I know you‘re interested in technology investing, so I put together this analysis on the top 10 AI stocks I believe are set to outperform over the next couple years.
My goal is to arm you with everything you need to feel confident investing in the high-growth AI sector:
- A clear methodology for how I picked these stocks
- Detailed profiles explaining the AI leadership and advantages for each company
- Financial charts and metrics demonstrating strong momentum
- Assessment of key opportunities and risks
- Conclusions summarizing my investment thesis
I applied my background as a former hedge fund technology analyst to approach this like I would for a client. So rather than just providing surface-level description, you‘ll get my in-depth research and perspective.
Sound good? Then let‘s dive right into the picks!
How I Selected the Stocks
Rather than just picking the tech giants jumping into AI, I aimed to provide a balanced blend of:
- Established leaders – Amazon, Alphabet, Microsoft
- Chip innovators – NVIDIA and Intel
- Emerging disruptors – C3.ai, SenseTime
My ranking considered 4 key criteria:
- AI focus – Does the company concentrate significant resources around AI R&D?
- Technology & Talent – Do they have differentiated IP and specialists pushing boundaries?
- Financial performance – Evaluated past growth, profitability and stock returns
- Competitive moats – Assessed sustainability of advantages against rivals
I favored more pure-play AI exposure, but also recognized leaders like Microsoft and Google where this technology permeates everything they build.
Let‘s get right into profiling each company!
1. NVIDIA Corporation: The AI Computing Leader
You likely know NVIDIA (NASDAQ: NVDA) best for bleeding-edge gaming graphics cards that enable your friends to destroy you in Fortnite. But beyond building the world‘s most advanced GPUs, NVIDIA has firmly established itself as the AI chip company.
And the numbers validate this company‘s leadership in the space:
- 90% market share in training AI models – Across industries like automotive, healthcare and manufacturing
- $11 billion+ investment in AI R&D initiatives by 2023
- 500k+ downloads of NVIDIA‘s AI frameworks – Including CUDA, TensorRT and Riva speech recognition
Unlike general computing CPUs, NVIDIA GPUs parallel processing capabilities translate beautifully for running deep learning neural networks. The most demanding AI models lean on stacks of NVIDIA A100 or H100 chips for training.
Then once put into production, NVIDIA GPUs also efficiently perform blazingly fast AI inferencing to drive real-time recommendations, predictive analytics and more.
But it‘s about more than just selling chips. NVIDIA also builds an entire AI infrastructure stack with frameworks like Rapids for data scientists and Fleet Command managing AI deployments across clouds or on-premise data centers.
The crazy part? Revenue has nearly tripled since 2018 while cash piles grow. Once known just for gaming, NVIDIA seems poised to dominate the AI era:
With category leadership and an existing customer base of leading cloud providers like AWS and Microsoft Azure, I believe NVIDIA remains a cornerstone AI investment.
(Take a breather! Nine more cool companies still to come…)
2. Alphabet: AI Software Supremacy
Alphabet (NASDAQ: GOOG) hardly needs an introduction as the parent company to search giant Google along with Other Bets like autonomous cars (Waymo) and life sciences (Verily).
And while Google Cloud Platform trails Amazon and Microsoft in cloud infrastructure market share, Alphabet sits at the epicenter of trailblazing innovations advancing AI capabilities:
- Language understanding – BERT natural language processing broke benchmark records upon release
- Conversational AI – Duplex booking agents and Google Assistant lead the industry
- Computer vision – Techniques transfer from DeepMind gaming algorithms to real-world functionality
Access to vast datasets from Google‘s 3+ billion monthly user base certainly aids training better AI models. But Alphabet sets itself apart by concentrating phenomenal talent including leading machine learning researchers across DeepMind, Google Brain and other centers of excellence.
Rather than keeping these breakthroughs locked up, Alphabet actively publishes research to push the entire field ahead. And partnerships bridge the gap to commercialization, including a recent collaboration with AI chip startup Anthropic.
