Last Updated on 24 June 2023 by Marc Munier
So, you’ve heard all the buzz about artificial intelligence, right? It’s pretty much taking over the world (in a good way) and shaking things up across all kinds of industries. Now, you’re probably thinking, “Sounds cool, but what AI stocks to buy? How do I get a piece of that action? What AI stocks should I be throwing my money at?” Hold your horses! Investing in AI isn’t a walk in the park, and it’s definitely not a one-size-fits-all kind of deal.
In this article, we’re going to dish out the details on some top AI stocks you might want to consider. From big-name tech giants that are splashing the cash on AI to smaller companies that are all-in on AI solutions, we’ve got you covered. We’ll take a look at what they’re doing with AI, where they stand in the market, and whether they’ve got room to grow.
But remember, folks, investing isn’t a game – so before you start splashing the cash, make sure you’re thinking about your own financial situation and how much risk you’re comfortable with. Alright, enough talk, let’s dive into the wild world of AI investing.
Hot stocks often allure with promises of quick returns and exciting growth prospects. This allure has never been stronger than in the current era of Artificial Intelligence, where the potential for transformative change has driven many investors to look towards AI-related companies as the next big thing… Like C3.ai for example, which comes up regularly as a “top AI stock to buy”. However, amid the glitz and glamor of skyrocketing stock prices and revolutionary technology, it is crucial for investors to approach with caution. Cheap AI stocks to buy are a hard find…
What stocks are involved in artificial intelligence?
When we talk about artificial intelligence, a few big names typically come to mind. Companies like Alphabet (Google’s parent company), Amazon, Microsoft, and IBM are all heavily invested in AI. These tech titans use AI to enhance their products and services, ranging from personal assistants like Google Assistant and Amazon’s Alexa, to cloud computing services like Microsoft’s Azure and IBM Watson.
But it’s not just the tech giants that are getting in on the AI action. Chipmakers like Nvidia and Micron are vital cogs in the AI machine, providing the hardware that powers AI solutions. Smaller companies such as C3.ai and Baidu are also making significant strides in AI, offering specialized AI products and services. These stocks all offer different ways to tap into the growing AI market.
What company is leading the AI race?
Determining who is leading the AI race can be a bit tricky as it depends on the specific area of AI you’re looking at. However, Alphabet, Google’s parent company, is often viewed as a frontrunner in the broader AI landscape.
Google has made substantial strides in a wide range of AI applications, from search algorithms and translation services to self-driving cars and healthcare research. Its DeepMind subsidiary is a world leader in AI research and development, having achieved significant milestones like defeating a world champion at the board game Go with its AI program, AlphaGo.
However, it’s important to note that other companies like Amazon with its AI-powered Alexa and AWS cloud services, and Microsoft with its AI-infused cloud platform Azure and investments in OpenAI, are also making significant impacts in the AI space. They are continually pushing the envelope in AI innovation, making the race for AI dominance a tight one.
What is the best AI stock to buy?
While there’s no definitive answer to what the best AI stock is to buy as it can depend on various factors such as your investment goals, risk tolerance, and market conditions, one stock that has consistently been mentioned as a strong contender is Tesla (TSLA). As of 2023, Tesla is not only a leader in the electric vehicle industry but also in AI, primarily due to its advanced driver-assistance system, Autopilot.
The company’s commitment to integrating AI into its operations, from manufacturing to autonomous driving, makes it a potentially promising investment. However, it’s important to note that investing always carries risk and it’s crucial to do your due diligence and perhaps consult with a financial advisor before making any investment decisions.
Can I buy stock in OpenAI?
As of June 2023, OpenAI is not a publicly traded company, so you cannot directly buy stock in it. OpenAI was initially founded as a non-profit, but in 2019, it transitioned to a for-profit model with a cap on returns for investors. Despite this change, it hasn’t announced any plans for an initial public offering (IPO) as of my last update.
It’s always possible this could change in the future, so it’s worth keeping an eye on news about OpenAI if you’re interested in investing. However, it’s worth noting that Microsoft has an exclusive partnership with OpenAI to provide cloud computing services to the AI lab, which could indirectly expose you to OpenAI’s operations through investing in Microsoft.
Please note that investment decisions should always be made considering your own financial situation, risk tolerance, and investment goals. Consider consulting with a financial advisor before making any investment decisions.
