Machine learning technology -- a branch of artificial intelligence (AI) that enables computers to emulate how humans learn and adapt by using data and experience -- is not new. Early work began in the late 1950s, and the coining of the term "machine learning" is credited to IBM (IBM 0.06%) scientist Arthur Samuel.
In the early 1960s, a machine learning-equipped computer beat researchers at a game of checkers. Today, machine learning systems are tackling far more complex problems. On a daily basis, you benefit from machine learning when you do an internet search on Alphabet's (GOOGL -1.23%)(GOOG -1.1%) Google or get a recommended television show or movie from Netflix (NFLX -9.09%).
Businesses of all kinds are trying to apply machine learning to their operations. According to researcher IDC, global spending is expected to roughly double from 2023 through 2026 and reach more than $300 billion annually. Given those projections, investing in companies with exposure to machine learning could yield rich rewards.
Machine Learning
Best machine learning stocks in 2024
Best machine learning stocks in 2024
Although they're not pure plays on machine learning, here are some top companies participating in the machine learning sector:
| Company | Market Cap | Description |
|---|---|---|
| Nvidia (NASDAQ:NVDA) | $1.23 trillion | Semiconductor design and software company providing machine learning know-how to its customers. |
| Tesla (NASDAQ:TSLA) | $770.95 billion | Electric vehicle maker using machine learning for autonomous driving technology. |
| Accenture (NYSE:ACN) | $207.36 billion | Consultancy and professional services firm with a machine learning research division. |
| ServiceNow (NYSE:NOW) | $136.05 billion | Cloud computing software platform that uses machine learning to help businesses manage workflows. |
| Snowflake (NYSE:SNOW) | $54.91 billion | Data storage, processing, and analytics software for the cloud computing and AI era. |
| CrowdStrike Holdings (NASDAQ:CRWD) | $49.59 billion | Cybersecurity software that leverages machine learning to automate the detection of online threats. |
| Palantir Technologies (NYSE:PLTR) | $43.70 billion | Software firm that specializes in AI and machine learning platforms so businesses can unlock insights from their data. |
1. Nvidia
1. Nvidia
Nvidia's hardware made a name for itself in powering high-end video game graphics, but in recent years the company's bet on AI and machine learning has started to pay off. Machines require massive amounts of information to learn, and Nvidia's graphics processing units (GPUs) are well suited to the task.
There is a changing of the guard in the semiconductor industry, and Nvidia is quickly emerging as the technological leader in the space. It's powering high-end computing with its GPUs that accelerate the production of data centers and training of AI models.
The semiconductor company is also continually researching next-gen circuitry. It provides machine learning and other AI customers with an extensive software library to help with the deployment of their technologies. Its customers include automakers developing self-driving vehicles, biotech researchers searching for cures for diseases, and retailers seeking to improve their supply chains. The company consistently generates operating profit margins well into double-digit percentages while spending billions of dollars every year on research and development.
2. Tesla
2. Tesla
Tesla's work on self-driving cars uses machine learning. Although self-driving cars have become controversial, they are one of the most exciting developments in machine learning. Emulating the many split-second decisions a human driver makes is unfathomably complex, but Tesla is steadily improving its Autopilot and Full Self-Driving (which isn't fully self-driving, at least not yet) vehicles. The electric vehicle maker regularly releases updates for its machine-learning-enabled vehicles via cloud-based software.
Tesla collects video and data from Tesla owners to continuously improve its machine learning algorithms. Tesla also has a supercomputer, nicknamed Dojo, that is training the software required to make cars truly capable of self-driving. Additionally, the company has applied its expertise on the software front to the global power grid, virtually managing and automating electricity storage for use across its own network of charging stations, as well as selling the electricity to local utilities and other businesses that need power.
Besides strong sales growth, Tesla is also highly profitable and generates far larger profit margins than its legacy automaker peers. The stock trades for a steep premium, but investors are betting the EV company will be able to use its lead in AI and machine learning to disrupt the energy and transportation status quo for years to come.
Semiconductor
3. Accenture
3. Accenture
Accenture is a global consulting firm and technology expert that often helps companies leverage tech to transform their operations. Accenture's numerous proficiencies include artificial intelligence and machine learning.