This alignment between open research and monetization makes Alphabet my top AI stock pick. With only 23% of revenue today tied to Google Cloud and Workspace products, I see substantial growth potential as Google weaves AI into its ad platform, self-driving cars, healthcare initiatives and everything they build.
3. Microsoft Corporation: Enterprise AI Powerhouse
What sets Microsoft (NASDAQ: MSFT) apart in the artificial intelligence race among tech titans?
The answer comes down to partnerships, platforms and productization.
Let‘s break it down:
Partnerships
While Google struggles outside software, Microsoft strategically partners with chipmakers like NVIDIA ensuring its cloud supports the full hardware stack required for AI workloads.
This includes an exclusive licensing partnership with NLP leader OpenAI for access to models like GPT-3 and Codex.
Platforms
Over $10 billion gets invested annually in Microsoft‘s Azure cloud where revenue grew 35% this past year. Why does Azure stand out?
- User-friendly AI building blocks simplify deployment for every skill level
- Advanced machine learning tooling enables expert data scientists
- Edge capabilities allow inferencing locally on devices
The shared knowledge with LinkedIn and GitHub also provides unique talent insights to customers.
Productization
Microsoft deserves applause for rapidly integrating AI throughout its software portfolio:
- Power BI data analytics
- Dynamics 365 business applications
- GitHub Copilot coding assistant
- Teams meeting summaries and task recommendations
The foundation lies inAzure AI helping developers quickly build their own apps. But Microsoft‘s secret sauce involves maximizing accessibility so any organization can benefit.
While Amazon and Google race to out-invest each other in AI cloud infrastructure, I believe Microsoft‘s trust, platforms and real-world use cases set them up perfectly for the next phase of enterprise adoption.
4. International Business Machines Corporation:
Nobody can claim a longer history in technological revolutions than IBM (NYSE: IBM).
And the aging tech giant is banking on artificial intelligence to fuel its revival beyond legacy hardware and services businesses.
That AI-powered transformation centers around Red Hat, Watson and hybrid cloud. Let‘s analyze each strategic growth vector:
Red Hat
IBM acquired open-source leader Red Hat for $34 billion in 2018 – its largest deal ever! This immediately equipped Big Blue with deep capabilities around containers, Kubernetes and open hybrid cloud building blocks.
It also aligned perfectly with IBM strength‘s in enterprise data and systems. Together this provides huge cross-selling potential as legacy installations shift into modern environments.
Watson
Watson definitely experienced some growing pains struggling to live up to lofty expectations after Jeopardy! triumph. But maturing applications across industries along with executive leadership changes re-established momentum:
- Oncology – Analyzes clinical trials and patient DNA better than humans
- Supply chain – Optimizes production and logistics for manufacturers
- Financial services – Enables fraud detection and hyper-personalization
What I particularly like is IBM‘s open approach similar to Microsoft. Any developer can leverage Watson through API access starting at just $0.10 per 1,000 transactions.
Hybrid Cloud
As businesses gradually containerize applications and adopt AI, they want flexibility around where workloads reside. This makes IBM‘s Red Hat OpenShift platform perfect for managing deployments spanning on-premise data centers and multi-cloud.
And IBM Cloud Satellite takes this a step further by distributing cloud control planes for localized processing.
Together this strategic positioning around open hybrid cloud and AI should fuel sustainable mid-single digit growth for years to come.
After shedding slower legacy divisions to narrow focus, I expect IBM to meaningfully outperform moving forward.
5. Intel Corporation: The AI Chip Comeback?
The rise of NVIDIA and smartphone-driven Arm processors left Intel (NASDAQ: INTC) struggling to keep pace with where computing was headed.
But new CEO Pat Gelsinger believes AI workloads centered around data represent Intel‘s comeback opportunity.
