Investment in Artificial Intelligence (AI) and AI software has been picking up pace in recent years, with the COVID-19 pandemic ushering in an accelerated rate of adoption. The most promising AI stocks are those where artificial intelligence not only enhances products but also secures a strategic edge.
The world's biggest tech stocks are utilizing the power of AI to streamline and power their businesses, helping keep them at the top of their game. Recent data reveals a rise in mentions of artificial intelligence during company earnings calls.
Goldman Sachs published a piece titled ‘Why AI stocks aren’t in a bubble’. Peter Oppenheimer, the chief global equity strategist at Goldman Sachs Research, suggests that despite the significant rally of AI stocks, they aren't in a bubble. He points out that these stocks' valuations aren't as inflated as during past bubbles, like the 2000 internet crash.
Furthermore, these companies showcase robust balance sheets and impressive returns on investment. Oppenheimer believes we're merely at the dawn of a tech cycle poised for even greater success.
Some of the companies considered among the best AI stocks to buy today include:
Nvidia (NASDAQ: NVDA)
Amazon.com Inc (NASDAQ: AMZN)
IBM (NYSE: IBM)
Alphabet Inc (NASDAQ: GOOGL)
Microsoft (NASDAQ: MSFT)
Micron Technology (NASDAQ: MU)
Meta Platforms Inc (NASDAQ: META)
Apple (NASDAQ: AAPL)
Splunk (NASDAQ: SPLK)
The Future Has Arrived
AI has been a futuristic presence in film, literature, and our collective vision since the 1950s when the power of computers began to spark innovative ideas. But an accelerated adoption of AI into society has come with the evolution of the internet, cloud computing, next-generation graphics, and an ever-mounting abundance of data.
AI stocks make a tempting investment because the power of AI is to minimize work and rapidly scale, a driving force of capitalism.
Big tech retains a capitalistic hold on our purse strings, with an intimate understanding of our wants and needs that fuels a complex relationship between companies and their consumers. And the success of big tech reflects how effective AI has been in forging this unique level of control.
From Mainframe to Metaverse
The computing sector has evolved from the mainframe era through the personal computing and mobile era to the Internet of Things era.
Universal connectivity, powered by unrestrained sensing and limitless scale, is now a possibility only impeded by a lack of money and resources. But advances in AI are bringing us to the digital edge revolution, which merges the virtual and physical to welcome a new existence in the metaverse.
This thrilling new world will see rising demand for analog semiconductors to power the endless possibilities emerging.
What Are AI Stocks?
AI stocks include businesses developing systems that emulate cognitive activity. This includes activities such as speech recognition, problem-solving, and automated learning.
Artificial intelligence differs from robotics, but the two often go hand in hand. AI can make decisions and solve problems without specifically being programmed to do so. Meanwhile, robots are built and programmed to accomplish specific tasks.
AI Is Flourishing Despite Challenges
In society today, organizations are using AI for many purposes, including loan approval, fraud identification, and surveillance.
However, according to a Deloitte survey, in 2020, more than half of company leaders reported that their organization was slowing AI adoption because of emerging strategic, operational, and ethical risks. Regulatory risk is another concern, and as AI language skills grow, so do scientists' concerns.
Deloitte's ongoing surveys also reveal companies continue to invest in AI, but the return on their investment (ROI) is lagging. That's because aligning people, processes, and technologies is more of a challenge than expected.
Nevertheless, investor interest in the space remains as AI is undoubtedly a piece of future tech advancement that is not going away. This became particularly evident in 2023, when the arrival of generative AI caused a surge of interest in AI stocks.
Nevertheless, investors should remain vigilant of underperforming companies that suddenly unveil AI product plans.
Investing In AI Stocks
These days many companies are working on AI initiatives or utilizing AI applications, which include machine learning, deep learning, and neural networks. However, there are not many pure-play AI stocks, certainly none that are well established. Therefore, a safer way to invest in the AI revolution is to choose the most prominent players operating in the space.
When it comes to investing in AI stocks, the top AI stocks you are likely to come across are:
Microsoft, Micron Technology, Nvidia, Amazon.com Inc, and IBM. These are the companies leveraging the power of enterprise AI, with the multiple facets of artificial intelligence embedded in the core of their business activities.
Micron Technology (MU)
Memory chip maker Micron Technology (MU) manufactures mobile memory and storage solutions that are purpose-built to fuel the next wave of 5G and AI-enabled smartphone experiences.
Industry bit shipments are rising, meaning the total amount of data storage capacity being produced and sent to customers by the entire industry is increasing. This can indicate growing demand, expanding production, or both.
Chip pricing is stabilizing, and by 2025, the industry targets a record total addressable market (TAM) with steady profitability.
Micron Technology, a major player in the semiconductor industry, introduced its HBM (High Bandwidth Memory) Gen2 product and will lead in specifications against competitors. It also launched a memory module supporting the CXL (Compute Express Link) standard, making it more versatile and in line with modern technological demands. Micron also completed filings for facilities in Idaho and New York.
