Top AI Stocks to Watch

Way before ChatGPT rocked our world, AI was recommending products on Amazon and movies on Netflix, while Google was using the technology to filter out spam on Gmail. AI has progressed so rapidly that the opening episode of Black Mirror’s latest season, Joan is Awful, had me twitching!

Companies are rushing to invest in the technology, so much so that the global AI market is expected to expand at a CAGR of 37.3% from 2023 to 2030, reaching $1,811.75 billion by the end of that period. This also explains a recent comment by Bank of America strategists that AI was on the verge of an “iPhone moment," adding a whopping $15.7 trillion to the global economy by 2030. The number of times management teams refer to AI on company earnings calls have also soared.

So, is this a good time to invest in companies associated with artificial intelligence? Yeah, that wasn’t a question. Here’s some I’m keeping an eye on plus an out there prediction at the end. As always, these are in no way suggestions for trade/investment. Just some stocks I'm keeping a close eye on.

Nvidia Corp (NASDAQ: NVDA)

This is a no-brainer, given that the company is the leading AI chip maker globally. The stock is up more than 200% YTD as of June 22, 2023. Nvidia’s Q1 earnings and forward guidance beat expectations, sending the stock soaring in May. The company has a long runway for growth, given that it offers the processing power required to operate advanced AI apps. Plus, Nvidia is working on expanding its addressable market globally.

In October 2022, the company announced that its long-standing AI-based collaboration with Oracle had been expanded. Oracle is using Nvidia’s complete AI platform, including its software, systems and chips, for Oracle Cloud Infrastructure. The question is whether you've missed the swell, personally, I think it has a lot more in it.

Microsoft Corp (NASDAQ: MSFT)

Microsoft had invested $1 billion in OpenAI way back in 2019 as part of a deal that made Microsoft Azure the exclusive cloud provider for OpenAI. In January 2023, Microsoft announced its intention to invest another $10 billion in OpenAI to promote breakthroughs in AI. ChatGPT was integrated into Bing in February, with thousands using the AI-driven version of Microsoft Teams within months of its launch.

Opportunities in AI/ML accelerating growth for Azure and rising premium sales for Office 365 are expected to drive Microsoft’s stock higher going forward.

Alphabet Inc. (NASDAQ: GOOGL)

This is one company that is already using artificial intelligence in almost every aspect of its business. Plus, Google launched the competitor to ChatGPT, Bard, in March 2023. The search engine has been using AI since as far back as 2015, when it launched RankBrain. Since then, Google has launched neural matching, BERT and most recently, MUM. As of May 2023, 93.12% of all searches are conducted on Google, with Bing accounting for a mere 2.8%.

Alphabet is also likely to benefit for a long time to come from Google’s industry-leading AI-driven advertising technology. Plus, the company provides AI tools and infrastructure for business through its cloud computing subsidiary.

C3.ai Inc. (NYSE: AI)

With a stunning YTD rise of more than 243% as of June 22, 2023, C3.ai is possibly the closest match to a pure-play AI stock. Of course, the use of “AI” in the company’s name might have been a giveaway. The SaaS provider offers software for businesses to deploy large AI apps. Its tools also help companies speed up software development, while reducing costs and risks. C3.ai also offers numerous applications, such as the one that predicts aircraft systems failures for the US Air Force.

The company is working on launching a generative AI suite, with the first product being enterprise search. This will allow users to benefit from a natural language interface to find and retrieve specific data from an enterprise's entire information system. C3.ai is also a pioneer in providing a turnkey enterprise AI development platform.

Robert Half International Inc. (NYSE: RHI)

Couldn’t resist including this human resource consulting giant among all the obvious tech companies investing in artificial intelligence. Robert Half is now using AI to connect job seekers to employers as part of its professional staffing services. The company has partnered with Atrium to build machine learning models that “can quickly identify top matches to open job orders and expand their talent search by surfacing new candidates who are similar to those already on their lists in order to best meet their clients’ needs.”

Although some might be concerned about the state of the job market with ongoing layoffs across sectors, analysts expect the use of AI/ML to drive demand for Robert Half's offerings. In fact, recent studies show that 35%-45% of companies intend to use AI-based software for talent acquisition by 2024.

Long Punt

Rigetti Computing (Nasdaq: RGTI) is a developer of quantum integrated circuits used for quantum computers. I'm not going to say anything further, just leaving this here :).

AI is More Than a Buzzword

So far in 2023, we’ve witnessed a sharp rise in the share price of several small companies following a mention of AI-related news. For instance, BuzzFeed’s stock rose more than 200% on January 26, 2023, after the company announced its partnership with OpenAI to generate content. But the positive sentiment didn’t last too long, given that BuzzFeed was down almost 30% in the first 6 months of the year.

There is no alternative to rigorous due diligence even while considering the most promising stocks. For retail investors, broader indices or index funds might prove less risky than individual stocks or ETFs with a narrow focus. If individual AI stocks still attract you, consider limiting the risk but allocating a maximum of 10% of your total portfolio to individual stocks. And remember to not over-expose your portfolio to one sector. If you already have some Adobe, Alphabet, MS or Apple - then you're already invested in AI tech.

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