And based on recent results he might be right:
- AI Revenue Up Over 26% – Driven by data center chips
- Mobileye Growth 30%+ – Self-driving division with GM, Ford, Nissan as customers
- Investing up to $100B in Manufacturing – Ensure production capacity
Make no mistake – Intel still has an uphill battle competing against the ARM architecture dominating mobile and embedded use cases.
However, I‘m incredibly impressed by strides Mobileye already made autonomous vehicles relying on computer vision and awareness. My belief is this talent and capability unlocks new tensor processing opportunities.
Meanwhile Intel‘s OneAPI initiative around unified programming models aims smooth interactions across varied AI accelerators. And the $5.4B acquisition of chipmaker Tower Semiconductor expands capacity catering to growing AI inferencing demand.
There‘s definitely execution risk pivoting such a large organization. Although I like Intel‘s focus responding to where the market is headed rather than trying to force a legacy architecture into the future.
If Gelsinger‘s turnaround gains momentum through 2023, I expect Wall Street to reward significant upside in the stock.
6. Meta Platforms, Inc:
Social media giant Meta Platforms (NASDAQ: META) attracts justified scrutiny around ethics and privacy.
However, at its core this company pioneers extraordinarily complex applications of artificial intelligence across:
- Computer vision enhancing AR/VR experiences
- Natural language understanding driving Meta AI Assistant
- Recommendation algorithms maximizing engagement
And Meta openly shares research to push boundaries of what‘s possible, while academically pioneering the field of self-supervised learning used heavily today in practice.
Beyond internal usage, Meta AI also democratizes capabilities so any developer can easily embed computer vision, speech recognition, translations and more using PyTorch frameworks.
I believe Metaverse immersive experiences and social presence applications still remain highly speculative. Although the underlying AI research happening here sits among the industry‘s best.
As long as ethical considerations guide technology developments to avoid harmful manipulation or polarization, I view Meta as an AI innovation leader poised for future upside even amid the current advertising spending pullback.
7. Salesforce: Infusing CRM with AI
Cloud CRM juggernaut Salesforce (NYSE: CRM) surpassed $30 billion in revenue in 2022 on the back of 24% year-over-year growth.
But rather than resting on its laurels, Salesforce leans heavily into AI and automation under the Einstein brand to help customers:
- Personalize every consumer touchpoint
- Predict future sales pipeline performance
- Recommend optimized marketing spend allocation
- Automate tedious administrative tasks
And those AI capabilities permeate the full Salesforce portfolio:
- Commerce Cloud – Semantic search, shopper predictions
- Marketing Cloud – Journey analysis, 1:1 messaging
- Service Cloud – Agent assists, chatbot integrations
Acquisitions have also accelerated AI progress including:
- Slack – For workflow automation bots
- Tableau – To visualize data insights
- Acumen – Bringing AI solutions tailored for public sector
As organizations invest heavily over the next decade to digitally transform sales, service and employee workflows, Salesforce sits incredibly well positioned to surf this trend leveraging AI‘s potential.
Based on analyst consensus estimates, CRM stock continues seeing 20%+ annual growth ahead. So while not as pure-play of an AI stock compared to others on this list, I still believe Salesforce deserves inclusion based on its technology leadership and mission critical role across industries.
8. Amazon.com, Inc: The AI Retail King
Most consumers recognize Amazon (NASDAQ: AMZN) as the dominant force revolutionizing the retail landscape.
But beneath retailer exterior lies an incredible array of artificial intelligence that‘s eating the technology world as well:
- AWS AI Services – SageMaker, Kendra, Lex, Rekognition and more
- Alexa Voice Assistant – Over 130 million devices sold as of 2022
- Robotics – 350,000+ warehouse bots deployed across fulfillment centers
- Cashierless Stores – 30+ locations leveraging computer vision checkout
Very few companies not named Google or Microsoft matches the level of AI investment happening here. For instance in 2021 alone Amazon committed over $54 billion towards research, development, robotics and cloud computing enablement.