Nvidia (NVDA)
NVIDIA Corp (NVDA) designs, develops, and markets three-dimensional (3D) graphics processors and related software. The company offers products that provide interactive 3D graphics to the mainstream personal computer market. NVIDIA heavily utilizes AI and machine learning in many aspects of its business.
Jensen Huang, founder and CEO of NVIDIA, said:
AI is reinventing the scientific method. Learning from data, AI can predict impossibly complex workings of nature, from the behavior of plasma particles in a nuclear fusion reactor to human impact on regional climate decades in the future,
By providing a universal scientific computing platform that accelerates both principled numerical and AI methods, we’re giving scientists an instrument to make discoveries that will benefit humankind.
NVIDIA dominates the market for training large language models. The demand for AI training hardware remains strong, even with the production of many LLMs.
And demand for generative AI and LLMs is expected to grow as more industries adopt these techniques. While hyperscalers were the first to adopt, the rest of the enterprise is now following suit. The scale of generative AI will grow as more industries and companies adopt this technique.
Amazon.com Inc (AMZN)
Amazon.com, Inc (NASDAQ: AMZN) is a multinational technology company that provides online retail shopping services. Its Amazon Web Services (AWS) segment sells access to virtual infrastructure and storage capacity start-ups, enterprises, government agencies, and academic institutions.
AWS leads in various product categories such as compute, networking, storage, database, data solutions, and machine learning.
When it comes to AI, AWS identifies three key layers of generative AI: compute for training and inference, large language models as a service, and the applications built on top of these models. AWS offers Amazon EC2 P5 instances powered by NVIDIA H100 GPUs for generative AI applications. AWS has also developed its own custom AI chips for training (Trainium) and inference (Inferentia) which offer a competitive price-performance option for customers.
AWS has developed Amazon CodeWhisperer, an AI-powered coding companion that enhances developer productivity. Nevertheless, while it will build some generative AI applications, it believes most will be developed by other companies, with a significant number being built on AWS.
IBM (IBM)
IBM is heavily involved in AI. The company has its own AI hardware center, where it has developed a new 23 billion transistor Artificial Intelligence Unit (AIU). This ASIC is designed to train and run deep learning models that require massively parallel computing. It is far faster than existing CPUs and could establish a trend in the AI hardware market.
IBM's research center develops next-generation chips and AI systems to improve AI hardware efficiency. This is generating buzz in the industry.
Furthermore, IBM helps integrate and scale AI and machine learning and infuse AI-powered intelligent workflows into business processes on Google Cloud. IBM also partners with clients to transform customer service with Google's Contact Center AI Platform.
Best AI Stocks
Within the next decade, it is likely that most companies will utilize AI in one shape or form. Big data has become big business that affects everyone's lives, and AI is an extension of this, being used to help companies better utilize and understand the data analytics at their fingertips.
Additional companies that analysts still see potential in and that may be considered among the best AI stocks include Fiserv, Analog Devices, JFrog, Electronic Arts, Splunk and Twilio.
Fiserv (FISV)
Fiserv (NASDAQ: FISV) provides integrated information management and electronic commerce systems and services. The company has invested in AI-based fraud management, and it also offers a virtual banking assistant that utilizes AI-driven conversations. Fiserv solutions include transaction processing, electronic bill payment, business process outsourcing, document distribution services, and software and systems solutions.
Analog Devices (ADI)
As AI adoption unites the physical and digital realms, demand for semiconductors that enable this transition is inevitable. Analog Devices (NASDAQ: ADI) is a semiconductor company that designs, manufactures, and markets integrated circuits used in analog and digital signal processing. Its products are used in communications, computer, industrial, instrumentation, military, aerospace, automotive, and high-performance consumer electronics applications.
ADI hopes to capitalize on AI's secular growth trajectories to lead the intelligent edge advance.
JFrog (FROG)
JFrog Ltd (NASDAQ: FROG) is a software development company using AI and machine learning internally. The company provides technologies and tools for everyday use and to increase effectiveness. JFrog has become the "Database of DevOps" and the de-facto standard in software release and update management, serving customers worldwide.
Electronic Arts (EA)
Electronic Arts (NASDAQ: EA) is a global software publisher for video game consoles, personal computers, handheld game players, and cellular handsets. The company also provides online game-related services. AI applications and machine learning are used to advance in-game animation and produce human-like movements.
Splunk (SPLK)
Splunk (NASDAQ: SPLK) develops web-based application software. The global company provides software that collects and analyzes machine data generated by websites, applications, servers, networks, and mobile devices. Splunk offerings include Splunk cloud, Splunk light and Splunk enterprise.
Twilio (TWLO)
Twilio (NYSE: TWLO) is a company that runs a cloud computing platform that allows web developers to integrate phone calls, Internet protocol voice communications, and text messages into web, mobile, and phone applications.
Twilio lets its customers integrate with third-party bot providers to create a conversational AI interface, to bridge the gap between human agents and self-service bots.
