Summary: Artificial intelligence (AI) is the next big thing in tech and an enticing asset for many investors looking to gain exposure to computing, engineering, transportation, and many other industries. Consequently, if the demand for AI keeps growing, investing in AI stocks could become a good way to diversify your portfolio. To invest in artificial intelligence stocks, you can use a licensed commodity-exchange platform, such as eToro.
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What is artificial intelligence?
Artificial Intelligence
AI technology has seen significant advancements in recent years, profoundly impacting a number of sectors. Nowadays, AI can perform actions involving learning, problem-solving, as well as language learning comprehension and generation. That makes AI a vital tool in healthcare, finance, robotics, transportation, and many other industries.
Artificial intelligence stocks as an investment option
Investor interest in AI stocks has skyrocketed thanks to the transformative nature and potential of AI technology. In fact, over 70% of UK investors now believe tools like ChatGPT will be able to give profitable financial advice in the future, and Wall Street analysts are not withholding their judgments either, showing both skepticism and interest in the new commodity.
In short, the future of AI is uncertain. However, that has not stopped investors with a bit higher risk tolerance from trying to capitalize on the hype. Indeed, in the first half of 2023, the NASDAQ composite saw a 33% increase thanks to excitement surrounding AI, which was its best year since 1983.
Consequently, if the rapid growth and demand for AI solutions continues, chip manufacturers, software developers, banking organizations, and businesses in many other sectors might very well stand to benefit significantly in the long run.
So, if you are ready to take a risk and give the new big thing on the market a shot, we’ve prepared a list of the top 5 most promising AI-related stocks to invest in down below.
Top AI stocks to buy in 2024:
Heading into 2024, the top five AI investment choices are:
- Microsoft (NASDAQ: MSFT);
- Amazon (NASDAQ: AMZN);
- Alphabet (NASDAQ: GOOG);
- Nvidia (NASDAQ: NVDA);
- C3ai.inc (NYSE: AI).
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1. Microsoft
The company’s AI focus: Varied
2023 Q4 Market capitalization: $2.45 trillion
Microsoft has gained a lot of exposure to the AI market thanks to its partnership with OpenAI and its $10 billion investment into ChatGPT, which now powers the new version of the Bing search engine.
In light of their success with ChatGPT, Satya Nadella, the company’s CEO, has stated that Microsoft plans on incorporating AI in virtually all of its products. Moreover, in April 2023, when the company’s shares were reported to have gone up by 8.3%, beating Wall Street estimates by +$0.22, the company ascribed its success to AI features. However, OpenAI recently launched its new enterprise-level ChatGPT model, a product independent from and in direct competition with Microsoft and its Bing Chat Enterprise. Is Microsoft going to work harder in the AI sector now that the competition is higher?
Naturally, as Microsoft is a tech giant with a well-established presence in various industries, including gaming and video streaming, Nadella’s future plans will open a large window of opportunities for investors looking to gain exposure to the AI market, especially those who want to invest in private companies like OpenAI indirectly.
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2. Alphabet
The company’s AI focus: Varied
2023 Q4 Market capitalization: $1.75 trillion
Alphabet, the parent company of Google, is one of the largest tech companies in the world, and one of the behemoths of the AI industry, now even taking a shot at the autonomous vehicles (AVs) market and introducing its own chatbot Bard.
Over the years, Alphabet has invested over $30 billion in AI start-ups, such as Anthropic, a company consisting of former OpenAI employees, which received $300 million dollars from Google in 2022.
The company’s interest in AI is not surprising. After all, Alphabet is in a favorable position to harness the potential of this kind of technology, being virtually synonymous with internet search engines and browsing software.
Moreover, given its strong presence in advertising and mobile software development, Alphabet is in constant direct contact with the user, which allows it to exert a strong influence on market sentiment and adapt to it whenever needed.
However, being cautious when investing is still advised. For one, Google has been the focus of a number of anti-trust lawsuits in Q1 2023, and two, the company does not give dividends to shareholders.
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3. Amazon
The company’s AI focus: Text-to-speech (TTS), e-commerce
2023 Q4 Market capitalization: $1.59 trillion
Although some have criticized it for falling behind its competitors, Amazon appears to be rather confident in its ability to keep up with the AI race, with CEO Andy Jassy ensuring the critics that the company is all about substance, not hype.
Indeed, Amazon employs artificial intelligence across various facets of its business. From the famous voice assistant Alexa to the cashier-less grocery stores of Amazon Go and to Amazon Polly, one of the most widely used text-to-speech solutions, AI plays a significant role.
However, predicting how much of an impact Amazon is going to have on the AI industry is difficult in light of some of the problems the company has been facing. For example, Amazon laid off 9,000 workers in March 2023 alone, and some of its services relying on AI, such as its Fresh supermarket and Go convenience stores, have come to a halt.
