The Internet of Things (IoT) has often been heralded as a game-changing development that will redefine how businesses operate and people live. Intelligent machine systems conjure up the image of talking computers aboard spaceships and free-thinking robots that used to be strictly confined to the realm of science fiction in years past. New technologies that fall under the IoT umbrella, however, are beginning to blur the line between reality and fantasy. The current level of development in artificial intelligence (AI) is still a far cry from the threat of sentient robots on the brink of rebellion. That said, investors looking for a promising catalyst of long-term growth will want to keep an eye on companies that are making inroads in this arena.

Big Blue

International Business Machines (IBM Free IBM Stock Report) has a long history of spearheading revolutionary new technologies in machine computing and AI. As a developer of world class supercomputers, it was also the creator of Deep Blue, the first AI system that was able to defeat a reigning chess champion. The company is currently pouring resources into its Watson IoT offerings, undoubtedly hoping to recapture some of its former glory as a high-growth tech leader. Indeed, in 2015 the company announced a $3 billion investment in IoT and a new global headquarters for its Watson business in Munich, Germany.

IBM actively markets its Watson question-answering computer system as a tool that can help people analyze data and come up with better solutions. To do so, the system couples several different technologies, which include natural language processing, information retrieval, knowledge representation, automated reasoning, and machine learning. In 2013, it received its first commercial application, which involved assisting nurses with utilization management and treatment decisions.

The Watson platform has spread its tendrils since then, and is currently being used in a variety of different environments that can take advantage of its ability to make deductions and inferences. IBM recently announced a multiyear agreement with KONE, in which its Watson IoT Cloud Platform will monitor and optimize KONE’s worldwide management of millions of elevators, escalators, doors, and turnstiles. Meanwhile, Fingrid, Finland’s main electricity transmission grid operator, has selected Watson to help automate its maintenance scheduling and management. Also, IBM recently released Quarks, a breakthrough technology that will allow the open source community to embed streaming analytics into IoT devices.

Alphabet Soup

Alphabet Inc. (GOOG), the parent company of Google, the world’s most popular search engine, is also no stranger to predictive analytics. For many years, the company’s core advertising revenues have benefited from its unparalleled ability to collect and analyze information from not only Web sites, but also consumers. This advantage has allowed it to amass substantial financial resources that are being used to explore a broad array of diverse AI-related technologies.

Among the most noteworthy is its widely publicized self-driving car project. Its automated cars have already logged over one million miles and have a surprisingly good safety record for such a new technology. Along with Tesla (TSLA) and possibly other companies such as Apple (AAPL Free Apple Stock Report), Alphabet is purportedly planning on a market-viable product by 2020.

In addition to its internal pipeline of projects at its secretive Google X division, Alphabet has acquired a dizzying array of smaller companies that specialize in AI, IoT, and robotics. DeepMind, a promising British artificial intelligence company, was acquired by Google in 2014. In October 2015, its AlphaGo computing system managed to defeat Europe’s reigning Go champion. Go, an ancient Eastern strategy game, contains an exponentially higher number of possible moves than chess. As a result, traditional deductive and brute force computing systems have struggled with Go’s seemingly endless permutations of moves. AlphaGo, however, utilizes deep machine learning that has allowed it to mimic human-like decision making. Another program that utilizes deep-learning techniques is Google’s recently unveiled PlaNet project. This promising program is able to identify the geographic location where a photo is taken, and already has a higher accuracy rate than humans.

Machine Intelligence is Inevitable

Although fully sentient machines will likely remain a pipe dream for many decades, AI-enabled devices will become more pervasive over time. From home energy monitoring to personal fitness trackers, the current crop of IoT products is already capable of transmitting and receiving data that can be analyzed. Too, many newer smart devices feature interactive voice assistants such as Apple’s Siri, Google Now, Cortana from Microsoft (MSFT Free Microsoft Stock Report), and Alexa from Amazon.com (AMZN). For the moment, these pseudo-AI technologies only offer a limited ability to learn. This should change, however, as algorithms become more complex.

The advent of computers and the Internet redefined the way that people work and consume entertainment, but new AI-enabled technologies promise to have an even bigger impact on our daily lives. As this occurs, businesses that are leading the charge into this uncharted territory ought to encounter many lucrative growth opportunities. Investors will want to keep this trend in mind as they identify candidates for their long-term holdings. IBM and Alphabet are two of the larger players in this space, but other quality companies also exist. For more information about the companies mentioned above and other possible investment opportunities, subscribers ought to check out our full reports in The Value Line Investment Survey.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.