Best AI Stocks Underwater
Once considered some of the best AI stocks around, Upstart, Ideanomics, UiPath, Duos Technologies Group, and Veracyte fell out of favor in 2022, but that doesn't mean they should be written off completely.
Being greedy when others are fearful is Warren Buffett's oft-quoted saying, meaning the best opportunities lie in beaten-down stocks. That's not to say this is the time to buy the dip in these former top AI stocks, they could still have further to fall, but it is a good time to weigh up their fundamentals and consider how their future may look.
Upstart (UPST)
Upstart Holdings (NASDAQ: UPST) provides a cloud-based AI lending platform to improve access to credit while reducing the risk and costs of lending for bank partners.
Ideanomics (IDEX)
Ideanomics (NASDAQ: IDEX) is a fintech. The company's electric vehicle division provides group purchasing discounts on commercial EVs, and Ideanomics Capital provides access to global markets.
Ideanomics is developing cutting-edge solutions that enable its customers to realize the full value of its data - from using predictive analytics to prevent minor problems from becoming big issues to using telematic data to enhance operational performance to using sustainability data to visualize ESG and climate impact.
The company also has a three-year partnership with Google Cloud to leverage the AI, and security features Google Cloud extends to its partners.
UiPath (PATH)
UiPath (NYSE: PATH), a leading enterprise automation software company, helps companies reach their greatest potential with the help of automation. UiPath combines a Robotic Process Automation (RPA) solution with a full suite of capabilities that enable every organization to rapidly scale digital business operations.
By pairing UiPath's AI and automation technology, Lenovo's robots can upload documents and data for specific tasks and sub-processes and can automate complete departmental processes, such as HR onboarding identification through self-developed OCR. This lets Lenovo experience the benefits and opportunities of hyper-automation, freeing its human workforce to focus on more impactful tasks.
Duos Technologies Group (DUOT)
Duos Technologies Group (NASDAQ: DUOT) is a small software company. truevue360™ is Duos' fully integrated platform that utilizes AI, including machine learning, computer vision, object detection and deep neural network-based processing for real-time applications. The company also offers imaging, video surveillance, video analytics, physical security information systems, and custom security system hardware and software solutions. Duos Technologies Group serves customers in the United States.
Veracyte (VCYT)
Veracyte (NASDAQ: VCYT) develops molecular tests for oncology. The company's menu of tests leverages advances in genomic science and machine learning technology to influence patient care. Veracyte's portfolio includes Afirma, Percepta and Envisia. It hopes to treat thyroid cancer, improve lung cancer screening and clarify the diagnosis of idiopathic pulmonary fibrosis.
ARK Invest Loves AI
AI features in the spatial computing category that is picking up pace as a hot investing opportunity. Leading the charge on many AI stock picks is ARK Invest with its ARK Innovation ETF (NYSEARCA: ARKK).
Some AI stocks found in ARKK include:
Zoom (NASDAQ: ZM) has implemented AI at its core. AI optimizes its connections, video compression, audio transfer and overall call quality. It also uses an AI tool to extract information from video call transcripts to help its sales teams close deals.
Tesla (NASDAQ: TSLA) uses advanced AI for vision and planning in its autopilot ambitions.
Roku (NASDAQ: ROKU) deploys its speech recognition AI to solve the issue of people speaking too quietly in movies and television to be heard.
Exact Sciences (NASDAQ: EXAS) has used advanced machine learning to refine its data analysis techniques.
UiPath (NYSE: PATH) boasts the largest group of AI and automation engineers anywhere in the world.
Block (NYSE: SQ) is adopting AI and automation techniques to continue to improve its business decisions and customer experience.
Teladoc (NYSE: TDOC) relies on technology, human expertise, and machine learning to provide a brand and experience that consumers trust with their critical health data.
Coinbase (NASDAQ: COIN) has invested in best-in-class AI and machine learning fraud detection.
Investing in AI
We hope this article gives you a better understanding of the companies working in artificial intelligence and the breadth of opportunity AI is bringing to business and the future of technology. We have included some of the best AI stocks of the past, present and future, and there are sure to be interesting developments in the way AI adoption spreads and scales in the coming years.
Data analytics are now established across a range of industries, and the way AI technology is processing and presenting this data is a strong area of growth. That's why AI-powered applications and algorithms are so important to individual businesses to enhance long-term profitability.
Meanwhile, AI algorithms are outpacing the hardware capabilities necessary to scale efficiently, but a new energy-efficient chip built by Stanford engineers potentially fixes this. The NeuRRAM, a neuromorphic chip, should allow large-scale AI algorithms to run on smaller devices in an energy-efficient way.
In the past, when a corporation considered investing in AI, it meticulously assessed the potential return on investment, ensuring that every dollar spent was justified. With a surge in AI investment and belief in its potential, due diligence has perhaps begun to fall by the wayside.
Nevertheless, there's no doubt artificial intelligence is a very exciting space to invest in, and interested investors should keep tabs on these top AI stocks and their developments.
*This article was originally published in November 2022 and updated in September 2023.