Artificial intelligence (AI) is transforming businesses and entire industries. As companies race to leverage the power of AI, investing in the right stocks poised to benefit from this megatrend could lead to market-beating returns.
This article highlights the 10 artificial intelligence stocks to buy in 2024 based on growth potential, competitive advantages, financial strength, and overall leadership in delivering AI solutions.
Overview of Artificial Intelligence and Its Investment Potential
AI refers to computer systems or machines that can perform tasks that typically require human intelligence, such as visual perception, speech recognition, and decision-making. It encompasses everything from machine learning and deep learning to natural language processing and robotics.
Global spending on AI solutions is forecasted to grow rapidly in the coming years, from $85.3 billion in 2022 to over $204 billion by 2027. The rise of AI presents a massive opportunity for companies developing AI software and hardware. As businesses adopt AI to drive efficiency, boost sales, and gain competitive edges, investment dollars will flow into AI leaders.
How to Identify the Best AI Stocks
Several key factors help determine the most promising AI stocks for 2024:
- AI leadership– Companies at the forefront in developing innovative AI technologies and applications have an edge. First movers tend to establish powerful competitive moats.
- Financial strength – Look for AI stocks with solid balance sheets, consistent profitability, and strong cash flows to fund growth. Avoid unproven upstarts.
- Diversified offerings – AI players with diverse product portfolios and revenue streams are safer bets compared to niche players.
- Data access – The more data a company can utilize to train and improve its AI, the greater its long-term potential. Leaders have abundant valuable data.
- Cloud infrastructure – Cloud services are critical for building, deploying and scaling AI apps and models. Top cloud vendors have an advantage.
- Industry applicability – The most investable AI stocks are those providing AI solutions applicable across multiple industries and use cases.
Let’s dive into the 10 best artificial intelligence stocks to buy for 2024 based on these criteria:
1. Microsoft (MSFT)
Market Cap: $2.25 trillion
Key AI Offerings: Azure AI services, Dynamics 365 AI applications, AI infrastructure
Microsoft is a pioneer in enterprise AI software and primed to dominate business AI adoption. The company’s Azure cloud platform provides a full stack of AI services including machine learning, natural language processing, computer vision, and conversational AI tools. This enables Microsoft’s millions of business customers to easily integrate AI capabilities into their operations and offerings.
As a leading cloud vendor, Microsoft Azure has the scale, computing power, and global reach required to run data-intensive AI workloads. The company also leverages AI extensively across its own best-selling software products like Office 365 for enhanced user experiences. With trusted brands and deep integration between its cloud and software, Microsoft has unparalleled access to data for continuously improving its AI models.
Backed by steady profitability and over $100 billion in annual free cash flow, Microsoft has the financial resources to pour into next-generation AI research and development. The company is making major investments in OpenAI, signaling its ambitious AI aspirations. Microsoft’s broad AI capabilities and adoption make it a top AI stock pick for long-term investors.
2. Alphabet (GOOGL)
Industry: Digital Media/Technology
Market Cap: $1.4 trillion
Key AI Offerings: AI search, Waymo, DeepMind
Alphabet, parent company of Google and Waymo, is a dominant force in consumer and enterprise artificial intelligence. The company achieved a major AI breakthrough in 2022 with its conversational chatbot Bard. Alphabet generates abundant data from billions of Google searches which it leverages to train AI algorithms.
Google Cloud offers a suite of AI development tools and services for businesses. These include APIs for translation, speech-to-text, conversational interactions, and machine learning model building and deployment. The Google Cloud Healthcare API uses AI for tasks like medical imaging analysis.
Waymo, Alphabet’s autonomous vehicle subsidiary, relies heavily on AI and machine learning technologies. Although still in testing phases, Waymo’s self-driving trucks and ride-hailing services could someday generate significant revenue built on AI.
With its unmatched scale and over $48 billion in free cash flow annually, Alphabet has the resources to pursue numerous AI moonshots through research divisions like DeepMind and X. Alphabet’s AI leadership makes it a top tech stock for long-term growth investors.
3. NVIDIA (NVDA)
Market Cap: $600 billion
Key AI Offerings: GPUs, AI infrastructure
NVIDIA produces the most advanced graphics processing units (GPUs) used for AI modeling and inference. The company’s GPUs allow AI systems to tackle complex neural networks, computer vision, natural language, and data analytics workloads. NVIDIA GPUs, such as its flagship A100 chip, power leading AI solutions at companies like Microsoft and Google Cloud.
NVIDIA also offers end-to-end AI infrastructure including its GPU-powered DGX systems tailored for enterprise AI needs. DGX platforms integrate AI software stacks to streamline development and deployment. The company further monetizes AI via industry partnerships in autos, robotics, smart cities, and metaverse applications.