Is C3 AI a good stock to buy?
C3.ai Inc. (AI) is considered one of the leading AI stocks to watch as of June 2023, and it’s a company that provides SaaS (Software as a Service) applications to develop, deploy, and run enterprise-scale AI applications. Some of its offerings include software suites for supply chain optimization and energy efficiency, as well as industry-specific solutions for financial services and oil and gas. Interestingly, C3.ai has a partnership with Alphabet, and all its AI applications are available on Google Cloud. The company’s market capitalization is $3.95 Billions.
However, it’s important to remember that while these factors make it an interesting option for those interested in AI companies, the decision to buy stocks should be based on a thorough analysis of the company’s financials, future prospects, and your personal investment strategy. Furthermore, it’s worth noting that the stock market can be unpredictable, and past performance is not always indicative of future results.
A quick look at C3.ai
So let’s take a closer look at C3.ai stock, which lost 25 % in a few days in the beginning of June ’23.
Therefore, we ought to be cautious (and this goes for all “hot” AI stocks) about investing in C3.ai, an artificial intelligence (AI) company that provides an AI application-development platform and suite of AI applications to large enterprises. Despite the general hype surrounding AI technology, C3.ai’s financial performance has been unimpressive.
Here are the key points from a great article from Timothy Green which tells you why.
- Flatlining Revenue and Significant Losses: C3.ai’s stock surged earlier in the year, but not due to the company’s financial performance. The company is transitioning from a subscription-based model to a consumption-based model, which has resulted in flat revenue and substantial losses. The company’s business model, which involves selling to large enterprises, requires long sales cycles and substantial spending on sales and marketing.
- Disappointing Earnings Report: In a recent earnings report for the fiscal fourth quarter, the company’s revenue remained unchanged from the prior-year period, net loss worsened, and guidance indicated a sequential revenue decline in the first quarter of fiscal 2024. Despite an increase in interest in AI in business processes, the company expects sluggish revenue growth in fiscal 2024, with a guided full-year revenue of $295 million to $320 million, representing growth of about 15% at the midpoint.
- Shift in Interest and Competitive Landscape: Interest is shifting away from C3.ai’s AI development platform towards its suite of AI applications, which includes enterprise software products for various functions. However, many software companies are finding ways to integrate AI into their own products, increasing competition for C3.ai.
- High Sales and Marketing Costs: The company spent $51.7 million on sales and marketing in Q4, which consumed all its gross profit and more than 70% of its total revenue. The company is seeing sales cycles shorten and increased interest due to its six-month pilot program, but this comes at a high cost.
- Comparatively Simple Competitors: The article contrasts C3.ai with NVIDIA, a company with a simpler story. NVIDIA designs powerful chips that are used to train and run advanced AI models, a clear and straightforward value proposition.
- Overvalued Stock: The company was valued at $4.5 billion before a significant drop in stock price, a premium valuation that the article suggests the company doesn’t appear to deserve given its current performance and growth projections.
In summary, while C3.ai may eventually succeed in the long term, the article suggests that it doesn’t seem to be a compelling investment at the moment due to a combination of flatlining revenue, significant losses, high sales and marketing costs, and a complex and competitive product landscape.
Truth is, when you search around the web for what AI stocks to buy, most of the top 10 AI stocks lists will include Alphabet, Microsoft, Amazon, IBM, Micron, Nvidia, Baidu, Adobe, IBM, Oracle, Palantir… And most of them are included in the Nasdaq-100 index. These are established, reputable companies with a proven track record of success and strong positions in their respective industries.
So why bother taking the risk on “hot AI stocks”? Returns?… Don’t worry, you can have juicy returns with the “big ones” too.
The attraction of hot AI stocks often lies in their potential for high returns. These are typically smaller, less established companies that have the potential for explosive growth. However, with this potential for high returns comes increased risk. These companies may not have a proven track record, their business models might be untested, and their financials may not be as strong or stable.
Long Term Returns
On the other hand, the ‘big ones’ like Alphabet or Microsoft, despite being large and more stable, have also shown the ability to generate substantial returns. These companies have been consistently investing in and developing AI technology, often leading the way with innovative solutions. As a result, they’ve been able to sustain growth and profitability, which in turn drives shareholder value.
