Top AI Stocks to Watch in 2024: Investment Insights

August 17, 2024|AI Investments and Careers

Top Performing AI Stocks and How to Invest in Them

Artificial Intelligence (AI) is transforming industries across the globe, driving innovation in fields such as healthcare, automotive, finance, and entertainment.

The rapid growth of AI technologies has not only fueled the development of cutting-edge solutions but has also created significant investment opportunities. Here, we explore some of the top-performing AI stocks and provide insights on how to invest in them.

Disclosure: This is Not Financial Advice

Introduction to AI Stocks

Artificial intelligence stocks represent companies that are deeply engaged in the development, use, or support of AI technologies. These firms range from AI chipmakers to software developers and cloud-based AI service providers. The importance of AI stocks lies in their potential to drive future innovation across multiple industries, making them a crucial component of any forward-looking investment portfolio.

The Growth of Artificial Intelligence

AI has experienced exponential growth over the past decade, fueled by advancements in machine learning, data analytics, and computing power. In 2023 alone, the global AI market was valued at approximately $327.5 billion and is projected to reach over $1.5 trillion by 2030. The growth trajectory is driven by AI’s increasing applications in industries such as healthcare, automotive, finance, and manufacturing.

The explosion of AI capabilities has catalyzed a surge in AI-related companies, many of which are rapidly expanding their market presence. These companies are capitalizing on AI trends and helping to push the technology further into the mainstream. As AI becomes increasingly ubiquitous, the potential for growth in AI stocks seems limitless.

Why Invest in AI Stocks?

Investing in AI stocks offers a promising opportunity for significant returns. AI’s potential to revolutionize industries has not gone unnoticed by investors. There are several key reasons to consider AI stocks in an investment strategy:

Disruptive Technology: AI is expected to disrupt numerous industries by increasing efficiency and creating new services and products.
High Growth Potential: AI-driven companies tend to have higher-than-average growth prospects, especially as AI adoption accelerates.
Long-term Market Demand: The continuous evolution of AI ensures a strong demand for related technologies, providing a robust market for AI companies.
Innovation Opportunities: Companies that lead in AI research and application are often at the forefront of the next technological wave, offering lucrative investment opportunities.

Top Performing AI Stocks

Among the top-performing AI stocks, certain names consistently stand out due to their innovation, growth, and leadership in the AI field.

1. NVIDIA Corporation (NVDA)

NVIDIA is perhaps the most well-known player in the AI hardware space. The company’s graphics processing units (GPUs) are essential for powering AI and machine learning systems. NVIDIA’s dominance in the AI chip market, particularly with its A100 and H100 GPUs, positions it as a crucial enabler of AI research and applications across industries.

NVIDIA’s stock has performed exceptionally well in recent years, thanks to the surging demand for AI processing power. In 2024, NVIDIA continues to expand its AI portfolio, making strategic acquisitions and forming partnerships that strengthen its position in both the AI and cloud computing markets.

NVIDIA is a leading player in the AI and semiconductor industries, primarily known for its GPUs (Graphics Processing Units). These GPUs are critical for AI processing and machine learning tasks, making NVIDIA a cornerstone of AI infrastructure. The company has expanded into AI through its CUDA platform, and its chips are used in data centers, self-driving cars, and AI research.

Performance: NVIDIA’s stock has seen significant growth, especially as demand for AI-driven applications has surged. Its focus on AI hardware and data center technology positions it as a key player in the AI revolution.
Growth Drivers: Demand for GPUs in AI, cloud computing, autonomous driving, and gaming sectors.

2. Alphabet Inc. (GOOGL)

Alphabet, Google’s parent company, has long been a leader in AI research and development. From its AI-powered search engine algorithms to its pioneering work in machine learning through Google Cloud AI, Alphabet is deeply embedded in the AI landscape. The company’s DeepMind division has also achieved remarkable breakthroughs in AI, such as AlphaGo and AlphaFold, which demonstrate the potential of AI to solve complex real-world problems.

Alphabet’s stock performance remains strong in 2024, driven by its continuous AI innovations and the expansion of its AI-driven services in cloud computing, healthcare, and autonomous technology.

Alphabet, Google’s parent company, is a leader in AI research and development. Google’s AI division, DeepMind, is known for advancements like AlphaGo and AlphaFold. Additionally, Google’s AI technologies power its search engine, Google Cloud services, autonomous driving initiatives through Waymo, and more.

Performance: Alphabet has consistently shown strong growth due to its diversified AI-driven services and investments in emerging technologies.
Growth Drivers: Google Cloud AI, advertising powered by AI, self-driving cars via Waymo, and breakthroughs from DeepMind.

