Savvy investors are keenly aware of the immense potential that AI stocks hold, and many are actively seeking to capitalize on this booming sector. However, with so many companies claiming to be at the forefront of AI innovation, it can be challenging to identify the true leaders in the field. So, we’ve thoroughly analyzed the market, considering factors such as financial performance, market position, and growth prospects, to identify the 10 best AI stocks for 2024.
Summary of the 10 Best AI Stocks in 2024:
| Company | Ticker | 1-Year Return | 5-Year Avg. Annual Historical EPS Growth | 5-Year Avg. Annual Expected EPS Growth |
| NVIDIA | NVDA | 269.9% | 48.3% | 36.1% |
| KLA Corp | KLAC | 89.6% | 16.7% | 6.0% |
| Amazon | AMZN | 84.0% | 23.5% | 16.0% |
| Cadence Design Systems | CDNS | 59.4% | 25.4% | 17.1% |
| Microsoft | MSFT | 59.3% | 20.7% | 16.3% |
| Synopsys | SNPS | 56.1% | 18.6% | 18.8% |
| Palo Alto Networks | PANW | 47.9% | n/a | 17.8% |
| UiPath | PATH | 47.1% | n/a | 46.2% |
| Alphabet | GOOGL | 40.4% | 21.5% | 19.3% |
| C3.ai | AI | 15.1% | n/a | 50.9% |
What Are AI Stocks?
AI stocks represent publicly traded companies that are involved in the development, production, or utilization of artificial intelligence technologies. This includes tech giants like Microsoft and Amazon that are investing heavily in AI, as well as smaller pure-play AI companies like C3.ai that are focused solely on AI solutions.
While there is no official AI stock designation yet, investors can identify these companies by their involvement in AI as enablers (creating AI products/technologies), engagers (using AI), or enhancers (building on AI tech). The First Trust Nasdaq Artificial Intelligence and Robotics. ETF (ROBT) is a helpful resource for identifying stocks associated with AI and robotics.
Another exciting development in the AI space is the growing interest in investing in OpenAI, the renowned AI research company behind groundbreaking projects like GPT-3 and ChatGPT. Although OpenAI is currently privately held, making it impossible to directly invest in the company, our article on how to invest in OpenAI explores alternative ways to gain exposure to this AI powerhouse.
Quantum Computing: The Next Frontier
One emerging area in AI that investors should watch closely is quantum computing. This cutting-edge technology leverages the principles of quantum mechanics to solve complex problems far beyond the capabilities of classical computers. Companies like IBM, Google, and Honeywell are at the forefront of quantum computing research. As this field advances, it could open up new possibilities for AI and drive significant growth for quantum computing stocks.
1. NVIDIA (NVDA)
NVIDIA is a leading developer of graphics processing units (GPUs) that play a crucial role in AI and machine learning applications. The company’s chips power everything from gaming consoles to autonomous vehicles to data centers.
Key Metrics:
- 1-Year Return: 269.9%
- 5-Year Average Annual Historical EPS Growth: 48.3%
- 5-Year Average Annual Expected EPS Growth: 36.1%
Why invest in NVIDIA: NVIDIA’s dominant position in the GPU market and its strong partnerships with major tech companies make it a compelling AI stock. The company’s EPS growth is expected to remain robust as demand for AI computing power continues to soar.
2. KLA Corporation (KLAC)
KLA Corporation is a global leader in process control and yield management solutions for the semiconductor industry. The company’s advanced systems help chip manufacturers optimize their production processes, which is crucial for the development of AI-focused chips.
Key Metrics:
- 1-Year Return: 89.6%
- 5-Year Average Annual Historical EPS Growth: 16.7%
- 5-Year Average Annual Expected EPS Growth: 6.0%
Why invest in KLA Corporation: As the demand for AI chips grows, semiconductor manufacturers will rely heavily on KLA’s solutions to improve yields and efficiency. The company’s strong financial performance and solid market position make it an attractive AI stock.
3. Amazon (AMZN)
Amazon is an e-commerce and cloud computing giant that has made significant investments in AI. The company uses AI to power its recommendation engines, Alexa virtual assistant, and AWS cloud services.
Key Metrics:
- 1-Year Return: 84.0%
- 5-Year Average Annual Historical EPS Growth: 23.5%
- 5-Year Average Annual Expected EPS Growth: 16.0%
Why invest in Amazon: Amazon’s vast troves of data and deep pockets give it a significant advantage in AI development. As the company continues to integrate AI across its businesses, it could unlock new growth opportunities and efficiencies.
4. Cadence Design Systems (CDNS)
Cadence Design Systems provides software, hardware, and IP for electronic design automation (EDA). The company’s tools are used to design complex semiconductors, including AI-focused chips.
Key Metrics:
- 1-Year Return: 59.4%
- 5-Year Average Annual Historical EPS Growth: 25.4%
- 5-Year Average Annual Expected EPS Growth: 17.1%
Why invest in Cadence Design Systems: Cadence is well-positioned to benefit from the growth of the AI chip market. As semiconductor designs become more complex, demand for the company’s EDA solutions is likely to increase.
5. Microsoft (MSFT)
Microsoft is one of the world’s largest tech companies and a major player in AI. The company has made significant investments in AI research and development, integrating AI capabilities into its products like Office 365, Azure cloud services, and the Bing search engine.
Key Metrics:
- 1-Year Return: 59.3%
- 5-Year Average Annual Historical EPS Growth: 20.7%
- 5-Year Average Annual Expected EPS Growth: 16.3%
Why invest in Microsoft: Microsoft’s diverse product offerings and strong foothold in enterprise software make it a relatively stable AI stock. The company’s Azure AI platform is seeing rapid adoption as more businesses look to leverage AI in the cloud.
