Top artificial intelligence (AI) stocks have delivered incredible returns and crushed the market over the last year -- and the trend looks poised to continue in 2024.
While some smaller companies will undoubtedly emerge as winners, the competitive advantages granted by infrastructure and data strengths suggest the AI race will continue to favor large players.
With that in mind, investors can best position themselves to profit from the AI revolution by building positions in today's category leaders. Read on to see why investing in these resource-rich, industry-leading companies is a great way to play AI trends in 2024.
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1. Nvidia
Nvidia's (NVDA 6.18%) graphics processing unit (GPU) technologies are at the heart of the AI revolution. When it comes to the advanced GPUs used to power AI applications, data centers, and other forms of accelerated computing, the semiconductor leader controls roughly 90% of the market. The company has entered an incredible new AI-powered growth phase, and soaring demand made it the best-performing "Magnificent Seven" stock over the last year.
In addition to a rock-solid demand outlook for its GPUs, Nvidia is building out its software business and offering AI computing as a service. With its hardware playing a foundational role in pushing AI forward and new business initiatives looking poised to deliver additional sales growth and very strong margins, profits are on track to continue expanding rapidly.
2. Microsoft
AI is already powering strong performance for Microsoft (MSFT 1.82%). This trend is most visible in the company's Azure cloud computing business, with demand for cloud infrastructure services surging as developers launch and scale AI applications. But AI stands to benefit virtually every business under Microsoft's corporate umbrella.
AI is on track to power continued advances for the company's operating systems, productivity software, search business, video games unit, and other businesses. Due to the popularity of its far-reaching product and service offerings, Microsoft also has access to tons of valuable data -- data that can be used to build and improve AI systems. Thanks to the strength of its product and services ecosystem and incredible technology resources, Microsoft stands at the top of the AI software power rankings.
3. Palantir
Founded in 2003, Palantir (PLTR 3.73%) has had a focus on machine learning and AI technologies for over two decades. Thanks to its ability to gather and analyze valuable data to produce simulations and suggest optimal courses of action, the software specialist has won major contracts with agencies within the U.S. Department of Defense and other government organizations.
The data analytics specialist has also been rapidly attracting business customers -- and its new AI technologies look poised to power accelerating growth in the private sector. Palantir launched its Artificial Intelligence Platform (AIP) in May 2023. By August, over 100 organizations were using the service. And by November, AIP had a customer base spanning nearly 300 distinct organizations.
While Palantir stock has been red hot, rising roughly 160% over the last year, it's still down 57% from its high. For long-term investors, this AI growth stock has the potential to be a massive winner.
4. Amazon
While most of Amazon's (AMZN 3.43%) revenue comes from its e-commerce business, the large majority of its profits come from Amazon Web Services (AWS). With demand for cloud infrastructure and other tools used to power AI applications poised to surge, Amazon could see sales growth for its most profitable business segment start to reaccelerate.
But AI will likely also power incredible improvements for the company's e-commerce business. With AI tech paving the way for increased factory automation and autonomous deliveries, margins for the online retail business could see dramatic improvements. If that happens, profits from Amazon's massive e-commerce could soar and power incredible gains for the stock.
5. Alphabet
Like other top tech players, Alphabet (GOOG 9.96%) (GOOGL 10.22%) has big advantages in AI thanks to the breadth of its software offerings and access to massive troves of valuable data. Trading at roughly 21 times expected earnings for 2024, its stock also looks like one of the best value buys in the AI space.
GOOGL PE Ratio (Forward 1y) data by YCharts. PE Ratio = price-to-earnings ratio.
Between its market-leading search and mobile operating system (OS) technologies, fast-growing cloud infrastructure business, communication and productivity software, and YouTube streaming platform, Alphabet has many avenues to win in AI. Through its Waymo subsidiary, Alphabet is also a leader in autonomous vehicle technologies and stands to see explosive benefits as AI-powered self-driving tech evolves.
With multiple ways to profit with AI and its stock trading at non-prohibitive levels, Alphabet is a great pick for investors seeking growth at a reasonable price.
6. CrowdStrike
The use of AI technologies to create and deploy cyberattacks could be one of this century's most disruptive trends. Thankfully, top cybersecurity companies are using advanced AI technologies to combat the rising tide of threats.
CrowdStrike (CRWD 2.03%) is arguably the leader when it comes to AI-powered cybersecurity software, and it's indisputably the leader in its corner of the market. The adaptive technologies offered through its Falcon platform help businesses and institutions prevent breaches of their networks through linked computers, mobile devices, servers, and other hardware.
The cybersecurity arms race could be one of the most important and most broadly overlooked aspects of the AI revolution. For investors looking to profit from the intersection of these world-shaping trends, CrowdStrike stands out as a top play.
7. Meta Platforms
AI-enhanced content feeds, ad targeting, and cost-saving efficiency initiatives are powering a major resurgence for Meta Platforms (META 0.43%). In the third quarter, the company's revenue rose 23% year over year to reach more than $34.1 billion. Earnings per share jumped 168% in the period, and the social networking leader ended the period with a staggering 3.05 billion users across Facebook, Instagram, WhatsApp, and other platforms.
Meta should be able to score additional AI-driven wins with its content feeds and ad platforms, and it's still in the early stages of monetizing chatbots and using AI to advance its metaverse vision. With its massive global user base, data access, and deep technology resources, the company is in a good position to keep racking up long-term wins.