Revenue growth has accelerated significantly for NVIDIA in recent years driven by booming demand for its AI chips. With top-line growth forecast above 30% annually, NVIDIA has strong momentum fueled by AI. Its position as the AI chip leader makes NVIDIA a premier AI stock.
4. Amazon (AMZN)
Industry: E-commerce/Cloud Computing
Market Cap: $1.2 trillion
Key AI Offerings: AWS AI services, Alexa, Cashierless Go stores
Amazon is renowned for its e-commerce empire, but also operates the leading public cloud platform, AWS. Many companies develop and run AI apps on AWS leveraging its compute capabilities and database technologies. AWS offers SageMaker for building, training, and deploying machine learning models at scale.
The company’s AI assistant Alexa has over 100 million users and helps Amazon accumulate valuable consumer data. Amazon applies computer vision, natural language processing, and sensor fusion algorithms to run its cashierless Go convenience stores. In robotics, Amazon utilizes AI for warehouse automation and delivery drones.
As a cloud leader generating over $60 billion in annual operating income, Amazon has the resources to invest substantially in AI research. The breadth of Amazon’s AI innovation across retail, cloud computing, robotics, and voice makes it a well-rounded AI stock pick.
5. IBM (IBM)
Industry: IT Infrastructure
Market Cap: $125 billion
Key AI Offerings: Watson Studio, IBM Cloud
Although not as flashy as some newer tech giants, IBM remains a force in enterprise artificial intelligence. The company’s AI platform Watson provides businesses tools for building AI applications from data preparation and model building to training, deployment, and monitoring. IBM Cloud gives customers access to Watson capabilities.
IBM Cloud Pak for Data combines data science, data engineering, and AI governance capabilities for easier enterprise-scale AI adoption. The company also offers industry-specific Watson solutions tailored for functions like supply chain, healthcare, and financial services management.
Decades of working with global businesses and institutions give IBM a trove of real-world data for training its industrial AI offerings. While IBM does face growth challenges in its legacy operations, its pivot toward AI and the cloud position it well for the future.
6. Intel (INTC)
Market Cap: $140 billion
Key AI Offerings: Habana AI processors, Intel Vision products
Intel produces advanced processors and silicon optimized for AI workloads beyond its traditional computer chips. The company offers a family of Habana AI processor chips designed specifically for machine learning training and inferencing. Habana chips help businesses integrate AI into their own products and systems.
Intel also provides software libraries like OpenVINO for optimizing AI development. Its RealSense technology adds computer vision capabilities to apps and devices. Intel Arc graphics cards likewise target AI capabilities.
Through strategic acquisitions like Habana Labs and Mobileye, Intel bolsters its capabilities in AI silicon and smart mobility tech. The company brings over 50 years of engineering prowess to the AI chip space – a key advantage.
7. Micron (MU)
Market Cap: $70 billion
Key AI Offerings: Memory and storage for AI
Micron manufactures advanced memory and storage chips central to artificial intelligence systems. The company’s DRAM and 3D NAND technologies provide the memory bandwidth needed for AI model training and the storage capacity required for data-intensive AI workloads.
Micron’s portfolio of high-performance memory and storage solutions gives it an essential role in the AI infrastructure supply chain. As companies create more complex AI requiring additional data and speed, demand for Micron’s chips and components rises.
The company also leverages its own memory and storage innovations to optimize operations. This includes applying deep learning and computer vision technologies in its fabs for predictive maintenance and quality control. Micron’s foundational position supplying memory and storage for AI computing makes it a strategic AI investment.
8. Qualcomm (QCOM)
Market Cap: $140 billion
Key AI Offerings: AI processors, edge computing chips
Known for its leadership in 5G modem chips for smartphones, Qualcomm also produces advanced system-on-chips (SoCs) built specifically for AI. The Qualcomm Hexagon processor optimizes on-device AI capabilities needed for applications from image processing and natural language understanding to AR/VR experiences.
Qualcomm’s Cloud AI 100 chip accelerates AI inferencing in the cloud, while its edge computing solutions like the Neural Processing SDK target AI at the network periphery. These capabilities will enable broader AI proliferation.
With over $12 billion in free cash flow annually, Qualcomm has the financial strength to support significant R&D investment as AI chips become a bigger part of its future. Its expertise developing heterogeneous computing architectures tailors Qualcomm well for the requirements of AI workloads.
9. Applied Materials (AMAT)
Industry: Semiconductor Equipment
Market Cap: $110 billion
Key AI Offerings: Semiconductor manufacturing equipment
Applied Materials provides the advanced fabrication tools and processes needed to manufacture the silicon that powers artificial intelligence. The company’s semiconductor manufacturing equipment is crucial for making AI chips from GPUs and ASICs to memory, storage, and edge computing components.
