All anyone in the Wall Street could talk about in 2023 was recession and AI. With rate hikes slowly but surely coming in the rear view, long-term investors are keen to see what course the AI boom would take from here and how the mind-numbing technological advances would affect various sectors. While algorithmic trading and quant hedge funds have been around for years if not decades, using AI to pick stocks in becoming more common by the day after the launch of ChatGPT and other generative AI tools. Yahoo Finance recently reported that a portfolio of stocks picked by ChatGPT during an experiment conducted by financial services company finder.com is outperforming the UK’s 10 most popular funds. This ChatGPT portfolio is up 16.73% since March 6, surpassing the average 6.24% return posted by the UK’s top funds.
Methodology
For this article we asked ChatGPT to wear the hat of a professional stock trader and recommend 15 stocks that could make one rich in the next five years. After standard warnings and cautions, ChatGPT recommended some stocks that it believes have the potential to grow based on their past performance.
Here was our exact prompt:
"Assume the role of a professional stock advisor and recommend 15 stocks that can make me rich in the next five years. For each stock mention the reason behind recommendation."
In response to our prompt, ChatGPT said it's a large language model and not a professional stock trader in addition to some other standard replies. The chatbot then said the following before recommending the 15 stocks mentioned in the article:
However, here are 15 stocks that have shown promising potential as of my last update in January 2022.
We also asked ChatGPT why it believes these stocks have the potential to make one rich in the next five years. The chatbot replied:
These growth prospects are based on the companies' market positions, technological advancements, innovation, global trends, and potential for continued expansion into evolving industries. However, market conditions are subject to change, so ongoing analysis and monitoring are crucial for investment decisions.
We ranked the stocks in the article in ascending order of the number of hedge fund investors. 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. Some of the biggest names picked up by ChatGPT include Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA).
Stocks That Will Make You Rich in 5 Years According to ChatGPT
15. Tencent Music Entertainment Group - ADR (NYSE:TME)
Number of Hedge Fund Investors: 15
Chinese social media company and technology company Tencent Music Entertainment Group - ADR (NYSE:TME) ranks 15th in our list of the stocks ChatGPT believes can make you rich in the next five years. Year to date the stock has lost about 11%.
Recently, Reuters reported Tencent Music Entertainment Group - ADR (NYSE:TME) closed one of its video game studios in the U.S.
ChatGPT believes the global shift towards remote work and online meetings has positioned Zoom Video Communications Inc (NASDAQ:ZM) to profit from an industry that has strong growth prospects. Zoom Video Communications Inc (NASDAQ:ZM) shares have gained about 4% year to date through December 21.
Wells Fargo recently counted Zoom Video Communications Inc (NASDAQ:ZM) among its top picks for 2024. Wells Fargo believes 2024 could see a market rotation back to growth stocks.
"Regardless of if macro improves in '24, we're expecting some of these forgotten names [with company] specific catalysts and/or inexpensive valuations to stage a comeback, given potential for upside to estimates + favorably skewed risk/reward," Wells Fargo analysts said.
As of the end of the third quarter of 2023, 44 hedge funds tracked by Insider Monkey had stakes in Zoom Video Communications Inc (NASDAQ:ZM).
ChatGPT is bullish on Block Inc (NYSE:SQ) due to its Cash App and Block Inc’s (NYSE:SQ) “foray into other financial services present opportunities in the evolving fintech landscape.”
A total of 60 hedge funds out of the 910 funds tracked by Insider Monkey reported owning stakes in Block Inc (NYSE:SQ). The most significant stakeholder of Block Inc (NYSE:SQ) as of September was Andreas Halvorsen’s Viking Global which owns a $545 million stake in Block Inc (NYSE:SQ).
Here is what Baron FinTech Fund has to say about Block, Inc. (NYSE:SQ) in its Q3 2023 investor letter:
“Block, Inc. provides point-of-sale technology to small businesses and operates the Cash App ecosystem of financial services for individuals. Shares fell due to a confluence of factors, including slowing growth, a brief system outage, and the departure of a key executive who ran the Square business segment. Ongoing investor concerns over consumer spending and a recession did not help sentiment. Nevertheless, Block reported strong quarterly results with 27% gross profit growth and adjusted EBITDA more than doubling. We believe Block’s businesses are resilient, and greater management focus on cost discipline should drive further margin expansion. We continue to own the stock due to Block’s long runway for growth, durable competitive advantages, and track record of innovation.”
ChatGPT believes Shopify Inc (NYSE:SHOP) is continuing to gain “traction” because of a broader rise in online sales and ecommerce. JMP Securities recently downgraded the stock to Market Perform from Market Outperform as the firm expects Shopify Inc’s (NYSE:SHOP) 2024 adjusted operating income to come below consensus.
