Investing in artificial intelligence has become a popular strategy for investors looking to rake in generous gains in the current market. Resultantly, companies engaged in AI have become the talk of the town, and with each company trying to outmaneuver the other, the competition within the AI space has also reached a point where investors are now faced with many excellent AI stock picks. In such a saturated market of the best AI stocks, it is becoming more important to research to find out which stock will best fit your portfolio.
Our research on the AI sector has revealed several attractive names to us, such as Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT). However, these are not the only companies investors should be keeping an eye on. Companies such as SentinelOne, Inc. (NYSE:S) and Palantir Technologies Inc. (NYSE:PLTR) can be considered attractive AI plays as well and are contributing much to the AI race. For instance, on March 14, Tomer Weingarten, the CEO of SentinelOne, Inc. (NYSE:S), joined CNBC's "Money Movers" to discuss the company's work in the AI space. Here's what he said:
"In our market, we're really helping customers transform their antiquated infrastructure. Arguably, this is one of the most critical points for most customers out there... when we engage with customers, we're not only trying to give them remarkable technology, we're also trying to give them a ton of value... I think that resonates with customers. They're looking for ways to get AI-enabled, and you have to start by really revamping your infrastructure, collecting your data, making sure its accessible, making sure you gain insights from that data... If you look at what's happening today, especially the threat landscape, what attackers are doing, they're moving at incredible speeds. If you are, as a defender, trying to protect from these attacks, it's also clear that you need to move at machine speed yourself. So you have to have AI really driving automotation across the enterprise, and that's exactly what we deliver to customers."
Innovative Contributors in AI
Weingarten's comments drive home the fact that AI is the future, and companies wishing to remain in the tech race must be equipped with this technology. Similarly, Palantir Technologies Inc.'s (NYSE:PLTR) CEO, Alex Karp, joined CNBC's "Money Movers" on March 13 to discuss what sets his company apart from the Googles and Microsofts of the market. Here's what he said:
"Everyone's making the same claim. The claim is that you can get a Large Language Model to increase your output at a lower cost, so you get more sales, more revenue, higher margins. We're making the same claim, the only difference is we're not making a claim, we're saying 'we will show you, while they tell you.' The most important thing is now, we've set a standard. The standard is that we're going to make the enterprise more efficient, we're gonna make the enterprise stronger, and have innovation work in a way that it's differential."
These insights show that while the AI market has become incredibly saturated by big tech names, several other companies have contributed to the growth of AI and are beginning to gain traction as well. We have thus compiled a list of the best AI stocks to buy, including the top generative AI companies and the best AI stocks to buy according to analysts.
5 Best Artificial Intelligence (AI) Stocks To Buy According to Financial Media
A scientist at a computer station, surrounded by a neural network of artificial intelligence code.
Our Methodology
We selected the names for our list of the best AI stocks by considering the top consensus picks of major financial media websites, such as Forbes, Motley Fool, Investor Place, US News Money, and Kiplinger. We then shortlisted the 12 best AI stocks using Insider Monkey's hedge fund data for the fourth quarter and ranked the companies based on the number of hedge funds holding stakes in them, from the lowest to the highest number. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by over 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.
Best Artificial Intelligence (AI) Stocks To Buy According to Financial Media
A Buy rating and a $330 price target were maintained on Palo Alto Networks, Inc. (NYSE:PANW) on March 13 by Stifel analysts.
Palo Alto Networks, Inc. (NYSE:PANW) is a systems software company based in Santa Clara, California. The company utilizes AI in its cybersecurity technology and operations to stay ahead of the latest cyber threats.
There were 77 hedge funds long Palo Alto Networks, Inc. (NYSE:PANW) in the fourth quarter, with a total stake value of $1.8 billion.
Like Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), Palo Alto Networks, Inc. (NYSE:PANW) is one of the best AI stocks to buy now.
Tesla, Inc. (NASDAQ:TSLA) is an automobile manufacturer based in Austin, Texas. The company uses AI to manufacture full self-driving cars, trucks, and autonomous vehicles.
On March 13, analysts at Wedbush reiterated an Outperform rating and a $315 price target on Tesla, Inc. (NASDAQ:TSLA).
Tesla, Inc. (NASDAQ:TSLA) was spotted in the 13F holdings of 82 hedge funds in the fourth quarter, with a total stake value of $6.3 billion.
Citadel Investment Group was the largest shareholder in Tesla, Inc. (NASDAQ:TSLA) at the end of the fourth quarter, holding 46.7 million shares in the company.
“Tesla, Inc. (NASDAQ:TSLA) is an electric vehicle manufacturer with a significant technological lead in its large and rapidly growing addressable market. Tesla is a transportation company that is setting the pace for industry innovation, in our view. During the quarter, the company reported weaker-than-expected fiscal third quarter earnings, where gross margins were negatively impacted by factory downtime and ramping production volumes at new manufacturing plants. However, the company noted that they remain confident by the amount of data that Tesla’s established and growing fleet of vehicles has gathered, which may bode well for the company’s full self-driving capabilities.”
We saw 86 hedge funds long Snowflake Inc. (NYSE:SNOW) in the fourth quarter, with a total stake value of $7 billion.