And the company still claims 33% market share in global cloud infrastructure where AI adoption expands rapidly. That segment grew 39% this past year to $62 billion as more enterprise workloads shift to the cloud.
I suspect criticism will rightfully continue around Amazon‘s workplace practices and market power. However, their expanding AI empire not only provides intrinsic value…it also fuels personalization and automation efficiencies keeping prices low for consumers.
Long-term oriented investors should appreciate how AI woven throughout fuels this company‘s ambitions where retail merely scratches the surface of what they might achieve next.
9. Tesla Inc: Autonomous Driving Innovators
Most investors in Elon Musk‘s Tesla (NASDAQ: TSLA) fixate around dominating electric vehicle sales where 2022 unit volume exceeded 1.3 million.
But as Musk reminds markets quarter after quarter, Tesla actually positions itself as an artificial intelligence robotics company developing Full Self-Driving capabilities across its fleet.
Here we find arguably Tesla‘s greatest competitive advantage and software monetization opportunity long-term:
- Tesla Vision relies solely on external cameras (no LIDAR) creating fresh training datasets to improve neural networks
- Fully autonomous ride-hailing without drivers expected to launch in 2024
- Early access customers already assist data labeling to validate recognitions
- Dojo supercomputer optimized for parallel training coming online to fuel innovation
Make no mistake – controversy will rightfully scrutinize whether Full Self-Driving promotes sufficient safety before unlocking new features. However as an AI pioneer with vehicles continuously learning from billions of miles driven, Tesla finds itself miles ahead in autonomous research.
And if you look across industries, companies struggling with retention look most endangered by self-driving trucks and rideshares removing high employee costs. Tesla with its high-caliber engineering staff instead race ahead developing what comes next.
For AI investors, Tesla today trades around 4.5x 2023 sales reflecting tempered growth assumptions. But expanding profitability through software-defined vehicles makes me incredibly bullish over the long-term.
10. C3.ai: Enterprise AI App Development Platform
Most companies lack resources or data science skill sets to build their own machine learning applications from scratch.
Enter C3.ai (NYSE: AI) – a fast-growing upstart providing turnkey AI software capabilities to rapidly develop smart enterprise apps:
- Pre-built industry-specific AI models
- Intuitive web interface with drag-and-drop components
- Integrates easily with existing IT environments
- Handles security, scalability and monitoring behind the scenes
Consider a smart manufacturing use case. C3.ai offers pre-built models predicting equipment failure or optimizing supply chains. Users simply connect relevant data sources, inject domain expertise to validate predictions, then launch and interate on the application.
No PhD data scientists required! Templates accelerate time-to-value while still providing flexibility to customize as needed.
And the low/no code approach resonates tremendously with enterprise IT groups managing tight budgets and multi-year modernization backlogs.
Even innovative companies like Microsoft partner closely with C3.ai to expand adoption of AI solutions spanning dynamics CRM, teams collaboration and machine learning ops.
C3.ai grew revenue 55% last year to $252 million by staying laser focused on this enormous process improvement opportunity. With only ~5% market penetration today in their addressable industry verticals, expect strong growth to continue for years to come.
Let‘s Summarize Key Takeaways
Congratulations, you made it!
You now know my highest conviction AI stocks entering 2024 covering:
- Cloud infrastructure players
- Semiconductor innovators
- Automotive leaders
- Industry disruptors
No doubt near-term volatility could pressure valuations across high-growth tech stocks. However, I believe the 10 companies above leverage uniquely differentiated artificial intelligence capabilities fueling their upside.
As an investor, focusing on AI not only keeps you exposed to secular tailwinds around digitization and automation…it allows participating in some of today‘s most compelling technologies changing how we live and work for the better.
So which companies stand out most intriguing to you? Do you hold any currently in your portfolio? I‘m curious to hear your perspectives as well!
Leave a comment below or connect with me on LinkedIn if you have any other questions.
To future breakthroughs!