On the other hand, the fact remains that Amazon has been a consistent frontrunner in adopting emerging digital technologies, including cloud computing, which now heavily relies on artificial intelligence models. Amazon Web Services (AWS), for example, stands as one of the largest tech companies in the world. It offers an array of services, including machine learning and artificial intelligence, and it generated 88 billion US dollars in 2023 net sales.
This kind of flexibility has enabled Amazon to adapt and venture into new business domains over the years, so many investors are eagerly awaiting to see what the future will bring for the company.
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4. Nvidia
The company’s AI focus: Graphics cards
2023 Q4 Market capitalization: $1.04 trillion
Although known primarily for its focus on graphics processing units (GPUs), Nvidia is now mostly focused on AI, both because machine learning requires a lot of processing power Nvidia’s chips can provide and because the company showed a lot of support for the pioneers in the AI industry.
In fact, in May 2023, the company announced a revenue outlook of $11.00 billion for Q2 of fiscal 2024. Judging by the data center report, AI is one of the main factors responsible for the company’s revenue and growth potential. Among the most promising announcements was the collaboration with Google, whose Cloud services now offer Nvidia’s new L4 Tensor Core GPU meant to give generative AI apps a significant boost.
Additionally, Nvidia introduced its AI Foundations service to help enterprises develop custom AI language and generative AI models, announced a partnership with ServiceNow, and presented plans for integrating its AI Enterprise software with Microsoft’s Azure to ensure the acceleration of mutual AI interests. Moreover, it now collaborates with Dell Technologies on developing various enterprise-level solutions.
However, new investors looking to capitalize on the growth of the AI market will likely be put off by Nvidia’s stock prices. That is, while the company might have dominated NASDAQ-100, and while the share value seems to be going up, the projections and expectations the stock exchange market has put on the company could easily prove too much for it. That is especially true if some of the investor concerns prove justified, for example, those in regard to chip export restrictions.
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5. C3ai.inc
The company’s AI focus: Enterprise-scale AI apps
2023 Q4 Market capitalization: $3.04 billion
Although it is not a household name for AI the way, say, OpenAI is, C3.ai has made our list of the top 5 AI-related stocks for two reasons. One, AI is its sole focus, and two, thanks to its software solutions that help users develop their own code, which makes C3ai a highly attractive investment option for traders looking to capitalize on the opportunities presented by AI within a very specific industry.
Still, it must be said that C3ai has been known to perform poorly in the past. In fact, it has recently been labeled a consistently unprofitable company, despite the surge in popularity its stock had seen early in the summer of 2023. In other words, C3ai stocks are volatile.
Consequently, even though the company has seen a 5.6% year-on-year improvement between fiscal 2022 and 2023, it is more than possible that the company’s performance might take a nosedive, especially short term.
Nevertheless, it remains to be seen what kind of impact C3ai’s Enterprise search feature is going to have on the market. This generative AI product suite enables users to utilize a natural language interface to efficiently and securely locate and retrieve relevant data from all of their information systems.
This is a step further away from the chat models we have come to know in recent years, and CEO Tom Siebel believes it has the potential to revolutionize enterprise AI solutions, saying:
“This is kind of a non-obvious use of generative AI. This is not about chat, okay? This is about enterprise search. And we believe that this invention represents a breakthrough development that will dramatically facilitate the ease of use and explainability of enterprise AI applications.”
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Pros and cons of investing in artificial intelligence stocks
Pros
- High growth potential;
- Potentially transformative technology;
- AI has uses in most industries nowadays.
Cons
- The public is raising a lot of concerns about the technology;
- Some of the companies most invested in the AI sphere are under constant lawsuit pressure;
- The industry is still not completely regulated;
- The market is changing quickly and can be highly competitive.
Conclusion
The advent of AI technology has revolutionized both our personal and professional lives, giving us both food for thought and presenting us with enticing new investment opportunities. As far as we can tell, the momentum the AI industry has picked is showing no signs of waning, with AI spending projected to double to more than $300bn by 2026, according to IDC.
However, caution is necessary when investing in AI stocks, given the fact that hype is still the main driving force behind the technology. Therefore, before committing to artificial intelligence stocks, investors should conduct enough research on the market and the company they wish to invest in.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
FAQs about artificial intelligence stocks
What are artificial intelligence stocks?
In short, AI Stocks are shares in companies that focus on the development and use of AI or invest in other companies that do so.
Can you buy artificial intelligence stocks?
Yes, you can buy AI stocks. More precisely, you can invest in companies that focus on or invest in AI technology.
What are the best AI stocks to invest in?
Some of the most widely bought AI stocks include Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), C3ai.inc (NYSE: AI), and Alphabet (NASDAQ: GOOG).
Should you invest in AI?
Investing in AI could be a good way to diversify your portfolio, considering the industry is evolving and growing quickly thanks to its innovative technology. However, the AI industry can also be somewhat volatile. Therefore, due diligence, research, and high risk tolerance are mandatory.
What are some artificial intelligence stocks under $10?
For penny AI stocks, check out our guide on 3 artificial intelligence penny stocks to buy in 2024.
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