Artificial intelligence was the main force that drove the US stock market to record highs last year. While major indices have since pulled back, the big question is whether the AI trade is fully priced in. Nothing could be further from the truth, as we are still in the early stages of AI development and revolution.
Tech giants pumping billions of dollars into data centres, building AI platforms and investing in startups affirm that AI growth is all but starting. According to former OpenAI chief scientist Ilya Sutskever, we are still in the early stages of the AI revolution, and significant changes are on the horizon.
“We’re in the beginnings of this generative AI revolution as we all know. And we’re at the beginning of a new generation of foundation models that are able to do reasoning and able to do long thinking,” Sutskever said.
After years of building the foundation to support the AI revolution, generative AI is entering a new phase of advanced foundation models that should take AI reasoning and thinking to new heights. Likewise, Sutskever insists we are on the cusp of super-intelligent, self-aware AI capable of reasoning like humans as tech giants work on game-changing innovations.
Nvidia CEO Jensen Huang shares similar sentiments, who insists there is about $1 trillion worth of computers that need updating for accelerated computing. Consequently, AI is looked upon to bring about much-needed changes by improving business efficiency and developing game-changing products. This implies that there is plenty of room for AI-driven revenue growth that should benefit many companies.
Amid the stock run-up experienced in 2024, investment professionals are also optimistic that the trend will persist in 2025. Companies should start reaping the rewards of adopting generative AI as others start generating some returns from their AI investments.
Similarly, Wedbush analyst Daniel Ives expects a 25% rise in tech stocks in 2025, keeping up with the momentum enjoyed last year. While most of the gains will be driven by reduced regulatory pressure under President Donald Trump's administration, a more AI-friendly environment will also significantly impact the upward momentum.
"We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and $2 trillion+ of incremental AI cap-ex over the next 3 years,” analysts led by Daniel Ives said in a note.
Some cracks are starting to emerge amid the expected growth around artificial intelligence. Although generative AI has advanced rapidly over the last two years, Silicon Valley has grown increasingly concerned in recent weeks that the pace of advancement is slowing. The lack of advancement between models published by the industry's major players is one early sign. The primary issue might be that AI firms are running out of data on which to train their models.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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data center
A team of software engineers at desks working on code for a cutting-edge cloud computing solution.
ServiceNow, Inc. (NYSE:NOW) is a software application 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, artificial intelligence and machine learning. While growth has slowed among software makers, the company is on the cusp of reaching the $10 billion mark in annual revenue.
The growth is being accelerated by the integration of artificial intelligence into products, therefore eliciting strong demand. Likewise, the company is increasingly monetizing its AI-driven products, which have emerged as a control tower for AI business transformation. On January 4th, analysts at RBC Capital reiterated an overweight rating on ServiceNow, Inc. (NYSE:NOW) and increased the price target to $1210 from $1045.
The price hike came amid expectations that ServiceNow will be one of the biggest beneficiaries of improved spending trends in the software sector as artificial intelligence drives new innovations.
Overall NOW ranks 1st on our list of the unlikely AI stocks with tremendous upside potential. While we acknowledge the potential of NOW as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
