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Artificial Intelligence (AI) is rapidly gaining focus, especially after the release of ChatGPT and similar apps. The AI technology field is young but promising, and investors are always on the lookout for the next big thing in this innovative space.

Financial experts and analysts are optimistic about the prospects of these AI stocks, some of which have already delivered remarkable returns over the past year. With the right combination of software, hardware, and data access, these companies are poised to dominate the AI landscape and offer significant returns in 2024 and beyond.

Some of the most popular Artificial Intelligence ETF include Global X Artificial Intelligence & Technology ETF (AIQ), Global X Robotics & Artificial Intelligence ETF (BOTZ), Roundhill Generative AI & Technology ETF (CHAT), First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) and iShares Robotics and Artificial Intelligence Multisector ETF (IRBO).

Key Takeaways:

• AI technology is revolutionizing industries, creating significant investment opportunities
• The top 7 AI stocks for 2024 include leaders in hardware, software, cloud computing, and cybersecurity
• Diversification across different AI applications is crucial for a balanced investment strategy

What is Artificial Intelligence Stock?

An AI stock represents a company that develops, utilizes, or significantly benefits from artificial intelligence technologies. These companies may specialize in various AI subfields, such as machine learning, deep learning, natural language processing, computer vision, robotics, and cognitive computing. AI stocks span diverse industries, including technology, healthcare, finance, automotive, and manufacturing.

Artificial Intelligence Market Growth:

• The Artificial Intelligence (AI) market is witnessing rapid growth and is projected to reach a market volume of $826.70 billion by 2030, growing at a CAGR of 28.46% from 2024-2030. statista
• The global AI market size is expected to grow from $214.6 billion in 2024 to $1,339.1 billion in 2030, at a CAGR of 35.7% during the forecast period. marketsandmarkets
• North America currently has the largest market share at 43%, driven by the presence of leading tech giants and favorable government initiatives. Asia Pacific is expected to be the fastest growing AI market, with a projected CAGR of 42% from 2022-2030. nqr.gov.in

Artificial Intelligence market is poised for substantial growth in the coming years, driven by technological progress, industry demand, and supportive government initiatives across regions.

Performance Comparison of Top Artificial Intelligence Stocks

7 Best Artificial Intelligence Stocks to Buy

With that primer on artificial intelligence, let’s now look at 7 of the best AI stocks that are well-positioned to benefit from the proliferation of AI. The companies we have listed are based on hedge fund interest, using data from Insider Monkey’s Q2 2024 report.

1. NVIDIA Corp (NVDA)

Number of Hedge Fund Holders (Q2 2024): 180

NVIDIA has established itself as the undisputed leader in AI hardware, particularly in the realm of graphics processing units (GPUs) that power complex AI computations. The company’s innovative chip designs and software ecosystems have made it an indispensable player in the AI revolution, powering everything from autonomous vehicles to large language models. NVIDIA’s dominance in this space makes it a cornerstone of any AI-focused investment portfolio.

NVIDIA’s second-quarter fiscal 2025 results showcase the company’s dominance in AI technology, with data center revenue soaring to $26.3 billion, a 154% year-over-year increase. This growth reflects the surging demand for AI infrastructure and solutions across industries.

The company introduced several AI innovations, including the NVIDIA H200 Tensor Core GPU and Blackwell architecture B200 Tensor Core processors, which excelled in industry-standard MLPerf benchmarks. NVIDIA also unveiled the AI Foundry service and NIM inference microservices to accelerate enterprise adoption of generative AI.

According to insidermonkey, Citadel Investment Group, led by Ken Griffin, holds approximately $18.4 billion worth of NVIDIA Corp (NVDA) stock, totaling 148,546,600 shares.

NVIDIA’s AI advancements extend beyond hardware, with the introduction of NVIDIA ACE for lifelike digital humans and Project G-Assist for real-time AI assistance in gaming. The company’s focus on AI-driven solutions spans various sectors, including robotics, automotive, and professional visualization, positioning NVIDIA at the forefront of the AI revolution.

According to Wall Street Analyst on NVDA stock. Of the 62 analysts following the stock, 49 give it a Buy and 4 has it at Hold.

Why We Picked NVIDIA Corp:

NVIDIA’s unparalleled position in AI hardware makes it a top pick for 2024. The company’s GPUs are essential for training and running AI models, and demand is expected to surge as AI applications proliferate. NVIDIA’s consistent innovation, strong financial performance, and expanding software offerings provide a compelling growth story in the AI sector.

