the 2020 results, CEO Dan Schulman explained that the overarching goal of these new services is to increase the total volume of payments on the platform – the amount of transactions that pass through its pipes.
PayPal has the ability to glimpse an unprecedented amount of data on consumer spending and transactions. This is important because the company doesn’t just provide services to people like you and me; it also has a healthy and growing business activity. In 2020, he added 1.4 million new merchant accounts, bringing his total to over 29 million.
At PayPal’s Investor Day event in February, Schulman said, “We have a platform with hundreds of millions of consumers basically saying to the merchant, ‘This is what I want.’ In the near future, the company intends to provide its merchants with tools to improve their marketing capabilities based on this valuable consumer data. And given that it expects to have over 750 million users by the end of 2025, PayPal’s data will be more comprehensive than that of most other fintech companies.
Take the latter with a grain of salt, because Nano-X Imaging (NASDAQ: NNOX) does not yet technically collect data. The company hasn’t even launched its flagship product yet.
What is its flagship product, you ask? Nanox intends to produce a machine called Nanox.ARC, which will provide digital imaging technology comparable to traditional x-rays but at a fraction of the cost. Earlier this month, the company received clearance from the Food and Drug Administration for the single-source version of its Nanox.ARC. But now he’s starting the approval process for his multisource Nanox.ARC, the more powerful version of the two and the one Nanox intends to bring to market.
Many investors are excited about the differentiated business model. Nanox plans to price its Nanox.ARC machines affordably, or even make them free, to deploy 15,000 over the next four years. From there, he intends to generate high-margin recurring revenue by charging license fees every time the machine is used. The potential of this business model is exciting. But maybe I’m more excited about what Nanox could do with its potentially very large data set.
Nanox says it is developing partnerships with AI companies to analyze large data sets. Consider that deciphering medical information is not as easy as it sounds. For example, a 1999 study of mammograms suggested that mammograms sometimes unintentionally overlook warning signs found in images because they lack constructive feedback whenever they misinterpret the data. In other words, mammograms struggle to improve because no one tells them when they’re wrong.
More recently, IBM published a study acknowledging how difficult it is for radiologists to cope with their growing workload, but also noting that AI is proving it can decipher X-ray data as well as people can.
Nanox expects each of its machines to be used approximately 161 times per month. With 15,000 machines, the company could be sitting on a gargantuan medical imaging dataset in a few years. It remains to be seen how this could be monetized. But based on the two previously cited studies, I submit to you that a dataset of this size has more than monetary value: AI could use it to improve human health, and that’s something that i can support.
Betting on Big Data
Based on the zettabytes of data our world is creating, I think there are many companies that follow the big data trend are worth investing in. I love Pinterest and PayPal today, in part because their tons of data has immediate application to their core businesses. Nanox is a much more speculative stock, and its business may never start. That said, if it executes its stated plan, it could be another strong company in an increasingly data-driven world.
This article represents the opinion of the writer, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.