April 22, 2024
Artificial intelligence (AI) was one of the major trends across multiple sectors in 2023, and it is a key trend to watch in 2024 as well. A recent survey of executives and managers by McKinsey found that 40% plan to increase their investments in generative AI. It’s no surprise, then, that the Nasdaq CTA Artificial Intelligence & Robotics Index, a benchmark for the AI industry as a whole, is up about 12% in the last year, though it has failed to keep pace with the Russell 1000, which climbed 21% in the same period.
Below, we explore the best AI stocks for February 2024, considering those with the best value, fastest growth, and most momentum. Data are current as of Jan. 25, 2024.
Value investing is a strategy based on the principal that some stocks trade at prices that are below their intrinsic value. Investors able to identify these stocks, usually through analysis of fundamental metrics, may be primed for a return on their investment when the market corrects the mispricing and the stocks rise. One such metric is the price-to-earnings (P/E) ratio. Lower P/E ratios are generally considered to be signs of a more attractively valued company since it is valued at less than its fundamental value.
| Best Value AI Stocks | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing P/E Ratio | |
| Alibaba Group Holding Ltd. ( BABA ) | 73.94 | 188.9 | 10.2 |
| Aptiv PLC ( APTV ) | 83.16 | 23.5 | 10.4 |
| JD.com Inc. ( JD ) | 23.91 | 31.5 | 11.2 |
Source:
Investors often evaluate growth stocks based on revenue and earnings per share (EPS) , as these are key measures of a company’s performance. Looking at only one of these two factors, however, can leave your search susceptible to temporary phenomena, including tax law changes or one-off gains.
We aim for a more balanced screen of AI growth stocks by looking at the most recent YOY percentage growth for both revenue and EPS, giving each equal weighting. We also exclude companies with growth rates in either category of 1,000% or more on the grounds that these are likely outliers.
| Fastest-Growing AI Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
| Aptiv PLC ( APTV ) | 83.16 | 23.5 | 592.4 | 16.4 |
| Dynatrace Inc. ( DT ) | 58.18 | 17.7 | 493.5 | 24.7 |
| ServiceNow Inc. ( NOW ) | 763.10 | 156.4 | 426.0 | 23.8 |
Source: TradingView
Momentum investing is based on the principal that stocks that have increased at a faster rate compared with the market or their peers are likely to continue on that trajectory, at least in the short term, as long as there aren’t fundamental changes to those companies’ operations or the broader industry.
Below, we look at the AI stocks that have provided the highest total return in the last 12 months.
| AI Stocks With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Nvidia Corp. ( NVDA ) | 612.27 | 1,512 | 223.7 |
| Meta Platforms Inc. ( META ) | 391.01 | 1,005 | 176.9 |
| Advanced Micro Devices Inc. ( AMD ) | 178.84 | 288.9 | 145.3 |
Source: TradingView
Broad applications
Fast-moving innovation
Popular trend
Industry uncertainty
Untested companies
Dangers of AI
Broad applications : AI has transformed—or has the potential to transform—a host of different industries and sectors. Companies positioned as leaders within the AI space could be well-positioned to benefit from widespread adoption and a broad, diverse customer base.
Fast-moving innovation : AI is at the forefront of innovation today, with both major tech firms and smaller up-and-coming companies working diligently to advance this technology. This means that the potential for breakthrough success may be huge as the industry continues to evolve.
Popularity : As of early 2024, AI is one of the most talked-about trends in technology. Interest in this space is very high, meaning that investors could be poised to benefit from tremendous momentum with the right investments.
Industry uncertainty : Although AI has been in existence for decades, it is only in the last several years that technological developments have brought this field into the mainstream. With changes and advancements happening incredibly quickly, it can be difficult for even the most knowledgeable investors to keep pace with what is happening in the industry. For instance, this means it could be easy for investors to get caught up in the hype surrounding a particular company after the ideal time to purchase that company’s stock.
Untested companies : While many of the major tech firms are involved in AI, other AI companies have little history and foundation for investors to consider when selecting investments. These companies may pose a greater risk than more stable, time-tested firms.
Dangers of AI : Leaders in computer science and related fields have warned of the potential dangers associated with AI. As the field continues to expand and change, public opinion, regulations, and other factors may change and have the potential to impact AI stocks in unexpected ways.
AI stocks present investors with the opportunity to tap into one of the most popular—and potentially most revolutionary—technology trends today. With companies across virtually all industries and sectors exploring ways to integrate AI into their operations, firms that are focused on the hardware and software required to run AI programs stand to benefit. But there are significant risks to investing in AI stocks, including the uncertain future of the industry and the potential dangers of AI technology itself.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.
As of the date this article was written, the author does not own any of the above securities.
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