2. Alphabet Inc. (GOOGL)

Number of Hedge Fund Holders (Q2 2024): 388

As the parent company of Google, Alphabet is at the forefront of AI research and implementation. Its vast data resources, world-class research teams, and advanced AI capabilities give it a significant edge in the AI race. From search algorithms to autonomous driving technology through Waymo, Alphabet’s AI innovations touch numerous aspects of our digital lives. The company’s deep integration of AI across its product suite positions it as a formidable player in the AI stock market.

Alphabet’s Q2 2024 results highlight the company’s AI-driven growth. Revenues reached $84.7 billion, up 14% year-over-year, with Google Search generating $48.5 billion and Cloud achieving $10.3 billion. CEO Sundar Pichai emphasized their focus on AI innovation across all technology levels, from infrastructure to research teams.

Google Cloud marked a milestone, exceeding $10 billion in quarterly revenue and $1 billion in operating profit. This represents 29% year-over-year growth for Cloud, demonstrating increasing demand for AI-powered solutions. The segment’s operating margin improved to 11.3%, up from 4.9% the previous year.

According to insidermonkey, Fisher Asset Management, led by Ken Fisher, holds 48.6 million shares of Alphabet Inc. (GOOGL), valued at approximately $8.9 billion.

Alphabet’s commitment to AI is evident in their restructuring, consolidating AI model development under Google DeepMind. R&D expenses increased to $11.9 billion, up 12% year-over-year, largely due to AI investments. The company maintained a strong financial position with $100.7 billion in cash and marketable securities, enabling continued AI research and development.

According to Wall Street Analyst on GOOGL stock. Of the 63 analysts following the stock, 42 give it a Buy and 12 has it at Hold.

Why We Picked Alphabet Inc.:

Alphabet’s diverse AI portfolio and massive data advantage make it a standout choice. The company’s AI innovations drive its core advertising business and open new revenue streams. With DeepMind’s cutting-edge research and Google Cloud’s AI services, Alphabet is well-positioned to capitalize on the growing demand for AI solutions across industries.

3. Amazon.com, Inc. (AMZN)

Number of Hedge Fund Holders (Q2 2024): 313

Amazon leverages AI across its e-commerce platform, cloud services, and consumer devices, making it a diversified play in the AI space. The company’s AI-driven recommendation engines power its retail operations, while Amazon Web Services (AWS) provides crucial AI and machine learning tools to businesses worldwide. With AI also driving innovations in its logistics network and consumer devices like Alexa, Amazon represents a multifaceted approach to AI investment.

Amazon’s Q2 2024 results reveal a strong focus on AI integration across its platforms. The company reported a 10% increase in net sales to $148.0 billion, with AWS experiencing significant growth, driven by AI-related services.

New AI-powered features like Rufus and Maestro showcase Amazon’s commitment to enhancing user experiences through intelligent automation. These innovations span shopping, music, and entertainment sectors, demonstrating the company’s broad application of AI technologies.

According to insidermonkey, Fisher Asset Management, led by Ken Fisher, holds 43.8 million Amazon shares worth $8.5 billion as of the latest filing.

Amazon’s expansion of its Bedrock platform to include models from Anthropic, Meta, and Mistral highlights its strategy to remain at the forefront of AI development. This move, along with advancements in SageMaker, positions Amazon as a key player in the evolving AI landscape.

According to Wall Street Analyst on AMZN stock. Of the 64 analysts following the stock, 53 give it a Buy and 3 has it at Hold.

Why We Picked Amazon.com, Inc.:

Amazon’s ability to monetize AI across multiple business segments sets it apart. The company’s e-commerce dominance, coupled with AWS’s leading position in cloud AI services, provides a strong foundation for growth. Amazon’s continuous AI investments in areas like robotics and voice recognition further enhance its long-term potential in the AI market.

4. Microsoft Corporation (MSFT)

Number of Hedge Fund Holders (Q2 2024): 284

Microsoft has made significant strides in AI, integrating it across its product suite and cloud services. Its Azure AI platform offers comprehensive tools for developers, while AI enhancements in Office 365 boost productivity for millions. Microsoft’s strategic partnership with OpenAI, including exclusive access to GPT-4, has further solidified its position in the AI race. The company’s deep roots in enterprise software and growing cloud presence make it a strong contender in the AI stock market.

Microsoft’s Q4 FY24 results demonstrate robust growth, powered by AI and cloud innovations. Revenue surged 15% to $64.7 billion, with Intelligent Cloud revenue climbing 19% to $28.5 billion. Azure and other cloud services saw an impressive 29% growth.

