Notably, the release of OpenAI's ChatGPT in late 2022 marked a pivotal moment, bringing AI technology more sharply into focus. After that the financial markets have experienced a notable surge in AI-related stocks. This trend has led to a significant appreciation in the value of AI stocks, with many outperforming the broader market indices. For instance, by mid-2023, certain AI-related ETFs have surpassed the S&P 500 by a considerable margin.
10 Best AI Stocks To Buy In 2023
This trend has led to a significant appreciation in the value of AI stocks, with many outperforming the broader market indices. For instance, by mid-2023, certain AI-related ETFs have surpassed the S&P 500 by a considerable margin.
As the artificial intelligence sector continues to evolve, it presents a golden opportunity for investors to diversify their investment portfolios. Investing in AI stocks is not without risks, given the industry's nascent stage and the speculative nature of some stocks.
According to a study by the renowned audit and advisory firm PwC, previously referred to as PricewaterhouseCoopers, in 2022, they projected that by 2030, AI might add a staggering $15.7 trillion to the worldwide economy.
For those keen on exploring this avenue, we’re here to present a list the current trends in the AI industry, analyze the top AI stocks to consider for investment
What Are AI Stocks?
AI stocks represent shares in companies that are primarily engaged in the research, development, and implementation of artificial intelligence technology. These companies may operate in various sectors including, but not limited to, technology, healthcare, automotive, and finance.
AI stocks can be further categorized into different types based on various factors such as the company's focus area within AI, market capitalization, and risk profile. Some companies are pure-play AI firms, focusing exclusively on AI technology development, while others are tech giants incorporating AI into a broader range of products and services.
This group comprises tech giants such as Microsoft and Alphabet, both of which are forging their AI pathways. Additionally, entities pivotal to AI tech creation, like chip producers Nvidia and AMD, are part of this mix. Then, there are entities wholly centered on AI, like the listed firm c3.ai.
Investing in AI stocks means buying a stake in the future of technology, where machines can learn, adapt, and possibly even outperform humans in a variety of tasks. These stocks are generally characterized by their high growth potential, given the expansive applications of AI technology.
Best AI Stocks To Buy Right Now in 2023
Over the past year, NVidia has emerged as the top-performing AI stock. Although the profit growth in the last half-decade was modest at 5%, experts predict a substantial increase in annual earnings in the upcoming years.
The expectation is a 34% surge in EPS in the forthcoming year, with this year also seeing a significant rise in earnings. The present forward P/E ratio, which is well above 40, is notably elevated, nearly twice as much as the S&P 500's P/E, which stands close to 20.
Additionally, NVDA enhances its stock value in the long term by repurchasing its shares. The company's buyback yield stands at 0.8%, calculated by comparing the value of the repurchased stock to its market cap.
Comparable to Nvidia, AMD specializes in creating CPUs for PCs and servers, as well as GPUs tailored for gaming and data centers. The company is integrating AI capabilities into its upcoming chip models.
Over the previous five years, AMD's commendable financial performance propelled its stock value to a record peak, reaching approximately $160 towards the end of 2021. This was a noteworthy accomplishment, especially when considering its stock was valued at roughly $40 just two years earlier.
Nevertheless, there's been a notable decline in AMD's stock price recently, attributed to the decreased global appetite for tech products, which has impacted its valuation.
Amazon is more than just an online marketplace. The company has a significant footprint in the domains of cloud services and data management, offering a foundation for initiating, honing, and launching AI initiatives.
Additionally, Amazon has introduced AI-driven tools and solutions like Alexa and Echo. The company saw its stock value plummet by nearly 50% in 2022, but there's a resurgence in 2023 as the earnings show signs of recovery.
The upcoming year is set to witness a robust 63.3% growth in earnings. Furthermore, Amazon has initiated a share repurchase strategy, with a buyback yield of 0.3%.
Google remains a formidable force in the online search domain, but the tech giant has also integrated AI into its search platform, applications, and products like Google Nest for years.
