In this piece, we will take a look at the ten AI stocks that will skyrocket. If you want to skip our overview of the AI industry and all the recent developments, then you can take a look at the 5 AI Stocks That Will Skyrocket.
If we were to rewind the hands of time to 18 months back, not a lot of people would be hyped up about artificial intelligence. For the general public, the term would belong squarely to the realm of science fiction, and for those in the industry, AI becoming a worldwide phenomenon would appear to be a thing of the distant future.
Yet, with the first quarter of 2024 now over, AI is neither exclusively in the realm of science fiction and it is already a global phenomenon. The ball that started to roll with the debut of ChatGPT to the public in late 2022 and early 2024 has now sent chipmaker NVIDIA Corporation (NASDAQ:NVDA)'s shares soaring by a whopping 518% since the close of 2022. At the same time, dozens of companies claiming to use large language models to help users with their daily lives are now live. They are joined by others that are selling video and image generation software for an industry whose computing needs are thought to sit in billions, if not trillions of dollars.
These computing needs are also at the center of a fundamental shakeup in the semiconductor industry. Before we get to that though, it's important to understand what AI really is. In layman's terms, AI is a set of mathematical formulae that seek to generate conclusions to queries or problems based on patterns that have been gleaned through training from an existing data set. The more voluminous and relevant this data set is, the better an AI system is, and voluminous data sets require large amounts of semiconductor chips called AI accelerators and GPUs for their processing.
While the software end of AI is quite diverse, the hardware end can prove to be a bigger bottleneck simply due to the nature of chip fabrication. Making chips is neither cheap nor easy, and therefore, only a handful of companies in the world are capable of manufacturing high end semiconductors. In fact, only the American Intel Corporation (NASDAQ:INTC), Taiwanese Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Samsung Electronics Co., Ltd. (OTC:SSNLF) are capable of making advanced AI chips. Out of these, only TSMC has been able to rapidly mass produce the latest chips, while Intel is catching up with its technology roadmap and Samsung fails to capture market share to stand its ground with TSMC.
This complexity and cost of manufacturing semiconductors is also why we regularly see unbelievable funding estimates for AI. In fact, the latest such bit comes from the The Information in form of a project that Microsoft Corporation (NASDAQ:MSFT) and OpenAI are working on. According to the details, the two plan on building a $100 billion U.S. based artificial intelligence supercomputer. The price tag is unsurprising since a single NVIDIA Blackwell GPU - one of the most advanced artificial intelligence chips in the world - costs between $30,000 to $40,000 according to fresh statements by NVIDIA chief Jensen Huang.
Speaking of Mr. Huang, even before the AI fever, he has advocated new technologies through which 'software will end up writing software' regularly during his technology conferences and earnings call reports. Now, with AI a permanent part of investor vocabulary, Huang's vision also appears to be coming to fruition. This is through the well known venture capitalist Peter Thiel backed startup Cognition Labs considering raising funding for a valuation of a whopping $2 billion. Cognition Labs seeks to develop an AI based tool to write code.
Finally, before we head to our list of AI stocks that could skyrocket, another major player in the AI race has been the Menlo Park, California based social media firm Meta Platforms, Inc. (NASDAQ:META). Before AI, Meta was one of the worst performing mega cap stocks on the market as investors remained unconvinced about its foray into the metaverse. However, it's a Wall Street AI darling now, with the shares up 129% over the past 12 months.
Meta Platforms was a leading contributor to performance for the quarter – and the year. Core advertising revenue growth accelerated to +23% while operating margin rebounded strongly from a year ago. The Company has been a consistent beneficiary of artificial intelligence (AI) over the past several years, investing aggressively in deep learning recommendation systems that help power its products, which reach nearly half the population of the planet. Meta Platform’s AI investments, combined with its massive scale, allow the Company to quickly spin up new products across its digital advertising real estate to reinforce its competitive positioning. For example, the Company's relatively new Reels product is just over two years old, yet it has driven a +40% increase in the time Instagram users spend on the app. Reels content and other content served up to Instagram users is often driven by several very large and expensive AI recommendation systems that must sort through billions of datapoints in real time and come up with a probability of a user engagement. The Company is one of the few companies that has been able to consistently and profitably monetize AI technologies for shareholders and we continue to hold it has a top position in our portfolios.