Of the 910 hedge funds tracked by Insider Monkey, 69 hedge funds had stakes in Shopify Inc (NYSE:SHOP). The biggest stake in Shopify Inc (NYSE:SHOP) is owned by Catherine D. Wood’s ARK Investment Management which owns a $379 million stake in Shopify Inc (NYSE:SHOP).
Alger Mid Cap Focus Fund made the following comment about Shopify Inc. (NYSE:SHOP) in its Q3 2023 investor letter:
“Shopify Inc. (NYSE:SHOP) operates a cloud-based commerce platform designed for small and medium-sized businesses. Its software is used by merchants to run business across all sales channels, including web, tablet and mobile storefronts, social media storefronts, and brick-and-mortar and pop-up shops. The firm’s platform provides merchants with a single view of business and customers and enables them to manage products and inventory, process orders and payments, build customer relationships and leverage analytics and reporting. While the company’s shares nearly doubled in the first half of 2023, market sentiment deteriorated towards unprofitable technology companies during the third quarter, as shares detracted from performance. Despite the share price decline, we continue to remain positive on the company’s asset-light model within the vast eCommerce market and believe that we are in the early innings of the company’s renowned focus on operational efficiency and profitability.”
PayPal Holdings Inc (NASDAQ:PYPL) ranks 11th in our list of the best stocks that can make you rich in the next five years according to ChatGPT.
A total of 78 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in PayPal Holdings Inc (NASDAQ:PYPL).
Wedgewood Partners made the following comment about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q3 2023 investor letter:
“PayPal Holdings, Inc. (NASDAQ:PYPL) was a detractor from performance during the quarter. Total payment volume grew +11% while revenues grew +8% – both FX-neutral. Adjusted operating earnings grew +20%. E-commerce industry sales trends have normalized back to their pre-pandemic trend of growth, with high-margin branded payments keeping track with the industry. Despite this, investors continue to be concerned that PayPal’s fast-growing private-label payments solutions will dilute Company returns. However, payments is a very scalable business, and the Company will be able to manage both private label and branded for attractive returns and double-digit growth. While multiples in the payment industry have significantly compressed, especially after the multi-year process of being added to the index @inancial sector, PayPal’s businesses are substantially different enough from traditional spread-based businesses; in addition to possessing much more compelling growth drivers, PayPal’s well below market multiple should revert to its higher, historical average.”
ChatGPT believes Tesla Inc (NASDAQ:TSLA) remains a leader in the EV industry. But Wall Street skeptics believe Tesla Inc (NASDAQ:TSLA) is facing a lot of competition in the industry amid other companies launching EVs and a broader downturn in the EV industry due to lackluster demand.
Average analyst price target on Tesla Inc (NASDAQ:TSLA) for the next 12 months is $245, which is lower than the December 21 stock price of $247.
Tesla was among the notable gainers in 2023, in addition to Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA).
Here is what White Brook Capital has to say about Tesla, Inc. (NASDAQ:TSLA) in its Q3 2023 investor letter:
“The magnificent seven, that underpin the S&P 500 performance, which includes Tesla, Inc. (NASDAQ:TSLA), now comprise almost 30% of the market capitalization of the S&P500. At least three of the seven stocks have heightened downside risk and suffer from already high penetration, weakening end markets, competitive risk, and lofty valuation. They have been remarkably resilient to increased interest rates and the potential for slowing growth. Small and midcap stocks, on the other hand, have been systemically penalized by fears of recession and continue to price that eventuality even as significantly better outcomes have become more probable. Today, it’s relatively easy to find attractive investments in this segment.”
Johnson & Johnson (NYSE:JNJ) is a strong company due to its consistent dividend increases and a diversified pipeline.
ChatGPT said Johnson & Johnson (NYSE:JNJ) is a "stalwart in the healthcare sector" and the company's "diversified" business of pharmaceuticals, medical devices, and consumer health provides it with stability and growth opportunities.
ClearBridge Large Cap Value Strategy made the following comment about Johnson & Johnson (NYSE:JNJ) in its Q3 2023 investor letter:
“The health care space provided some opportunities in the quarter, as we increased our exposure to medical device company Becton, Dickinson as well as large cap pharmaceutical company Johnson & Johnson (NYSE:JNJ). Johnson & Johnson recently spun out its consumer health care business, becoming a more focused yet broadly diversified pharmaceutical and medtech company.”