3. Microsoft Corporation (MSFT)

Microsoft’s integration of AI into its suite of products has made it one of the top-performing AI stocks. From Azure’s AI services to the integration of AI in Office 365, Microsoft has embraced AI across all levels of its business. One of its most notable AI projects is OpenAI, the developer of the widely recognized language model, GPT.

Microsoft’s significant investments in AI, such as its partnership with OpenAI and the development of AI-powered enterprise solutions, have contributed to its stock’s consistent growth. Investors continue to look to Microsoft as a major player in the AI sector due to its innovation and strong market position.

Microsoft has made significant strides in AI through its Azure cloud platform and investments in AI-powered products. Microsoft Azure provides AI services to enterprises, while products like Cortana and AI-driven features in Office 365 enhance productivity. Microsoft’s partnership with OpenAI, including their investment in ChatGPT, has further strengthened its AI capabilities.

Performance: Microsoft’s AI-driven growth in cloud computing, productivity software, and consumer electronics has been a key driver of its stock performance.
Growth Drivers: Azure AI, Office 365 AI features, LinkedIn AI-driven insights, and OpenAI collaboration.

4. Amazon.com Inc. (AMZN)

Amazon’s use of AI extends far beyond its e-commerce platform. The company uses AI to enhance its recommendation engines, optimize logistics, and improve customer service through AI-driven chatbots. In addition, Amazon Web Services (AWS) is a major player in providing cloud-based AI services to businesses across various sectors.

Amazon’s stock remains a top performer, bolstered by its AI innovations and the growing importance of AWS in the AI ecosystem. The company’s forward-thinking approach to integrating AI into its business model ensures its continued leadership in both the retail and cloud industries.

Amazon is a giant in the AI space through its cloud computing division, AWS (Amazon Web Services). AWS offers a wide range of AI and machine learning services that businesses use to build, train, and deploy AI models. Additionally, Amazon uses AI in its e-commerce business for personalized recommendations, logistics, and Alexa-powered smart devices.

Performance: Amazon’s stock is driven by its leadership in e-commerce and cloud computing, with AI being a key enabler of its technological growth.
Growth Drivers: AI in AWS, AI-driven logistics and warehousing, personalized recommendations in e-commerce, and voice-activated AI with Alexa.

5. Tesla, Inc. (TSLA)

Tesla, led by visionary Elon Musk, is much more than an electric vehicle (EV) company. Tesla’s AI ambitions are most evident in its self-driving technology, powered by advanced AI software and specialized hardware. Tesla’s Full Self-Driving (FSD) software, which uses machine learning algorithms, has placed it at the forefront of autonomous driving. The company’s ongoing AI research and its development of AI-driven robots further showcase its commitment to AI innovation.

In 2024, Tesla’s stock continues to soar, partly due to the increasing adoption of FSD and Tesla’s aggressive push towards AI-powered robots and energy solutions. The company’s AI Day events also highlight its deep commitment to AI as a core component of its future growth.

Tesla is at the forefront of autonomous driving technology, which heavily relies on AI. The company’s full self-driving (FSD) software uses AI to navigate roads, identify obstacles, and make real-time driving decisions. Tesla’s AI capabilities are also integrated into its manufacturing processes and energy solutions.

Performance: Tesla’s stock has surged thanks to its leadership in electric vehicles (EVs) and autonomous driving technology.
Growth Drivers: Autonomous driving AI, energy AI solutions, and AI in manufacturing.

Emerging AI Stocks

Beyond the tech giants, several emerging AI companies are gaining traction and could be worth watching for future growth.

Palantir Technologies (PLTR)

Palantir specializes in data analysis and uses AI to assist governments and enterprises in making data-driven decisions. Palantir’s AI software has been instrumental in various high-profile government contracts, particularly in the defense and intelligence sectors. The company’s AI capabilities are essential for managing and interpreting vast amounts of data.

With its strong foothold in government sectors and an expanding commercial business, Palantir’s stock has significant growth potential. Its AI-driven approach to data analysis continues to attract investors looking for emerging AI opportunities.

UiPath (PATH)

UiPath is a leader in robotic process automation (RPA), using AI to automate repetitive tasks across industries. As automation becomes increasingly critical for businesses seeking efficiency, UiPath’s AI-driven solutions offer significant growth potential.

In 2024, UiPath’s stock is on the rise, thanks to the increasing demand for AI-driven automation across sectors such as finance, healthcare, and manufacturing.

