Best AI stocks to watch in January 2024

Top five best AI stocks to keep an eye on might be Tesla, Microsoft, Nvidia, Meta Platforms, and Alphabet. The five biggest AI businesses listed in the US are represented by these stocks.

The theme for investment in 2023 has been artificial intelligence (AI). Just seven businesses—the so-called "magnificent seven"—accounted for nearly all of the S&P 500's gains in 2023, and they are all perhaps riding the AI wave to some extent.

Artificial Intelligence is arguably distinct from prior tech manias, even though this might be just another bubble. Numerous real-world industries have already adopted it, including manufacturing, self-driving cars, warehouses, dozens of other industries, social media, entertainment, retail, security, and sports analytics.

To give more and better data, every sports match, every supermarket rewards buy, and every Netflix recommendation are subjected to an ever-intense analysis. Although customers have always known, even in a vague fashion, that artificial intelligence is replacing humans in labor-intensive tasks, the industry's impetus for investment has only recently materialized.

Of course, ChatGPT - a chatbot created using OpenAI that attracted over a million users in only five days - is the catalyst. Facebook reached this milestone in ten months, whereas Netflix took three and a half years. With more than 100 million active users every week, ChatGPT is generating interest from investors who are wondering if this invention could completely replace employment in many fields.

Interest rates are comparatively high, and quantitative easing seems to be finished for the time being from an investment standpoint. AI development is incredibly expensive, and there are hundreds of expensive failures for every ChatGPT success story.

Consequently, the bigger blue chips may be the ideal AI stocks to keep an eye on since they help diversify investments in case their AI initiatives don't work out. It's also important to keep in mind, though, that some analysts believe the big US stocks are trapped in an AI bubble that will eventually burst.

And never forget that past results do not guarantee future success. The biggest AI-focused businesses in the United States are listed below, however, several analysts dispute over whether Apple and a few others should be included because they are not considered AI companies.

Microsoft (NASDAQ: MSFT)

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Given that Microsoft was the pioneer of global computing power, it is not surprising that the US giant ranks first on the list of the top AI stocks to follow. Before ChatGPT launched, the corporation already had a strong relationship with OpenAI, and since 2019, it has spent $13 billion on the company.

The connection between the two companies is still mutually beneficial: Microsoft is giving OpenAI access to its cloud centers so that ChatGPT can have more processing power, and Bing, a native search engine, has integrated the chatbot into its features to overtake Google's commanding market position.

Microsoft may soon receive a direct return on its investment since OpenAI is still contemplating a $86 billion initial public offering (IPO) following the return of CEO Sam Altman.

Revenue increased by 13% to $56.5 billion in Q1 figures. "With copilots, we are making the age of AI real for people and businesses everywhere," CEO Satya Nadella exclaimed. To increase productivity for our clients, we are quickly integrating AI into every level of the tech stack, as well as into every function and business process.

Market Capitalisation: $2.77 trillion

Alphabet (NASDAQ: GOOGL)

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Although Alphabet, the parent company of Google, now holds 84% of the worldwide search market, Yahoo used to rule the space as well. In 2023, Alphabet fired thousands of workers, but it also introduced Bard, a competitor chatbot.

Google's LaMDA programming, which has been under development since 2021, powers Bard. Despite claims that Bard was rushed into the market to compete with ChatGPT, the titan should shortly resolve the issues

It's important to note that a lot of Google's present operations already make use of AI. Additionally, it has at least two more AI-focused projects: DeepMind, which it purchased in 2014, and its coding-focused Generative Language API.

"Product momentum this quarter, with AI-driven innovations across Search, YouTube, Cloud, our Pixel devices, and more," CEO Sundar Pichai said in the Q3 results. Revenue reached $77 billion, up 11% from the previous year.

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Nvidia (NASDAQ: NVDA)

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As one of the most valuable semiconductor companies in the world, Nvidia is widely recognized for its use in high-end computing, automobiles, and smartphones, among other devices. With a 235% increase in shares year to date to $480, Nvidia now has an extremely high price-to-equity ratio of 63. However, the business recently reported quarterly earnings that were above expectations once again.

Furthermore, the most sophisticated deep learning chips from Nvidia may indicate that the NASDAQ business is still cheap. They already enable both internal and user-facing AI systems at clients like Alphabet and Facebook owner Meta.

Demand for these chips is rising as AI becomes more and more commonplace, and crucially, there is a significant financial barrier to entry because Nvidia has a sizable economic moat around its position as the go-to AI option for "bricks and mortar" stores. Its chips are so sophisticated that there are sometimes export restrictions from the US.

Nvidia's CEO Jensen Huang stated that "NVIDIA GPUs, CPUs, networking, AI foundry services, and NVIDIA AI Enterprise software are all growth engines in full throttle" as the company's revenue soared by a staggering 206% year over year and 34% quarter over quarter to $18.12 billion in Q3 results. The generative AI era is rapidly emerging.

Market Capitalisation: $1.24 trillion

Meta Platforms (NASDAQ: META)

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Owner of Facebook, WhatsApp, and Instagram, Meta Platforms, has had a fantastic year in 2023, increasing by 176% so far this year to almost reach its all-time high.

In Q3, the number of monthly active users for this "family of apps" increased by 7% year over year to 3.96 billion, or over 50% of the global population. The tech giant has benefited greatly from CEO Mark Zuckerberg's "year of efficiency," as seen by a 24% drop in personnel over the previous year

To put things in perspective, Meta has faced several challenges, including growing interest rates, declining advertising budgets, competition from TikTok, Apple's 2021 operating system upgrade, and significant investments in the Metaverse that have not yet resulted in financial gains. To put things in perspective, the business continues to be sued because its goods are dangerous for kids and highly addicting. Furthermore, despite significant investment in the field, virtual reality is still a niche industry.

According to Meta's Q3 statistics, revenue increased by an astounding 23% year over year to $34.15 billion, while expenses and costs decreased by 7% to $20.4 billion.

Market Capitalisation: $886 billion

Tesla (NASDAQ: TSLA)

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The original electric vehicle pioneer, Tesla, may return to its former glory in late 2021 thanks to advances in artificial intelligence, even in the face of legal and public controversy surrounding CEO Elon Musk.

As it considers potential expansions into Europe and India, its share price has already rebounded by 133% year to date. However, the much-anticipated launch of the Cybertruck serves as a fresh trigger and might spur significant additional growth through 2024.

The long-term objective is fully autonomous driving, and the business intends to introduce a robot taxi service shortly. Additionally, it is creating Optimus, a humanoid robot that Musk believes has the potential to surpass Tesla's vehicle division in value over time. However, in 2024, a slowdown in China's economy might result in problems with short-term profitability.

Market Capitalisation: $801 billion