Farran Powell
Farran Powell
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Updated 9:01 a.m. UTC June 11, 2024
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AI stocks were among the hottest investment trends on Wall Street in 2023. Investors and analysts are recognizing the long-term value potential of artificial intelligence, especially after OpenAI chatbot ChatGPT took the world by storm.
The AI technology field is still in its early stages, but dozens of public companies are competing for a piece of the pie. We selected the best AI stocks for 2024 based on several factors: highest year-to-date returns among AI stocks, included in a major AI ETF portfolio, covered by at least one Wall Street analyst and holding a market capitalization greater than $300 million.
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Best Performing AI Stocks
- Symbotic (SYM).
- MicroStrategy (MSTR).
- Nvidia (NVDA).
- C3.ai (AI).
- Meta Platforms (META).
Symbotic (SYM)
Market cap
YTD performance
What you should know
Symbotic is an automation technology company that operates an automation-based product movement technology platform. Symbotic helps companies upgrade their traditional warehouses by installing fleets of autonomous robots powered by AI software.
In the fiscal first quarter, Symbotic reported impressive 78.59% year-over-year revenue growth. Symbotic also has customer relationships with some of the largest names in the grocery industry, including C&S Wholesale Grocers, Albertsons and Walmart. Walmart is also a Symbotic investor, disclosing an 11.1% ownership stake in the company in 2022.
As labor and product costs continue to rise, more companies will look for ways to use AI technology to automate and optimize their supply chains, warehouses and stores.
Pros and cons
Pros
- Accelerating revenue growth.
- Partnerships with Walmart and other high-profile companies.
- Opportunities to add new verticals, grow product offerings and expand internationally.
Cons
- Heavily reliant on existing customers and their ability to grow their businesses.
- Analysts anticipate net losses will continue through at least 2024.
More details
MicroStrategy (MSTR)
Market cap
YTD performance
What you should know
MicroStrategy designs and sells enterprise analytics and mobility software. MicroStrategy is investing in enhancing the AI capabilities of its MicroStrategy ONE analytics platform.
The company recently announced an expansion of a multiyear partnership with Microsoft to improve the availability of MicroStrategy’s products. MicroStrategy will also integrate the company’s advanced analytics capabilities into Azure OpenAI Service, which will help businesses maximize the value and utility of their data.
MicroStrategy has experienced two powerful tailwinds in 2023: AI and cryptocurrency. MicroStrategy holds more than 158,000 in bitcoin on its balance sheet, according to CoinGecko, making it the largest corporate bitcoin investor. After a brutal 2022, the price of Bitcoin is up by double digits in 2024.
Pros and cons
Pros
- Total software licensing revenue was up 23% in the first quarter.
- Subscription services revenue was up 46% in the first quarter.
- The stock has significantly outperformed the S&P 500 and Big Tech stocks.
Cons
- High exposure to the extremely volatile cryptocurrency market.
- Reputation as a crypto stock could undermine investor awareness in the enterprise analytics business.
- Net income of $461 million in the first quarter of 2023 masked a $20.3 million loss from operations.
More details
Nvidia (NVDA)
Market cap
YTD performance
What you should know
Nvidia is a semiconductor company that develops and markets graphics and mobile processors for use in personal computers, workstations, smartphones, tablets and other wireless devices. The company’s high-end AI chips help provide the enormous processing power AI software needs to perform optimally.
Nvidia shares rallied more than 25% in one day in late May of 2023 after the company reported a first-quarter earnings beat and noted “surging demand” in its data center segment. Nvidia said cloud vendors and consumer internet companies are buying Nvidia graphics processing units hand over fist. These GPUs are used to train and deploy genAI applications, such as ChatGPT.
Nvidia is also generating impressive growth numbers in its automotive division, and Nvidia chips will likely play a large role in the global AV auto market.
Pros and cons
Pros
- Highly exposed to several massive long-term growth trends, including cloud computing, AI technology, the Internet of Things, the metaverse and online gaming.
- Nvidia’s Drive PX self-driving platform is an early leader in the AV auto market.
- The mind-boggling complexity of high-end GPU research and development creates a large barrier to entry for potential competitors.
Cons
- Highly exposed to the maturing PC market.
- The AV technology market is still in its early innings and is highly competitive.
- Nvidia shares have a P/S ratio of around 26, creating significant valuation risk.
More details
C3.ai (AI)
Market cap
YTD performance
What you should know
C3.ai is an enterprise software vendor that provides a platform for building large-scale AI systems to analyze business metrics and optimize operational functions. The company’s platform includes data integration, analytics processing, data management, machine learning, stream processing, and app development and visualization tools.
C3.ai has certainly gotten caught up in the AI hype on Wall Street in 2023, but a closer look at some of the company’s underlying business metrics suggests investors should think twice about chasing the stock. In the fiscal fourth quarter, C3.ai’s revenue was up just 5.6% compared to a year ago. The company is guiding for $50 million to $75 million in losses from operations in fiscal 2024.
Pros and cons
Pros
- It is highly exposed to recurring, high-margin subscription revenue, which accounts for nearly 80% of total revenue.
- It closed 126 agreements in fiscal 2023, up around 50% from the prior year.
- The company plans to achieve sustainable profitability by the end of fiscal 2024.
Cons
- Revenue growth is lagging many AI technology peers.
- The stock is steeply valued at a price-to-sales ratio of around 12.
- Guided for $50 million to $75 million in losses from operations in fiscal 2024.