Snowflake Inc. (NYSE:SNOW) is an internet services and infrastructure company and is one of the best AI stocks to invest in. It brings generative AI into data and enables beneficiaries of its services to analyze their data and build AI applications using Snowflake Cortex.
Citigroup analysts maintain a Buy rating and a $240 price target on Snowflake Inc. (NYSE:SNOW) as of March 4.
Fisher Asset Management was the most prominent shareholder in ServiceNow, Inc. (NYSE:NOW) at the end of the fourth quarter, holding 1.4 million shares in the company.
ServiceNow, Inc. (NYSE:NOW) is a systems software company that provides end-to-end intelligent workflow automation platform solutions for digital businesses. It operates the Now platform for end-to-end digital transformation, AI, machine learning, robotic process automation, process mining, and more.
An $820 price target and a Buy rating were reiterated on ServiceNow, Inc. (NYSE:NOW) on March 14 by Stifel analysts.
ServiceNow, Inc. (NYSE:NOW) was seen in the portfolios of 91 hedge funds in the fourth quarter, with a total stake value of $5.7 billion.
Baron Funds mentioned ServiceNow, Inc. (NYSE:NOW) in its fourth-quarter 2023 investor letter:
“ServiceNow, Inc. (NYSE:NOW) offers cloud-based solutions that improve workflow efficiency through automation and digitalization. The stock rose 26.4% in the fourth quarter, finishing the year up 82.0%. Stock appreciation was supported by strong quarterly results above expectations with 24.5% year-over-year subscription revenue growth in constant currency and 30% non-GAAP operating margins despite ongoing macro complexities. In addition, the stock benefited from growing investor expectations that the company would benefit from the integration of GenAI technology into its products, and a rise in software stocks more broadly. Management noted that key business drivers included strong traction with government customers, improving momentum with new customers, and budget consolidation into platforms like ServiceNow. In addition, the company launched its GenAI-supported product line, sold under a new higher-priced Pro Plus sku, at the end of the quarter and has already signed on multiple customers with hundreds more in the pipeline. The new product line should generate material efficiencies for customers as it improves their ability to automate and digitize, and hence we expect broader adoption of the Pro Plus sku, creating an additional growth engine for ServiceNow, supporting the company’s long duration of growth.”
Adobe Inc. (NASDAQ:ADBE) is an application software company. It uses generative AI in its graphics software products, such as Adobe Illustrator and Photoshop, and is among the best AI stocks to buy.
In total, 105 hedge funds were long Adobe Inc. (NASDAQ:ADBE) in the fourth quarter, with a total stake value of $8.9 billion.
An Overweight rating and a $705 price target were maintained on Adobe Inc. (NASDAQ:ADBE) on March 12 by Piper Sandler analysts.
7. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 105
Bernstein analysts maintain a $150 price target and Outperform rating on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as of March 11.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) had 105 hedge funds long its stock in the fourth quarter, with a total stake value of $13.1 billion.
Holding 31.1 million shares in the company, Fisher Asset Management was the largest shareholder in Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of the fourth quarter.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells integrated circuits and other semiconductor devices. Its products are used in AI and automotive products and applications, and the company is one of the best AI stocks to buy in 2024.
Polen Capital made the following comments about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its fourth-quarter 2023 investor letter:
“The largest relative detractors to the Portfolio’s performance during the fourth quarter were Aon Plc, Unilever Plc, and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) (not owned). Though we do not currently own it in the Portfolio, Taiwan Semiconductor was one of the larger relative detractors from performance during the quarter due to its strong performance and comparatively greater index weight.”
Advanced Micro Devices, Inc. (NASDAQ:AMD) is another semiconductor company on our list of the best AI stocks. It offers chips that can power faster AI training alongside the AMD Vitis AI platform which provides users access to various AI models, among more.
At the end of the fourth quarter, 120 hedge funds were long Advanced Micro Devices, Inc. (NASDAQ:AMD), with a total stake value of $15.2 billion.
On March 11, Cantor Fitzgerald analysts maintained an Overweight rating and $190 price target on Advanced Micro Devices, Inc. (NASDAQ:AMD).
Jackson Peak Capital said the following about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth-quarter 2023 investor letter:
“On the long side of the portfolio, a core theme we remain invested behind is the data center infrastructure buildout and AI chips arms race that we’ve discussed since our first letter in Q2. Some skepticism has crept into the market, and it’s understandable given the huge ramp in 2023. However, our research continues to suggest 2023 was the start of a multi-year platform shift. Value will accrue to varying segments of the AI value chain at different parts of the cycle. We continue to see value in the “boots on the ground” winners in the data center buildout (Vertiv, Modine Manufacturing, Celestica). Our positioning in AI semiconductor companies (NVDA and Advanced Micro Devices, Inc. (NASDAQ:AMD)) has ebbed and flowed given we are cognizant (perhaps too much so) that these names are crowded positions across investor style types. We’ve done well in these chip stocks since inception and NVDA is currently a long, and we’re trying to “let winners run” while using sizing to risk manage these names due to the market-wide positioning bias in semiconductors.”
Like Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the best AI stocks to invest in this year.