6. Synopsys (SNPS)
Synopsys is an EDA software company that helps chipmakers design and verify complex semiconductors. The company’s solutions are used in the development of AI-focused chips.
Key Metrics:
- 1-Year Return: 56.1%
- 5-Year Average Annual Historical EPS Growth: 18.6%
- 5-Year Average Annual Expected EPS Growth: 18.8%
Why invest in Synopsys: Like Cadence, Synopsys stands to benefit from the growing complexity of AI chip designs. The company’s strong financial performance and industry-leading position make it a solid AI stock pick.
7. Palo Alto Networks (PANW)
Palo Alto Networks is a cybersecurity company that uses AI and machine learning to detect and prevent cyber threats. The company’s platform analyzes vast amounts of data to identify potential security breaches.
Key Metrics:
- 1-Year Return: 47.9%
- 5-Year Average Annual Historical EPS Growth: n/a
- 5-Year Average Annual Expected EPS Growth: 17.8%
Why invest in Palo Alto Networks: As cyber threats become more sophisticated, the demand for AI-powered cybersecurity solutions is likely to grow. Palo Alto Networks’ strong market position and impressive growth prospects make it an attractive AI stock.
8. UiPath (PATH)
UiPath is a leading provider of robotic process automation (RPA) software. The company’s platform uses AI to automate repetitive tasks and streamline business processes.
Key Metrics:
- 1-Year Return: 47.1%
- 5-Year Average Annual Historical EPS Growth: n/a
- 5-Year Average Annual Expected EPS Growth: 46.2%
Why invest in UiPath: The RPA market is growing rapidly, and UiPath is well-positioned to capitalize on this trend. The company’s AI-powered automation platform has gained traction with enterprise customers, and its expected EPS growth is impressive.
9. Alphabet (GOOGL)
Alphabet, the parent company of Google, is a tech giant with deep roots in AI. Google uses AI across its products, from search and advertising to cloud computing and autonomous vehicles.
Key Metrics:
- 1-Year Return: 40.4%
- 5-Year Average Annual Historical EPS Growth: 21.5%
- 5-Year Average Annual Expected EPS Growth: 19.3%
Why invest in Alphabet: Alphabet’s vast resources and world-class AI talent make it a formidable player in the AI space. As the company continues to innovate and integrate AI across its businesses, it could unlock significant growth opportunities.
10. C3.ai (AI)
C3.ai is a pure-play AI company that provides enterprise AI software solutions. The company’s platform helps organizations across industries accelerate their AI adoption and drive digital transformation.
Key Metrics:
- 1-Year Return: 15.1%
- 5-Year Average Annual Historical EPS Growth: n/a
- 5-Year Average Annual Expected EPS Growth: 50.9%
Why invest in C3.ai: As a smaller, focused AI company, C3.ai offers investors higher risk but potentially higher reward. The company’s impressive expected EPS growth reflects the huge market opportunity for enterprise AI solutions.
How to Buy AI Stocks
If you’re ready to invest in AI stocks, follow these steps:
Step 1: Research and Analysis
Thoroughly research the AI companies you’re interested in. Examine their financial health, products, market position, and growth potential.
Step 2: Select a Brokerage
Choose a reputable online broker like Charles Schwab, Interactive Brokers, or Webull. Consider factors like fees, available tools, and ease of use.
Step 3: Fund Your Account
Open and fund your brokerage account. Most brokers have no account minimums.
Step 4: Determine Number of Shares
Decide how many shares to buy based on your budget and investment strategy. With fractional shares, you can invest in costly stocks with less capital.
Step 5: Place Your Order
Enter the stock ticker and number of shares you want to purchase. Use a market order to buy at the current price or a limit order to specify your price.
Step 6: Review and Confirm
Double check your order details before submitting it.
Step 7: Monitor Your Investment
Keep an eye on your AI stocks and the broader market. Stay up to date on company and industry news.
Step 8: Reassess Periodically
Review your portfolio regularly and make adjustments as needed based on your goals and risk tolerance.
Fees and Taxes
When buying AI stocks, be aware of potential fees and taxes. Online brokers charge various commissions and fees for trades. These typically range from $0 to $10 per trade.
As for taxes, profits on stocks held for more than a year are subject to long-term capital gains tax, while shorter-term gains are taxed as ordinary income. Consult a tax professional for guidance.
Conclusion
Artificial intelligence is a megatrend that will likely transform our world in the coming years. By investing in the best AI stocks, you can participate in this technological revolution and potentially earn impressive returns.
As always, remember to do your own research, invest only what you can afford to lose, and maintain a diversified portfolio. With the right approach, AI stocks could be a rewarding addition to your investment strategy.
FAQs
What are the best AI stocks to buy now?
Some top AI stocks for March 2024 include NVIDIA, Microsoft, Amazon, and C3.ai. However, the best AI stocks for you will depend on your individual financial goals and risk tolerance.
How can I invest in AI stocks?
To invest in AI stocks, you’ll need to open a brokerage account, fund it, research potential investments, and place trades. Many online brokers offer low fees and easy-to-use platforms for buying stocks.
Are AI stocks risky?
Like any stock investment, AI stocks carry risks. Some AI companies are not yet profitable, and the technology is still evolving. However, the potential rewards could be significant for investors who choose wisely and hold for the long term.
What should I consider when evaluating AI stocks?
When researching AI stocks, look at factors such as the company’s financials, market position, growth prospects, and partnerships. Key metrics to examine include revenue and earnings growth, price-to-earnings ratio, and debt levels.