Moreover, these larger companies offer diversification that smaller, niche AI stocks can’t. They have varied business operations spanning different sectors and geographic regions, which helps to spread risk. For example, Amazon is not only a retail giant but also leads in cloud computing services with Amazon Web Services, and has a presence in digital advertising and entertainment sectors. Similarly, Alphabet is not only about its flagship search engine, Google, but also includes YouTube, Google Cloud, and various other ventures.
Thus, you don’t necessarily need to seek out hype AI stocks to reap attractive returns in the AI space. By investing in the larger, more established companies that are included in the NASDAQ-100, you can potentially achieve substantial returns while mitigating some of the risks associated with investing in smaller, less established companies.
AI stocks to Buy: ETF alternative
An alternative to individual AI stock picking, for those who are determined to focus specifically on the AI sector, is investing in AI-related exchange-traded funds (ETFs). These funds provide an easy way to gain exposure to a diverse range of companies involved in the development and utilization of AI technologies without having to pick and choose individual stocks.
ETFs are investment funds that are traded on stock exchanges, much like individual stocks. However, instead of representing ownership in a single company, they represent a basket of stocks, often those that are related by a specific theme, like AI. This allows investors to purchase a single, easily tradable asset that offers exposure to a range of companies within the AI sector.
AI-related ETFs might include stocks from a broad range of companies that are contributing to and benefiting from the growth in AI. This can include not only the AI specialists but also hardware companies producing the infrastructure needed for AI, software companies creating AI applications, and even non-tech companies that are heavy users of AI in their operations.
AI ETFs examples
Investing in AI ETFs offers a number of advantages. They provide instant diversification, reducing the risk associated with investing in individual stocks. They’re also managed by professionals who track the performance and prospects of AI companies. Moreover, ETFs are generally more liquid and easier to trade than individual stocks, especially those of smaller, less well-known companies.
So if you’re keen to invest specifically in AI but want to avoid the risk of picking individual stocks, AI-related ETFs can be a great choice. They allow you to benefit from the growth of the entire sector, rather than pinning your hopes on the success of a single company.
Here are some of the Artificial Intelligence ETFs:
- Global X Robotics & Artificial Intelligence ETF (BOTZ)
- Global X Artificial Intelligence & Technology ETF (AIQ)
- ROBO Global Robotics and Automation Index ETF (ROBO)
- iShares Robotics and Artificial Intelligence ETF (IRBO)
- iShares Exponential Technologies ETF (XT)
- First Trust Nasdaq Artificial Intelligence ETF (ROBT)
The list goes on…
However, beware of the Holdings of these ETFs: many will already include the “big ones” (Meta, Tesla, Microsoft, Amazon…). Be sure to check them before investing blindly in them. If you are looking for exposure to more specialized AI companies, some ETFs may not be suited to your investing goals.
To Sum Up
The fascination of hot AI stocks is undeniable given the rapid advancements in the field and the potential for significant returns. But companies like Microsoft, Amazon, Nvidia, Alphabet, and Tesla, among others, are leading the way in AI development and implementation, showing promising growth prospects. Additional well-known players such as Adobe, Baidu, IBM, Oracle, and Palantir also offer possibilities.
However, investors must approach this sector with caution. AI is a complex and rapidly evolving field, and not all companies that claim to be leveraging AI are doing so in ways that will necessarily translate to long-term financial success. It’s essential to understand the company’s business model, the practical applications of its AI technology, and the competitiveness of its offerings. Be mindful of hype and overly optimistic projections.
Furthermore, individual stocks carry their own set of risks. Diversification, achieved through holding a variety of stocks or investing in ETFs, can help mitigate these risks. Unfortunately, finding AI-specific ETFs can be challenging and requires diligent research.
Finally, investors should not let the shimmer of AI blind them to fundamental investing principles. Always consider a company’s broader market position, financial health, and growth prospects outside of AI. In the rapidly evolving landscape of AI, today’s frontrunners may not necessarily be tomorrow’s winners. We’ve witnessed it in 2000. Investing in AI stocks, like all investment decisions, should be made with careful consideration, research, and an understanding of one’s risk tolerance.
So what do you reckon: buy specific AI pure-player stocks? Buy AI ETFs? Or go with the usual suspects?
FAQ – AI Stocks to Buy
Which is the Best AI Company?
