While 2022 was a year most investors would rather forget, this year has started out much differently, giving many people hope that the worst has passed. After weathering the worst downturn in over a decade, things have turned decidedly positive in 2023. Each of the major market indexes has gained more than 20% from their respective lows, leading many market watchers to call the beginning of the next bull market, at least according to that measure.
The catalyst sending many stocks higher is the next generation of artificial intelligence (AI) technology. The broad and widespread use cases for generative AI have captured the public imagination, and business leaders are scrambling to benefit from the potential productivity gains -- and with good reason. One of the more bullish prognostications comes from the technology gurus at Cathie Wood's Ark Investment Management, which estimates that the global AI software market could represent a $14 trillion opportunity by 2030.
Nvidia has been at the epicenter of this AI gold rush, as its processors are the gold standard for running these AI systems, and the company has gained a whopping 188% so far this year as a result. That said, AI isn't the only catalyst sending stocks higher this year. Numerous businesses -- with more tenuous connections to AI -- have gained more than 100% in 2023, and some could still have further to run. Let's take a look.
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1. Carvana -- Up 586%
Topping the list is Carvana (CVNA 8.79%). The stock plummeted roughly 98% last year, driven lower by 40-year-high inflation, rising interest rates, and plunging demand for used cars. So far this year, however, the online used-car dealer has risen like a phoenix from the ashes, gaining nearly 600%. Carvana's stock more than doubled last month alone.
While not strictly an AI company, Carvana has long employed data science and AI to improve its business performance. The company uses AI to help select the cars it buys, locate these vehicles within its logistics network, determine the best pricing, and assess the creditworthiness of the buyers to whom it offers financing.
Carvana's recent results are encouraging. During the first quarter, revenue of $2.6 billion declined 25% year over year, resulting in a net loss of $286 million. While that may not seem like something worth writing home about, its loss improved by 42% year over year and 80% sequentially. Furthermore, the company reported the best first quarter in its history when measured using adjusted EBITDA and total gross profit per unit sold.
At less than 1 times sales, investors can get Carvana for a song but should be prepared for the volatility that is sure to continue. Carvana will continue to be risky, so it should be an appropriately sized portion of a balanced portfolio.
2. IonQ -- Up 288%
Next on our list is IonQ (IONQ 9.66%), which provides quantum computing services to educational institutes, governments, and businesses via the cloud.
CEO Peter Chapman has been clear that there's a fair degree of overlap between machine learning -- a branch of AI -- and quantum computing, so there's a tenuous connection, but AI is not IonQ's primary focus. In the face of the downturn, IonQ lost 79% of its value last year, making it ripe for a rebound.
In the first quarter, IonQ reported revenue of $4.3 million, well ahead of expectations. While its net loss ballooned from $4.2 million to $27.3 million, much of that resulted from a significant increase in the company's research and development (R&D) spending.
Two of the biggest catalysts for the stock price move came last month. First, management increased IonQ's bookings expectations to $50 million at the midpoint of its guidance, up from its previous level of $40 million. This represents an increase of more than 100% compared to 2022's record bookings.
Then, just weeks later, the company announced an agreement with South Korea's Ministry of Science and Information and Communications Technology to help the agency develop a "local quantum ecosystem." These developments will boost IonQ's financial results and add further credibility to its business model.
Quantum computing is certainly an intriguing proposition, with the potential to accelerate computing speed to the next level. However, the technology is still in its infancy -- making IonQ risky as well. Then, there's the stock's valuation. IonQ is selling for 69 times sales, a pretty penny for a company that's burning cash and still isn't profitable. There's certainly a compelling opportunity here, but it comes with a disproportionate amount of risk. Let the buyer beware.
3. Opendoor Technologies -- Up 253%
Opendoor Technologies (OPEN 3.38%) operates an e-commerce platform for residential real estate, a market that was punished during the downturn. As the housing market dried up and Opendoor's business faltered, its stock plunged 92% last year. However, as the macroeconomic headwinds began to abate, investors smelled an opportunity, sending the stock soaring.
The company has AI integrated throughout its business operations, using machine learning to set prices for the homes listed on its platform while also helping anticipate demand and manage inventory.
During the first quarter, Opendoor's revenue of $3.1 billion was down 39% year over year, while the total number of homes sold declined 35%. As a result, the company swung to a loss of $101 million, compared to a profit of $28 million in the year-ago quarter. Opendoor continues to burn cash, but that situation should improve as the housing market recovers.
Furthermore, at less than 1 times sales, Opendoor is a bargain, but its future success depends on the continued rebound in the housing market. For an investor with a sufficient investing time horizon, Opendoor could be a steal at current prices. And the ongoing recovery in home sales could provide tailwinds for the foreseeable future.
