AI Stocks to Buy Now That Could Make Your Future in 2024
AI Stocks: Investment in AI stocks requires an in-depth evaluation of your portfolio, financial security and the industry as a whole. There are generally two categories of AI stocks: blue-chip technology companies that invest and partner with AI developers; and small experimental businesses specializing in developing generative AI solutions like large language models.
1. Nvidia
Nvidia is at the epicenter of AI’s explosion, as its GPU chips power data centers that facilitate this artificial intelligence magic. With an estimated market cap approaching $2 trillion and overtaking companies like Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL), Nvidia’s market cap has skyrocketed.
NVIDIA stock has seen an astounding 234% surge since last January as its graphics processing units (GPUs) became increasingly popular among AI developers worldwide. That momentum boosted NVIDIA’s P/E ratio to an eye-popping 78 times earnings – quite high by tech standards.
Nvidia’s growth has more than offset its high price-to-earnings ratio and could see further gains in 2024 as it continues to capitalize on artificial intelligence demand for its chips. Recently, they partnered with ServiceNow and provided coders an open access platform for creating AI systems; additionally they have a strong presence within gaming industries, which may provide further catalysts.
KeyBanc analyst John Vinh included Nvidia on his list of “key stock ideas” for 2024 with a buy rating and target price of $625 for its shares.
Investors can get exposure to Nvidia’s growth by including its stock in their tech portfolio – such as global or specialist technology funds, investment trusts or exchange-traded funds – or directly using an online brokerage platform such as eToro.
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2. Alphabet
Alphabet’s diverse business structure allows it to pursue riskier ventures while protecting its core brand and shareholders from reputational damage, leading it to achieve a 56% year-over-year increase in earnings per share last year.
These strong gains have propelled an incredible surge in the stock, which has already increased more than 40% year-to-date. Though recent highs may have been breached, its long-term prospects remain secure.
Alphabet stands out due to its strong cash flow and relatively lower valuation relative to mega-cap peers. Over the last three years, its net income has exceeded $45 billion while operating cash flow totaled an impressive $16.2 billion during Q4 alone.
Apple returned approximately 85% of its operating cash to investors through share buybacks, partially offsetting stock-based compensation costs. As of April 2018, the company had amassed more than $111 billion in cash, cash equivalents and marketable securities on its balance sheet.
Google is focused on investing in new technologies that will drive future revenue growth, such as artificial intelligence, autonomous vehicles and cloud computing. Particularly notable is its focus on its Google Cloud platform – designed to assist customers manage applications and data across various cloud environments.
These investments will not only accelerate growth but will also reduce advertising dependence. With its strong balance sheet and undemanding valuation structure, GOOG has great potential to continue growing over time.
Get the full story from CNBC’s Jim Cramer here. His charitable trust owns GOOGL, MSFT and Meta. To see his full portfolio click here; or, to join CNBC Investing Club with Jim click here and start investing with free tools and research reports!
3. Amazon
As technology companies invest in Artificial Intelligence to improve products and gain a competitive advantage, hardware and software providers who facilitate AI are poised to experience exponential growth – creating an unprecedented opportunity to profit from one of the greatest technology trends of our time.
Nvidia (NVDA) is one of the AI stocks. In its most recent quarterly report, which handily beat earnings expectations on February 21, it confirmed that demand for its advanced graphics processing units (GPU) is soaring – these high-powered chips power AI systems used by Internet and tech firms as well as self-driving cars currently undergoing tests. Furthermore, Cuda software development system and various AI libraries owned by Nvidia have been cited 90x more often in academic papers compared with competitor chipmakers.
Palantir Technologies Inc (PLTR), which specializes in technology defense services, offers another excellent AI stock. Their software platform uses artificial intelligence (AI) to detect suspicious patterns and alert law enforcement authorities of criminal activities that could help thwart terrorist attacks or criminal activity in general – while providing businesses protection from cyberattacks as well.
The best AI stocks are those with multiple revenue sources and applications, including chipmakers, software companies and cloud-computing service providers that employ AI tools for productivity gains or to gain an edge against rivals. Investors should avoid companies which label older data analytics tools as AI in order to increase marketing exposure – instead, look for proven track records, strong fundamentals and potential future growth when selecting their investment options so as to feel assured they have made intelligent choices.
4. Super Micro
Supermicro has also enjoyed tremendous growth during the AI revolution sweeping through technology. As a server and infrastructure vendor for Nvidia-based “clusters” used to train and deploy AI models, Supermicro saw its revenues more than double between December 2017 and this quarter; analysts anticipate sales could exceed their forecasted increase.
As data centers expand, so will server demand. That is one reason why Supermicro’s shares have surged so dramatically this year; their rise is over 300% year to date; an investment made on January 1 is now worth four times what it was back then!
Supermicro has seen impressive gains, yet its stock remains volatile – potentially an indication that its rally may have gone too far.
One factor that could increase Supermicro’s volatility is its valuation. The stock currently trades with a P/E ratio of 24; that compares favorably to the S&P 500’s PE ratio of 25 but more attractively than Nvidia’s PE ratio of 200.
Supermicro’s growth prospects should justify an aggressive PE multiple compared to what the market currently values it at. The company is working to increase production capacity while expanding manufacturing facilities in Malaysia; all these projects should help it reach its long-term revenue goal of $25 billion per year and maintain margins without incurring an earnings pullback that causes stock to tumble.
5. IBM
Since 2011, IBM (NYSE:IBM) has been undervalued in the market. Although its Watson AI system won Jeopardy in 2011, since then it has struggled to become widely-known and commercialize its AI technology. But progress may be made. Last quarter management reported that bookings for Watsonx and AI solutions roughly doubled between third and fourth quarter, leading to mid-single digit revenue growth for IBM.
The market responded positively to IBM’s quarterly results, sending shares up by as much as 10% on Thursday. While this is a positive development, it doesn’t indicate that Big Blue is back and investors should buy its stock just yet; as the company still needs to create defensible niches for their new products and services. Luckily, IBM has been taking steps towards capitalizing on AI disruption across industries for some time – growing their business while AI remains disruptive.
IBM is well known for producing robust free cash flows; in 2023 alone it generated $11.2 billion, easily covering its $6 billion dividend payment and leaving room for future expansion. Furthermore, they are working on several cutting edge technologies like quantum computing, Kubernetes mainframes security blockchain power systems software development.
As opposed to some AI-focused market darlings, such as Palantir or CrowdStrike that trade at absurd valuation multiples (price-to-sales ratios in the high teens or price-to-free cash flow multiples in the low 70s), IBM’s core business is stable and highly profitable, making it an attractive long-term investment choice. Combine that with AI and cloud computing’s growth potential and you have yourself an excellent long-term bet!