ChatGPT thinks Netflix Inc’s (NASDAQ:NFLX) original content and its global subscriber base makes the stock worth holding for the next few years.
Analysts believe the ads industry is set to experience strong growth in 2024 amid rate cuts. This could help companies like Netflix Inc (NASDAQ:NFLX) which depends on ads, albeit partially, for revenue.
In November, Bank of America’s global research team added Netflix Inc (NASDAQ:NFLX) to its list of tier-1 collection of best investment ideas.
"The US 1 list is intended to represent a collection of our best investment ideas that are drawn from the universe of Buy-rated, US-listed stocks (including ADRs), covered by BofA Global Research fundamental equity research analysts," BofA analysts said.
Carillon Clarivest Capital Appreciation Fund made the following comment about Netflix, Inc. (NASDAQ:NFLX) in its Q3 2023 investor letter:
“During the third quarter of 2023, an underweight to real estate and an overweight to healthcare helped performance, while an overweight to information technology and an underweight to energy detracted. Stock selection was strong within information technology and consumer staples but was weak within financials and communication services. Netflix, Inc. (NASDAQ:NFLX), the internet streaming subscription service company, missed expectations. That suggested the company’s crackdown on pass-word sharing has yet to deliver the sales growth analysts expect.”
ChatGPT said Adobe Inc’s (NASDAQ:ADBE) dominance in the design tools market and its prospects of Cloud subscriptions make it a stock to buy and hold to get rich in the next five years, according to ChatGPT. But there’s another, stronger growth catalyst for the stock that ChatGPT failed to mention: AI. Adobe Inc (NASDAQ:ADBE) is rigorously integrating AI features with its tools.
Adobe Inc (NASDAQ:ADBE) recently posted fiscal Q4 results. Adjusted EPS in the period came in at $4.27, beating estimates by $0.13. Revenue in the quarter jumped 11.5% year over year to $5.05 billion, beating estimates by $30 million.
Adobe Inc (NASDAQ:ADBE) talked about its AI plans at length during its latest earnings call:
The general availability of our generative AI Firefly models and their integrations across Creative Cloud drove tremendous customer excitement with over 4.5 billion generations since launch in March.
Here is what Polen Global Growth has to say about Adobe Inc. (NASDAQ:ADBE) in its Q3 2023 investor letter:
“Both Alphabet and Adobe’s businesses continue to perform well. With respect to Adobe, the most recent quarter delivered more of the same with constant currency revenue growing 13%, margin expansion, and over 2% of shares outstanding repurchased for non-GAAP earnings growth of over 20%. We believe its approach to GenAI through Firefly, which guarantees safe content because it trains on Adobe Stock, will continue to be attractive to enterprises. The counter to GenAI, and something we are keeping an eye on with Alphabet and Adobe, is that it requires heavy investment. While both businesses can leverage their scale and manage costs in other areas, we expect the investment in future growth through GenAI will weigh on company-wide margins over the near term.”
Salesforce Inc (NYSE:CRM) ranks 6th in our list of the best stocks to buy according to ChatGPT. ChatGPT said Salesforce Inc (NYSE:CRM) is a dominant player in the CRM software domain and Salesforce Inc’s (NYSE:CRM) expansion into enterprise software positions it for further revenue growth.
A total of 122 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Salesforce Inc (NYSE:CRM). The most significant stakeholder of Salesforce Inc (NYSE:CRM) was Ken Fisher’s Fisher Asset Management which owns a $2.9 billion stake in Salesforce Inc (NYSE:CRM).
In addition to Salesforce, ChatGPT also likes Apple Inc (NASDAQ:AAPL), Amazon.com Inc (NASDAQ:AMZN) and NVIDIA Corp (NASDAQ:NVDA).
Harding Loevner Global Equity Strategy made the following comment about Salesforce, Inc. (NYSE:CRM) in its Q2 2023 investor letter:
“Salesforce, Inc. (NYSE:CRM), a company we’ve owned since 2019, recently added ChatGPT-like capabilities onto its existing Al module, Einstein, to support its internal sales efforts and customer-facing software. For example, Einstein GPT can help generate marketing emails tailored to specific clients by using Salesforce’s customer database and past email correspondence to learn the most effective approach for each client. Einstein GPT is also different from off-the-shelf LLMS in three important ways: It keeps personal identifiable information private and secure, compared with external tools that retain anything a user enters. It employs the latest data in Salesforce’s system, as opposed to the sometimes-stale public data that train generic models. And generative Al capabilities can be integrated with other Salesforce offerings; the company has already introduced Slack GPT and Tableau GPT, Al-equipped versions of its workplace collaboration and analytics tools.”