More details
Meta Platforms (META)
Market cap
YTD performance
What you should know
Meta Platforms owns and operates some of the world’s largest social media and messaging platforms, including Facebook, Messenger, Instagram and WhatsApp. As of April 2024, Meta had more than 3.2 billion total daily active people across all of its platforms, up 5% from a year ago. Facebook alone has more than 2.5 billion daily active users, up 5% year over year.
Meta is investing heavily in several AI initiatives, including building custom silicon chips for running AI models, constructing a 16,000-GPU AI research supercomputer, and updating and optimizing its data center infrastructure to enable future generations of AI hardware.
Meta is also building an AI “Discovery Engine” to improve advertising and content targeting, interpret user data and increase engagement.
Pros and cons
Pros
- An unmatched global social media user base provides unique value to advertisers.
- Ad revenue per user is trending higher.
- AI technology integration will help increase user engagement and ad targeting.
Cons
- Social media is a highly competitive business, particularly among younger users.
- Meta is exposed to regulatory risks that could limit or restrict user data collection and utilization.
- Metaverse investments are very costly, and there’s no guarantee they will pay off in the long term.
More details
Compare the best AI companies
Methodology
The best AI stocks included above all trade on a major U.S. stock exchange and meet the following criteria:
- Covered by at least one Wall Street analyst. Stocks that are covered by a certified equity analyst have been assessed by a professional trained in reviewing business performance, stock market valuations and financial statements. Stocks covered by analysts also tend to have higher trading volume, media coverage and investor awareness.
- A market capitalization of at least $300 million. Stocks with market caps below $300 million are considered microcap or nanocap stocks, and these stocks are often among the most volatile and risky stocks listed on major exchanges. Stocks with market caps above $300 million are more likely to have analyst and media coverage and plenty of trading liquidity.
- iShares Robotics and Artificial Intelligence Multisector ETF (IRBO) or Robotics & Artificial Intelligence ETF (BOTZ) holding. The IRBO and BOTZ ETFs are two of the most popular ETFs focused on artificial intelligence. The funds invest only in stocks that have businesses positioned to benefit from innovation and long-term growth in robotics and AI.
- Highest year-to-date returns among AI stocks. The six stocks included in this list are the best-performing U.S.-listed stocks from among the IRBO and BOTZ fund holdings. Each of the stocks included has at least a 100% year-to-date gain.
Why other stocks didn’t make the cut
This list includes only top-performing AI stocks of 2023 and is not necessarily a list of AI stocks that will make the best long-term investments.
While Microsoft (MSFT), Alphabet (GOOG) and Apple (AAPL) have performed well in terms of stock prices this year, these AI stocks aren’t the top gainers. This stock list is a directory of best-performing AI stocks.
Exciting technology tends to inspire a great deal of enthusiasm among investors. The popularity of ChatGPT and other AI services has triggered extreme rallies in the stocks included in this list. If any stock’s price doubles in a matter of weeks or months, investors would be wise to look closely at the company’s business fundamentals to determine whether the underlying metrics justify the big move. Investors should generally avoid stocks priced with sky-high P/E ratios, P/S ratios or price-to-free cash flow ratios.
Final verdict
The hype surrounding AI technology has raised awareness of AI stocks and generated big returns for the AI stocks mentioned in this list. However, DataTrek Research co-founder Jessica Rabe said additional upside for these stocks hinges on their ability to improve upon their current offerings and turn their AI technologies into profitable, sustainable businesses.
"So far, Big Tech has collectively benefited most from the buzz around genAI. We think this trend will continue given their ability to leverage their global scale and large competitive moats when utilizing this disruptive technology," Rabe said.
Frequently asked questions (FAQs)
Yes, AI technology is likely a safe long-term investment as a whole, but many individual AI stocks will be big winners and big losers along the way. The best approach to investing in AI technology is to build a diversified basket of high-quality AI stocks that are consistently profitable and have reasonable valuations based on fundamental metrics.
Yes. While most high-growth companies do not pay dividends, a handful of AI-related stocks do. Semiconductor stocks Texas Instruments (TXN), Qualcomm (QCOM) and Microchip Technology (MCHP) are three examples of AI-related stocks with dividend yields.
Many AI stocks may currently be overvalued based on traditional fundamental valuation metrics, such as P/E and P/S ratios. The market has historically rewarded higher-growth stocks with premium valuations, but investors should proceed with caution when buying AI stocks that have valuation metrics significantly higher than overall market or sector averages.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
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Wayne Duggan is a regular contributor for Forbes Advisor and U.S. News and World Report and has been a staff writer for Benzinga since 2014. He is an expert in the psychological challenges of investing and frequently reports on breaking market news and analyst commentary related to popular stocks. Some of his prior work includes contributing news and analysis to Seeking Alpha, InvestorPlace.com, Motley Fool, and the Lightspeed Active Trading blog. He’s the author of the book "Beating Wall Street With Common Sense," which focuses on practical investing strategies to outperform the stock market. He resides in Biloxi, Mississippi
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Farran Powell is the lead editor of investing at USA TODAY Blueprint. She was previously the assistant managing editor of investing at U.S. News and World Report. Her work has appeared in numerous publications including TheStreet, Mansion Global, CNN, CNN Money, DNAInfo, Yahoo! Finance, MSN Money and the New York Daily News. She holds a BSc from the London School of Economics and an MA from the University of Texas at Austin. You can follow her on Twitter at @farranpowell.
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