“Best” AI company varies by needs & perspective. Top players: Alphabet (Google), Microsoft, Amazon, Nvidia. Google’s DeepMind, Microsoft’s OpenAI, Amazon’s AI in e-commerce & cloud, Nvidia’s GPUs for AI/ML, & emerging C3.ai stand out.
Determining the “best” AI company can depend on various factors such as financial performance, innovative capabilities, breadth and depth of AI applications, and market influence. However, companies like Alphabet (Google), Microsoft, Amazon, and Nvidia were considered top players in the AI space. Google’s DeepMind and Microsoft’s partnership with OpenAI have made significant strides in AI research and development. Amazon’s AI capabilities are apparent in its e-commerce platform and cloud services, while Nvidia’s GPUs power many AI and machine learning applications.
As for newer companies, C3.ai is making waves with its AI software solutions for businesses. It’s important to note that the AI landscape is rapidly evolving, and new players are emerging all the time. Therefore, one’s choice of the “best” AI company may vary depending on their specific needs and perspective.
What is the best AI penny stock to buy?
Picking best AI penny stock requires analysis & caution due to high risk. Research on financials, growth, & AI industry position is vital. Diversification & preparedness for volatility are key.
Choosing the best AI penny stock to buy can be challenging as it requires careful analysis and consideration. Penny stocks are typically associated with higher risk due to their lower market capitalization and liquidity. When it comes to AI penny stocks, it’s important to conduct thorough research on the company’s financials, growth potential, and competitive positioning in the AI industry. Some AI penny stocks that investors may consider include smaller companies focused on AI technology, software development, or niche AI applications. However, it’s crucial to approach penny stocks with caution, diversify your portfolio, and be prepared for potential volatility.
Does AI Work on Stocks?
Artificial Intelligence (AI) is increasingly being employed in the realm of stock market investing. AI can analyze vast amounts of data at high speeds, identify patterns, predict trends, and make decisions without human intervention. It’s used in algorithmic trading, where computers execute trades at lightning speeds based on pre-set criteria. AI can also provide risk assessment, portfolio management, and predictive analysis, helping investors make more informed decisions.
Additionally, AI’s machine learning capabilities enable it to improve its performance over time, learning from its successes and failures. However, while AI can enhance efficiency and accuracy, it’s important to remember that the stock market is influenced by a multitude of factors, some of which can be unpredictable. Therefore, AI should be used as a tool to assist in decision-making, not as a substitute for human judgement and expertise.
Is there an AI trading stocks?
Yes, AI is widely used in trading stocks. AI algorithms and machine learning techniques have revolutionized the financial industry, enabling automated trading systems that can make real-time decisions based on market data and historical patterns. These AI-powered trading systems can analyze large volumes of data, identify trends, and execute trades with high speed and precision.
AI trading systems can employ various strategies, such as trend following, statistical arbitrage, and sentiment analysis. They can also adapt their strategies based on changing market conditions and learn from their past performance. By leveraging AI’s ability to process and analyze vast amounts of data, trading systems can potentially identify profitable opportunities and optimize trading strategies.
However, it’s important to note that AI trading systems are not foolproof. The stock market is complex and influenced by various factors, including economic indicators, news events, and investor sentiment. While AI can enhance trading capabilities, it’s essential to monitor and adjust these systems to ensure they align with market dynamics. Additionally, human oversight and expertise are crucial to managing risks and making informed decisions in the ever-changing financial landscape.
Is AI good for stock trading?
AI has gained significant attention in the world of stock trading due to its potential to analyze vast amounts of data, identify patterns, and make data-driven predictions. Artificial Intelligence algorithms can process information at high speeds, enabling quick decision-making and potentially improving trading outcomes. AI-powered trading systems can automate processes, execute trades based on predefined rules, and adjust strategies based on market conditions.
However, it’s important to note that AI is not a guaranteed path to success in stock trading. The stock market is influenced by numerous factors, including economic conditions, geopolitical events, and investor sentiment, which can be challenging to predict accurately. While AI can provide valuable insights, it’s essential to consider its limitations. AI models are trained on historical data and may not always account for unforeseen events or extreme market conditions.
Successful stock trading requires a combination of AI-powered tools, human expertise, and comprehensive market analysis. Traders should use AI as a complementary tool to support their decision-making, incorporating their own knowledge and judgment. Ultimately, it’s the synergy between human intelligence and AI technology that can potentially lead to successful stock trading outcomes.