So, wondering about which AI stocks will skyrocket? We shared our #1 AI stock pick that is trading at a steep discount with our premium subscribers, but there are other investment newsletters that have different stocks in mind. In this article we will take a look at what other investment newsletters think about the best way to bet on the future of AI.
10 AI Stocks That Will Skyrocket
A high-tech robotic drone, showcasing the company's advancements in unmanned aerial systems.
Our Methodology
To make our list of the AI stocks that will skyrocket, we ranked AI stocks covered by multiple investment newsletter websites dating back as far as November 28th, 2023 by the number of hedge funds that had bought their shares in Q4 2023.
For these AI stocks that will skyrocket, we used hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
GSI Technology, Inc. (NASDAQ:GSIT) is a small semiconductor company headquartered in Sunnyvale, California. It makes and sells memory products for civil and defense use along with processing chips. The stock has been performing well this year, and is up 28% year to date.
As of Q4 2023 end, four out of the 933 hedge funds profiled by Insider Monkey had bought a stake in GSI Technology, Inc. (NASDAQ:GSIT). Orin Hirschman's AIGH Investment Partners was the biggest shareholder due to its $2.4 million stake.
Arista Networks, Inc. (NYSE:ANET), GSI Technology, Inc. (NASDAQ:GSIT), Ulta Beauty, Inc. (NASDAQ:ULTA), and Vertiv Holdings Co (NYSE:VRT) are some AI stocks that can skyrocket.
Super Micro Computer, Inc. (NASDAQ:SMCI) is a computing technology firm that makes and sells server products. It is one of the hottest stocks of 2024 as the shares have gained 243% year to date on the back of strong catalysts in play AI. This might not be the end of the gains though, as JPMorgan outlined in a recent analyst note that the firm could capture as much as 15% of the AI market. Consequently, it rated the shares as Overweight and set a share price target of $1,150.
During December 2023, five out of the 933 hedge funds tracked by Insider Monkey were the firm's investors. Super Micro Computer, Inc. (NASDAQ:SMCI)'s largest stakeholder is Richard Driehaus's Driehaus Capital as it owns $126 million worth of shares.
Mitek Systems, Inc. (NASDAQ:MITK) is a small software company headquartered in San Diego, California. Its products allow users to streamline identity management, document authentication, and other services. This leaves it ripe for disruption from AI, since recognizing patterns sits at the heart of artificial intelligence. The shares are rated Strong Buy on average, and the average analyst share price target is $17.80.
For their fourth quarter of 2023 shareholdings, 15 out of the 933 hedge funds profiled by Insider Monkey had held a stake in Mitek Systems, Inc. (NASDAQ:MITK). Ben Gordon's Blue Grotto Capital was the biggest investor through its $45.1 million investment.
Symbotic Inc. (NASDAQ:SYM) is an interesting AI stock since it is involved in logistics. Specifically, the firm develops solutions to automate warehousing solutions. However, indicating the jittery nature of the ongoing AI wave, its stock tumbled in February 2024 after the latest earnings report despite an earnings beat.
By the end of 2023's December quarter, 24 out of the 933 hedge funds profiled by Insider Monkey were Symbotic Inc. (NASDAQ:SYM)'s shareholders.
BWX Technologies, Inc. (NYSE:BWXT) is another novel addition to the list of AI stocks that could skyrocket. AI servers use electricity, and the firm makes and sells nuclear reactors - setting it up to potentially capture any new energy markets. BWX Technologies, Inc. (NYSE:BWXT) is also a high technology firm, and has partnered up with NASA for the use of nuclear technology in space.
29 out of the 933 hedge funds part of Insider Monkey's Q4 2023 database had bought the firm's shares. BWX Technologies, Inc. (NYSE:BWXT)'s largest stakeholder in our database is Amy Minella's Cardinal Capital as it holds a $88 million stake.
Ulta Beauty, Inc. (NASDAQ:ULTA), BWX Technologies, Inc. (NYSE:BWXT), Arista Networks, Inc. (NYSE:ANET), and Vertiv Holdings Co (NYSE:VRT) are some hot AI stocks.