As more powerful and specialized AI hardware comes to market from companies like NVIDIA and Qualcomm, demand for Applied Materials’ deposition, etching, metrology, and inspection technologies rises. The equipment maker also utilizes its own AI for predictive maintenance across the semiconductor supply chain.
With no debt and over $8 billion in annual free cash flow, Applied Materials has the financial capacity to support heavy R&D spending to develop equipment enabling the next generations of AI chips. Its broad exposure to AI chip fabrication makes Applied Materials a lower-risk way to invest in AI infrastructure.
10. C3.ai (AI)
Industry: Enterprise Software
Market Cap: $4 billion
Key AI Offerings: C3 AI Suite
C3.ai provides an AI application development suite used by companies like Shell, AstraZeneca, and the U.S. Air Force. The integrated C3 AI Suite allows organizations to rapidly design, develop, deploy, and operate enterprise-scale AI applications. Prebuilt AI models make the platform easier to use for AI novices.
The company also offers industry-specific AI solutions tailored for manufacturing, oil and gas, utilities, healthcare, and defense. Being application-driven with a code-free model differentiates C3.ai from AI platform rivals. Its model-driven architecture aims to accelerate enterprise AI adoption, positioning C3 favorably if it can execute.
While smaller and less proven than giants like Microsoft and Google, C3.ai targets the crucial niche of enterprise AI development which gives it enticing growth potential as an emerging AI pure-play.
Key Factors Impacting the Future of AI Stocks
Here are some of the most important factors and market dynamics that will affect the performance of AI stocks going forward:
- Pace of business AI adoption – Enterprise spending on AI software, infrastructure, and services needs to accelerate significantly to meet lofty growth projections. Slow adoption would pressure stocks.
- AI regulation – Governments may step in with AI regulations around areas like data privacy, transparency, and algorithmic bias. Excess regulation could hinder innovation.
- Talent recruitment – The AI arms race has led to intense competition for elite AI and engineering talent. Companies that can attract top talent gain an edge.
- M&A landscape – Continued AI-focused mergers and acquisitions will fuel innovation and allow companies to expand their capabilities through dealmaking.
- AI literacy – Mainstream understanding of AI’s potential but also its limitations will shape investment and adoption trends. More education can boost productive usage.
- Cloud wars – The battle between AWS, Microsoft Azure, and Google Cloud in cloud infrastructure and AI services will impact growth trajectories.
To Recap: Time to Invest in Artificial Intelligence Leaders
AI promises to reshape entire industries and drive efficiency gains over the coming decade. Now is the time for investors to gain exposure by building positions in leading artificial intelligence stocks.
The companies dominating enterprise AI adoption and providing the hardware backbone for AI stand to capture lucrative slices of this emerging market. By investing in innovators like Microsoft, NVIDIA, Alphabet, Amazon and others highlighted here, investors can aim to profit from the transformative AI wave.
Just remember that investing in disruptive tech comes with higher risk. Maintain well-diversified portfolios, and be prepared to hold through any periods of elevated volatility in these high-growth AI stocks.
FAQs About Investing in Artificial Intelligence Stocks
What are the risks of investing in AI stocks?
Some risks for AI stocks include intense competition, regulatory uncertainty, talent scarcity, security concerns, and potential hype cycles or disillusionment. High valuations for certain AI stocks also raise downside risks.
How can I gain broad exposure to AI stocks?
Investors can buy ETFs like the Global X Robotics & Artificial Intelligence ETF (BOTZ) and the ARK Autonomous Technology & Robotics ETF (ARKQ) to gain diversified exposure across AI stocks and sub-themes.
Which AI stocks have the most long-term potential?
Microsoft, Alphabet, NVIDIA and Amazon appear well-positioned for long-term leadership and growth based on their technology strengths, data access advantages, financial position, and broad applicability across industries.
What AI capabilities do Apple and Tesla offer?
Although not included in the top ten, Apple and Tesla both utilize extensive AI capabilities and should benefit from AI progress. Apple’s machine learning powers functions like Siri, Face ID, the camera, and on-device personalization. Tesla’s AI training and computer vision are critical for its autonomous driving technology.
Should I wait to buy AI stocks during a market correction?
Dollar cost averaging into quality AI stocks can help avoid timing the market. However, buying on significant pullbacks or after earnings-related volatility can improve long-term returns. Build positions gradually over time.
In another related article, The Incredible Rise of Ardelyx Stock (ARDX) – Causes, Analysis, and Future Outlook
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