CEO Satya Nadella highlighted Microsoft’s commitment to AI, emphasizing their role in meeting customers’ critical needs while spearheading AI advancements. This focus is evident across their product range, from Azure’s AI capabilities to the AI-enhanced Microsoft 365 suite, which now boasts 82.5 million consumer subscribers.

According to insidermonkey, The Bill & Melinda Gates Foundation Trust, managed by Michael Larson, holds 34.9 million Microsoft shares worth $15.6 billion.

The financial report reflects Microsoft’s strategic AI investments, with R&D expenses increasing to $8.1 billion this quarter. As AI reshapes the tech landscape, Microsoft’s strong performance – including a 22% increase in annual net income to $88.1 billion – positions them well to leverage AI opportunities and maintain their competitive edge in this rapidly evolving market.

According to Wall Street Analyst on MSFT stock. Of the 61 analysts following the stock, 49 give it a Buy and 3 has it at Hold.

Why We Picked Microsoft Corporation:

Microsoft’s strong enterprise relationships and comprehensive AI strategy make it a top pick. The company’s Azure AI platform is gaining market share, while its partnership with OpenAI gives it a competitive edge in generative AI. Microsoft’s ability to integrate AI across its widely-used productivity tools positions it for sustained growth in the AI era.

5. Meta Platforms, Inc. (META)

Number of Hedge Fund Holders (Q2 2024): 225

Formerly Facebook, Meta Platforms is leveraging AI to enhance its social media platforms and push the boundaries of virtual and augmented reality. The company’s AI algorithms power content recommendations, ad targeting, and language translation across its family of apps. Meta’s significant investments in AI research, particularly in areas like computer vision and natural language processing, position it at the cutting edge of AI innovation in social technology and beyond.

Meta’s Q2 2024 results underscore its AI-driven growth strategy. CEO Mark Zuckerberg highlighted Meta AI’s potential to become the world’s most used AI assistant by year-end. The company released an open-source frontier-level AI model and reported strong adoption of its AI-enabled Ray-Ban smart glasses, though specific sales figures were not disclosed.

Financially, Meta’s AI investments are paying off. Revenue surged 22% year-over-year to $39.07 billion, while net income jumped 73% to $13.47 billion. The company’s AI-optimized ad targeting contributed to a 10% increase in both ad impressions and average price per ad across its platforms.

According to insidermonkey, Citadel Investment Group, led by Ken Griffin, holds 12.4 million shares of Meta Platforms (META), valued at $6.3 billion.

Looking ahead, Meta plans substantial AI-related investments. The company projects 2025 capital expenditures to grow significantly, supporting AI research and product development. Despite facing regulatory hurdles, particularly in the EU and US, Meta remains committed to AI integration across its ecosystem, which serves 3.27 billion daily active users as of June 2024.

According to Wall Street Analyst on META stock. Of the 67 analysts following the stock, 49 give it a Buy, 9 has it at Hold and 1 calls it a sell.

Why We Picked Meta Platforms, Inc.:

Meta’s massive user base and ambitious AI-driven projects make it an attractive investment. The company’s AI capabilities are crucial for its advertising business and central to its metaverse vision. Meta’s strong financial position and continued investments in AI research, particularly in AR/VR, present significant growth potential in emerging AI applications.

6. Arista Networks, Inc. (ANET)

Number of Hedge Fund Holders (Q2 2024): 65

Arista Networks provides high-performance networking solutions crucial for AI and machine learning workloads in data centers and cloud environments. As AI applications become more data-intensive and distributed, Arista’s low-latency, high-bandwidth networking equipment plays an increasingly vital role. The company’s AI-driven approach to network management and security, coupled with its strong partnerships with major cloud providers, positions it as a key enabler of AI infrastructure.

Arista Networks reported robust Q2 2024 results, with revenue climbing 15.9% year-over-year to $1.69 billion and non-GAAP net income reaching $672.6 million. The company’s non-GAAP gross margin improved to 65.4%, up from 61.3% in Q2 2023, demonstrating strong profitability.

Arista introduced new AI-centric networking solutions, including the Etherlink AI platforms. These are designed to support AI cluster sizes from thousands to 100,000+ XPUs, offering one and two-tier network topologies for superior application performance. The company claims these solutions can deliver lower job completion times for AI workloads.

According to insidermonkey, Ken Griffin’s Citadel Investment Group holds PUT options on Arista Networks (ANET) worth $301.3 million, comprising 859,600 shares.

Collaborating with NVIDIA, Arista aims to create unified AI Data Centers. This partnership focuses on aligning compute and network domains as a single managed AI entity, potentially revolutionizing how large-scale AI infrastructures are configured and monitored. For Q3 2024, Arista projects revenue between $1.72 billion to $1.75 billion, indicating continued growth in the AI-driven networking market.