Even though its stock hasn't outperformed the S&P 500 this year, GOOGL boasts impressive earnings growth, a trend analysts believe will persist over the next several years. The forecast for the next year predicts a 17.9% surge in EPS.
The stock's forward P/E is relatively more affordable compared to several others in the market. Emphasizing its commitment to enhancing shareholder value, Google has been assertively repurchasing shares, reflected in a buyback yield of 4%.
Microsoft's recent substantial investment in OpenAI underscores its dedication to enhancing AI prowess. The tech giant has been launching AI-driven initiatives, including a more advanced search engine and even its proprietary AI processor.
Microsoft’s profit growth in the past half-decade has been noteworthy. While this momentum might decelerate, it's anticipated to remain strong in the upcoming years. For the next year, a 13.5% rise in EPS is projected by experts.
The prevailing P/E and the forward P/E are characteristic of tech firms that are poised for sustained growth. MSFT offers a 0.8% dividend and has repurchased 0.9% of its shares in the previous year.
C3.ai specializes in delivering software that empowers users to deploy AI solutions on a grand scale. The stock made its debut in 2020, hence it's relatively new in the market. Nonetheless, AI's stock has witnessed an uptrend over the last year, leading the pack in terms of anticipated growth.
Financial experts foresee a substantial average annual EPS growth in the next five years. While the company hasn't reported profits yet, the general expectation is a shift to profitability by 2025, with earnings projected at $0.12 per share.
While AI showcases promising attributes, it remains a speculative stock. Its brief existence means limited data is available for future projections. Even with its recent surge, the stock is considerably below its peak in 2020.
UiPath develops software that empowers corporate staff to address both intricate and straightforward challenges, including executing mundane tasks. In comparison to other stocks in this list and the S&P 500, PATH's performance over the past year has been lackluster.
The company's presence in the public trading domain is relatively recent, and it hasn't recorded a profitable year so far. However, this trend is anticipated to shift in 2024, with financial experts projecting earnings of 34 cents per share.
Since the company hasn't reached profitability, it lacks a current P/E. However, its forward P/E aligns more closely with other AI stocks that have high growth potential.
KLA specializes in crafting diagnostic and monitoring systems for the semiconductor sector. Given that semiconductors are pivotal for AI project computing capabilities, KLA's role is crucial.
The stock has witnessed a sharp upward trajectory in 2023, currently hovering around its peak value. While the company has consistently reported growth in sales and earnings in recent years, this upward trend is projected to decelerate in the forthcoming years.
Analysts predict a 15.5% dip in earnings for the upcoming year. Consequently, its valuation is more conservative compared to other stocks in this compilation. KLA has been proactively repurchasing its shares, reflected in a buyback yield of 5.1%. The firm offers a 1.1% dividend, which has seen consistent annual increments.
9. Palo Alto Networks, Inc. (PANW)
Palo Alto offers security solutions for networks and clouds, which are foundational for numerous AI endeavors. In 2023, the stock showcased commendable performance, reaching its peak value.
Although the company hasn't recorded a profitable year to date, projections suggest earnings of $4.27/share for 2023. Analysts anticipate a 17.3% growth in EPS for the subsequent year, with even more substantial growth in the following years.
Investors are optimistic about potential earnings reaching $10 per share in the coming years, which would equate to a 25:1 price-to-earnings ratio. Additionally, PANW has consistently repurchased shares, with a current buyback yield of 0.8%.
10. Cadence Design Systems, Inc. (CDNS)
Cadence Design Systems specializes in delivering automation software tailored for microchip producers. Their solutions find applications in areas like AI, machine learning, and 3D technology.
The stock has seen a positive trajectory in 2023, nearing its highest value set earlier in the year. Over the next five years, robust annual growth is projected by analysts, with a 15.7% EPS growth expected for the next year. Cadence has been proactive in repurchasing shares, with a buyback yield of 1.4% over the past year. The company has maintained this trend since 2014.