This is a slow-and-steady growth stock, so it isn't the most exciting company on this list. But what Accenture stock lacks in excitement, it makes up for in shareholder returns with dividends and share repurchases.
Accenture has research labs dedicated to various branches of AI, and some of its projects require the company to determine how to apply machine learning to solve real-world problems. Where relevant, the company recommends the use of machine learning to its clients to support and increase the productivity of a human workforce, in addition to increasing the efficiency of cloud computing. Machine learning is likely to proliferate among businesses in the decade ahead, and Accenture is well positioned to help them implement it.
4. ServiceNow
4. ServiceNow
ServiceNow is a cloud computing platform powered in part by machine learning. As a provider of workflow automation software, the company uses machine learning to help its customers eliminate monotonous and redundant tasks. This ensures that employees are spending more time working rather than discussing how to do work.
ServiceNow's use of machine learning also means that its capabilities are always improving. The longer the platform operates using machine learning, the better the company gets at predicting how workflows can be improved and tasks flagged or prioritized. Although it's not a household name, ServiceNow is deeply engaged with machine learning and is changing work, software development, and customer relationship management.
ServiceNow is a large software firm at this point, but it's still expanding revenue at a better than 20% rate. This applied machine learning company still has a long runway ahead.
Artificial Intelligence
5. Snowflake
5. Snowflake
AI and machine learning require massive amounts of digital data to be stored and processed. Snowflake's cloud-based platform was built for precisely this need as organizations around the world try to figure out how to make the best use of their new cloud computing capabilities.
Snowflake calls its platform the "data cloud." Companies can use the software for a near-endless number of applications, including analytics and machine learning algorithm training. The business has been in hypergrowth mode ever since its 2021 IPO. The stock has fallen sharply since then due to an excessive valuation when it went public and the ensuing bear market. However, Snowflake presents an intriguing investment possibility today.
The business is now profitable as measured by free cash flow and expects to continue expanding at a rapid pace for the duration of the 2020s. However, as with any richly valued high-growth stock, Snowflake will likely be a wild ride but has massive potential as AI and machine learning grow in importance.
6. CrowdStrike Holdings
6. CrowdStrike Holdings
This cybersecurity company uses machine learning to detect and identify threats, recommend the next steps in the event of a security breach, and help information technology (IT) teams solve problems. CrowdStrike's machine learning technology gathers data from thousands of customers, enabling it to continuously adapt and get smarter.
CrowdStrike, a cloud-native company, got its start as a vendor of endpoint security software for devices used outside of traditional office settings. As a top security vendor, it is effectively leveraging machine learning to provide robust online protection that continues to improve over time.
On top of an incredible rate of growth, CrowdStrike is also incredibly profitable. The company has been generating a free cash flow profit margin that tops more than 30% -- an enviable rate of return, especially for a young tech outfit.
7. Palantir Technologies
7. Palantir Technologies
Palantir is a software company that builds foundational software solutions for large enterprises. Thanks in no small part to the rapid increases in computing power, the cloud, and AI, the global economy is witnessing unprecedented change. To keep up, businesses need a better way to gain insight into their massive and ever-growing troves of digital data.
That's where Palantir's AI and machine learning software comes into play. The company designs operating systems that use machine learning at the very core of their functionality, helping customers to make better decisions and forecasts. The company has sizable contracts with various government agencies and a rapidly expanding list of private-sector customers.
Palantir has a large following of retail investor fans, making it a top meme stock. But this is a rock-solid business. Palantir generates a profit (as measured by free cash flow) and has a stellar balance sheet armed with more than $2.9 billion in cash and short-term investments and no long-term debt.
Related investing topics
Should you invest in machine learning stocks?
Should you invest in machine learning stocks?
Companies around the world are pouring resources into developing AI and machine learning software for diverse purposes. This means that the machine learning sector is poised to grow significantly. As the technology continues to improve, it will increasingly influence the ways many companies operate and interact with customers.
But the sector is still emerging, so machine learning stocks are generally best suited for buy-and-hold investors who are comfortable with plenty of price volatility. As the machine learning industry advances and matures, investors who stay invested in machine learning stocks for many years could realize substantial returns.