According to Wall Street Analyst on ANET stock. Of the 27 analysts following the stock, 17 give it a Buy, 6 has it at Hold and 1 calls it a Sell.

Why We Picked Arista Networks, Inc.:

Arista’s specialized focus on high-performance networking for AI workloads makes it a unique pick. As AI models grow larger and more complex, the demand for Arista’s solutions is likely to increase. The company’s strong relationships with cloud giants and its innovations in AI-driven networking present a compelling growth story in the AI infrastructure space.

7. Palo Alto Networks, Inc. (PANW)

Number of Hedge Fund Holders (Q2 2024): 66

Palo Alto Networks is a cybersecurity leader leveraging AI to enhance threat detection and response capabilities. In an era where AI-powered cyber threats are becoming more sophisticated, Palo Alto’s AI-driven security solutions are at the forefront of protecting enterprise and government networks. The company’s continuous innovation in areas like automated threat intelligence and AI-based security orchestration makes it a critical player in the AI-enhanced cybersecurity landscape.

Palo Alto Networks reported robust financial results for fiscal Q4 and full year 2024, underscoring the success of their AI-powered cybersecurity solutions. Q4 revenue grew 12% year-over-year to $2.2 billion, while total fiscal year revenue reached $8.0 billion, a 16% increase. GAAP net income for Q4 2024 was $357.7 million, or $1.01 per diluted share, compared to $227.7 million in Q4 2023.

Their Next-Generation Security offerings, leveraging advanced AI capabilities, saw remarkable growth with ARR surging 43% to $4.2 billion. This trend highlights the increasing demand for AI-driven security solutions in today’s complex threat landscape. The company’s remaining performance obligation grew 20% year-over-year to $12.7 billion, indicating strong future revenue potential.

According to insidermonkey, Citadel Investment Group, led by Ken Griffin, holds a $965.5 million PUT position in Palo Alto Networks, comprising 2.85 million shares.

Looking ahead, Palo Alto Networks aims to further scale its AI-enhanced security platforms. For fiscal year 2025, the company projects total revenue between $9.10 billion to $9.15 billion, representing 13-14% growth. They also expect non-GAAP operating margin to reach 27.5-28.0%, demonstrating confidence in their AI-powered approach to cybersecurity and ability to meet evolving market needs while maintaining profitability.

According to Wall Street Analyst on PANW stock. Of the 52 analysts following the stock, 32 give it a Buy and 14 has it at Hold.

Why We Picked Palo Alto Networks, Inc.:

Palo Alto Networks’ focus on AI-driven cybersecurity addresses a critical and growing need in the digital economy. As cyber threats evolve, the demand for advanced, AI-powered security solutions is expected to surge. The company’s strong market position, continuous innovation, and expansion into cloud security make it well-positioned to benefit from the intersection of AI and cybersecurity.

CHECK OUT OTHER STOCKS

Conclusion

The artificial intelligence revolution is well underway, and the seven stocks we’ve explored represent some of the most promising opportunities in this rapidly evolving field. From hardware giants like NVIDIA to software and cloud leaders like Microsoft and Amazon, these companies are at the forefront of AI innovation and application.

FAQs

1. What is Artificial Intelligence (AI)?

Artificial Intelligence (AI) refers to the development of computer systems capable of performing tasks that typically require human intelligence, such as learning, problem-solving, decision-making, and perception.

2. How do AI stocks differ from traditional technology stocks?

AI stocks are companies that primarily focus on developing, implementing, or heavily utilizing AI technologies within their products, services, or operations. Unlike traditional technology companies, AI stocks are at the forefront of leveraging advanced algorithms, machine learning, and data processing capabilities to create intelligent systems.

3. What are the potential risks associated with investing in AI stocks?

While AI stocks offer significant growth potential, they are also subject to risks such as intense competition, regulatory challenges, cybersecurity threats, and the rapid pace of technological change. Investors should carefully evaluate the risks and diversify their portfolios accordingly.

4. How can investors identify promising AI stocks?

Investors should look for companies with a strong track record of innovation, a robust intellectual property portfolio, and a competitive advantage in their respective industries. Additionally, evaluating financial performance, growth prospects, and management’s vision for AI integration can provide valuable insights.

5. What role do AI stocks play in portfolio diversification?

AI stocks can play a crucial role in portfolio diversification, as they offer exposure to a rapidly growing and disruptive technology sector. By including AI stocks in their portfolios, investors can potentially benefit from the long-term growth potential of this field while mitigating risks associated with other sectors or traditional investments.