11. Synopsys, Inc. (SNPS)
Synopsys offers design automation tools for those in the microchip manufacturing sector. The firm presents a compelling blend of recent profit growth, future growth prospects, and a steadily rising stock value.
Of all the stocks mentioned in this list, Synopsys has the most impressive earnings growth over the past five years. A 13.8% EPS growth is forecasted for the upcoming year by analysts.
Share repurchases have positively influenced the stock value, with the current buyback yield standing at 1.4%. Like several other stocks in this compilation, SNPS trades at a premium P/E. However, the forward P/E appears more reasonable when factoring in projected future earnings.
How To Invest In AI Stocks?
Putting money into AI companies such as ChatGPT stocks is the same as investing in any other business sector. Initially, it's crucial for investors to thoroughly research and comprehend the AI sector and its related companies.
Here is a guide to help you understand process of investing in AI stocks:
1. Research and Education
Begin with acquiring a solid understanding of the AI industry, its current trends, and future prospects. Conduct a detailed analysis of various companies in the AI sector, considering factors like financial health, growth prospects, and market position.
2. Portfolio Diversification
Diversify your portfolio by including a mix of AI stocks with different risk profiles to mitigate potential losses. Consider investing in AI-focused ETFs, which offer exposure to a basket of AI stocks, providing a balanced approach to investment.
3. Financial Planning
Determine the amount of capital you are willing to invest in AI stocks, keeping in mind your financial goals and risk tolerance. Given the growth potential of the AI industry, consider a long-term investment strategy to potentially reap higher returns.
4. Choosing the Right Platform
Open a brokerage account with a reliable platform such as etoro that offers access to a wide range of AI stocks Utilize robo-advisors for automated investment management based on your investment goals and risk profile.
5. Monitoring and Adjusting
Regularly monitor market trends and developments in the AI industry to make informed investment decisions. Be prepared to adjust your portfolio based on changing market conditions and investment performance.
After gaining a deep understanding of the sector and its entities, you should identify the shares you think hold the most promise for long-term growth.
Once you’ve settled on your choices, you can acquire these AI shares through your brokerage firm. Nonetheless, it's always wise to seek guidance from a financial expert prior to making significant investment choices.
Where To Buy AI Stocks?
Numerous AI-related shares belong to companies that are available on prominent global stock markets. For instance, both Microsoft and Apple have their shares on the Nasdaq market. Meanwhile, firms like c3.ai can be found on the New York Stock Exchange (NYSE).
If the AI share you're eyeing is on one of these primary exchanges, your broker should facilitate its purchase. If the firm isn't on these exchanges, it could instead be available over-the-counter (OTC). However, shares traded over the counter, despite often being affordable, can exhibit unpredictability and limited liquidity, posing challenges in transactions.
How To Pick AI Stocks?
Like every industry, there isn't a one-size-fits-all approach to selecting AI stocks for investment. You must consider your unique preferences and portfolio requirements.
While the strategies of professional experts are a solid starting point for evaluating AI stocks, they might not suit everyone. It's essential for you to evaluate your specific needs and desires to decide which stocks you should incorporate into your portfolio.
Should you invest in AI stocks?
You must evaluate broadly prior to purchasing any stocks or specialized ETFs. Concentrated financial instruments might pose greater risks compared to diversified ones like the S&P 500 index funds, which historically yield an average annual return of roughly 10%, excluding inflation.
A useful principle to mitigate such risks is to allocate a maximum of 10% of your total portfolio to singular stocks. However, if your financial position is robust, it might be worthwhile to explore AI stocks .
AI Stocks For 2023 And Beyond
The vast promise of AI is truly captivating. Advanced data science techniques might pave the way for significant transformations in sectors like healthcare, cybersecurity, and international intelligence.
However, the underwhelming outcomes from Google Bard and Bing highlight that the technology still has room for improvement. For those considering AI investments in 2023, it's wise to adopt a long-term perspective.
Although AI promises substantial financial gains in the stock market, instant success is unlikely. Approach with a half-decade plan in mind and brace yourself for potential market fluctuations.
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