C3.ai (AI)

C3.ai focuses on providing AI software solutions for enterprises. Its cloud-based AI platforms allow companies to develop, deploy, and operate large-scale AI applications. C3.ai’s growth is driven by the increasing need for businesses to incorporate AI into their operations.

The stock is gaining traction as more companies turn to AI to solve complex business challenges, making C3.ai a promising investment for the future.

Snowflake (SNOW)

Snowflake is a cloud data platform that leverages AI to optimize data storage, processing, and analytics. Its AI-powered data warehousing capabilities enable businesses to derive insights from vast amounts of data quickly.

Snowflake’s stock continues to perform well in 2024, driven by the rising demand for AI-powered data solutions and cloud computing services.

How to Invest in AI Stocks

A. Direct Stock Purchase

Investing directly in individual AI companies is one of the most common methods for investors looking to capitalize on the AI revolution. To do this, you need to:

Open a Brokerage Account: Use platforms like E*TRADE, Fidelity, Robinhood, or Charles Schwab to buy and sell stocks. These platforms also offer tools for researching and investing in AI companies.
Research and Analyze: Before investing, conduct thorough research on each company’s performance, growth prospects, and competitive positioning in the AI space.
Diversify: While AI stocks have strong growth potential, they can also be volatile. Diversify your investments across multiple sectors to mitigate risk.

B. Exchange-Traded Funds (ETFs)

ETFs are a popular way to invest in a diversified portfolio of AI stocks without the need to pick individual companies. Some of the top AI-focused ETFs include:

Global X Robotics & Artificial Intelligence ETF (BOTZ): This ETF focuses on companies involved in the development of robotics and AI technologies, including NVIDIA, Tesla, and Intuitive Surgical.
iShares Robotics and Artificial Intelligence ETF (IRBO): This ETF includes a broad range of companies working on AI and robotics, from software firms to hardware manufacturers.
ARK Autonomous Technology & Robotics ETF (ARKQ): Managed by ARK Invest, this fund focuses on autonomous technology and AI, including companies in robotics, AI, and automation.

C. Mutual Funds

Mutual funds can also provide exposure to AI stocks. Some funds focus on technology companies, which include a significant portion of AI-driven firms. These funds are managed by professionals who allocate investments across a range of tech stocks, providing diversification.

T. Rowe Price Global Technology Fund (PRGTX): This mutual fund invests in global technology companies, many of which are leaders in AI.
Fidelity Select Technology Portfolio (FSPTX): This fund targets the technology sector, including firms driving innovation in AI.

D. Initial Public Offerings (IPOs)

Investors looking to get in on the ground floor of emerging AI companies can participate in IPOs. AI startups that are expected to go public offer potential high rewards, though IPOs can be risky.

Watch for AI IPOs: Stay informed about upcoming AI-focused IPOs by tracking financial news and IPO calendars.
Evaluate IPO Performance: Consider the company’s business model, financials, and the strength of its AI technology before investing in an IPO.

3. Risks and Considerations

While investing in AI stocks offers growth potential, there are several risks to be aware of:

Volatility: AI stocks can be volatile due to market speculation, regulatory changes, and technological breakthroughs.
Valuation Concerns: Some AI companies are highly valued based on future growth expectations, which may not always materialize.
Regulatory Risks: Governments are increasingly scrutinizing AI for ethical reasons, privacy concerns, and its impact on employment. Regulatory changes could affect the profitability of AI companies.

To mitigate these risks, it’s essential to:

Stay Informed: Continuously monitor the AI industry, including technological advancements, regulatory developments, and market trends.
Diversify Investments: Spread your investments across different sectors to reduce the impact of any single company’s performance on your portfolio.
Adopt a Long-Term Perspective: AI is a rapidly evolving field, and while short-term volatility is expected, long-term growth potential remains strong.

FAQs

What are AI stocks? AI stocks are shares of companies that develop, use, or support artificial intelligence technologies.
What are the risks of investing in AI stocks? The main risks include market volatility, technological disruptions, and regulatory challenges.
What is the future outlook for AI stocks? The outlook is positive, with strong growth expected as AI technology continues to advance.

Conclusion

Investing in AI stocks offers a chance to capitalize on one of the most transformative technologies of our time. Companies like NVIDIA, Alphabet, Microsoft, Amazon, and Tesla are leading the charge in AI innovation, providing investors with strong growth opportunities. By carefully selecting individual stocks, ETFs, or mutual funds and staying informed about industry trends, investors can participate in the AI revolution while managing risks responsibly.

To start investing in these AI stocks, you can open a brokerage account with Charles Schwab, which offers a user-friendly platform and extensive research tools to help you make informed investment decisions.

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