It's been an incredible year for the artificial intelligence (AI) industry. The advent and broad adoption of truly useful generative AI and large language model solutions already resulted in massive gains for many AI stocks.
But with the new year fast approaching, that raises the question: Which AI stocks should you buy to kick off 2024? I think these three stand out from the rest.
A warehouse-sized growth opportunity
Shares of Symbotic (SYM 8.53%) are on a roll, up an incredible 340% so far in 2023, capped by a 38% pop last week after its fiscal fourth-quarter 2023 (ended Sept. 30, 2023) report absolutely crushed expectations. But I think Symbotic stock should have plenty of room to run even higher from here.
The value proposition of Symbotic's automated warehouse systems is undeniable as supply chain leaders faced challenges over the past year, ranging from labor shortages to rising operating costs and imbalanced inventories. As such, Symbotic made huge financial progress over its full fiscal year 2023 with revenue nearly doubling year over year to $1.177 billion and its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) loss narrowing to $17.6 million from just under $90 million in fiscal 2022.
NASDAQ: SYM
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But with 12 fully operational systems and 35 systems currently being deployed as of the end of September -- up from seven fully operational systems and 17 deployed a year earlier -- Symbotic is now accelerating its pace of deployments. The company is poised to enjoy significant operating leverage going forward.
According to CEO Rick Cohen during the company's latest earnings conference call, Symbotic is maintaining a longer-term goal of reducing its total time required to complete each deployment to under six months. That's down from its current deployment pace of 22 months and a pace of 2.5 years (30 months) when it first went public in mid-2022.
Moreover, Cohen added that Symbotic systems are already moving goods at a capacity of over 400 million cases per year, and its current deployments represent additional capacity rated to move another 1.6 billion cases annually. Considering the current total addressable market in the U.S. alone is already over 500 billion cases and growing, Symbotic has barely scratched the surface of its longer-term growth runway.
A soon-to-be-profitable AI stock
It's been a veritable roller-coaster ride for Lemonade (LMND +0.22%) shareholders in 2023. Shares of the AI-centric insurance company rallied 35% year to date but remain 25% below their 52-week high set in July.
Considering Lemonade stock is operating from a position of strength following its impressive third-quarter report earlier this month -- which spurred an incredible 47% single-day pop for the stock -- I think chances are high that it can sustain that momentum heading into the new year.
To be sure, Lemonade's gross loss ratio ex-CAT (excluding catastrophe events) held steady at 73% last quarter -- well below its 75% target for the metric across all insurance products. And the company only just received approval for a 51% rate hike for its car insurance product in California (where around half its total book of business for car insurance resides). That increase alone should go a long way toward offsetting high inflation and skyrocketing repair costs, which previously hampered its underwriting results as the pace of rate-hike approvals lagged those rising expenses.
NYSE: LMND
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That brings us to Lemonade's biggest long-term catalyst: sustained positive cash flows and profitability. On the former, Lemonade management now predicts the company should achieve sustained positive cash-flow generation by late 2025 -- far earlier than its previous target for 2027 -- with "hundreds of millions in unrestricted cash in the bank." Lemonade also expects adjusted EBITDA to turn positive a few quarters later or sometime in 2026.
If Lemonade is able to meet these targets without raising additional capital along the way, I see no reason the stock won't continue to soar in 2024.
Take advantage of the recent pullback in this AI pure play
Finally, shares of C3.ai (AI 2.08%) are up 170% year to date in 2023, but -- similar to Lemonade -- have dropped around 35% from their summer high. Even as a C3.ai shareholder myself, I'll readily admit the initial rally likely went too far and too fast, given the hype surrounding AI stocks earlier this year. But I also think the pullback in this AI pure play looks healthy, having given the stock a chance to build a base as the company remains laser-focused on reaching sustained profitability.
More specifically, only a few months ago, C3.ai founder and CEO Tom Siebel predicted the company would achieve adjusted (non-GAAP) profitability and sustained positive free-cash-flow generation by the fourth quarter of this fiscal year (ending April 30, 2024). Management previously told investors it saw a "staggering" immediate positive response from customers to its earlier C3 Generative AI Suites made available on the Amazon Web Services (AWS) marketplace, the GCP Marketplace, and the Azure Marketplace.
NYSE: AI
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That momentum could easily carry forward if the company saw a similar positive response to its newest Generative AI Suite, which was made available on the AWS Marketplace just last week. With its next quarterly update slated for next week on Dec. 6., now might be a perfect time to open or add to your position ahead of the new year.
