Artificial intelligence (AI) took over Wall Street in 2023 and arguably drove the broader market's turnaround last year. But AI boils down to more than just owning any stock that happens to have some connection to those two magic letters. Inevitably, hype attracts both contenders and pretenders. Some AI stocks will be winners, and some won't.
Want to know which AI stocks to consider in 2024? I've made you a cheat sheet to point you in the right direction.
Here are the five AI stocks you need to have on your radar:
- Nvidia (NVDA 0.75%)
- Microsoft (MSFT 0.61%)
- Snowflake (SNOW 0.79%)
- Palantir Technologies (PLTR +1.07%)
- ASML (ASML 0.74%)
Here's why these five AI stocks are worth watching in 2024.
NASDAQ: NVDA
Key Data Points
1. Nvidia
The company's stock exploded by 230% over the past year, but the hype is warranted. Nvidia's graphics processing units (GPUs) are the go-to hardware for AI applications. Their cutting-edge technology and the fact that they're good for demanding computing applications helped propel Nvidia to an estimated 80% to 95% market share for AI chips. You can see how companywide revenue nearly doubled to $45 billion in 2023:
NVDA EPS LT Growth Estimates data by YCharts
Considering AI is still a nascent industry and given that Nvidia sits in the driver's seat, the company is poised for tremendous long-term earnings growth. Competitors will surely come for Nvidia's market share, but their success is no guarantee. Until proven otherwise, Nvidia remains the chip king in the AI industry.
2. Microsoft
For a technology giant like Microsoft, AI might seem like an afterthought. After all, Microsoft dabbles in virtually everything, including cloud computing, gaming, enterprise software, and personal electronics. However, don't be fooled: AI is a priority for Microsoft. Investors will want to own Microsoft stock for its hefty investments and tight partnership with OpenAI, the company behind ChatGPT.
MSFT EPS LT Growth Estimates data by YCharts
OpenAI is one of the world's fastest-growing companies. Microsoft's multibillion-dollar tie-up gives it the pole position for enjoying that growth and using it to benefit its other business segments. For example, Microsoft's cloud platform, Azure, powers all OpenAI computing loads. It's not an obvious AI stock, but don't overlook its long-term AI opportunities.
NYSE: SNOW
Key Data Points
3. Snowflake
Data might be the most essential ingredient of AI technology outside of computing power. However, data often comes from multiple sources and can be disorganized and hard to use. Snowflake is a cloud-based data warehouse platform that securely stores, analyzes, and shares data. That makes it a potentially crucial role player for companies using AI.
SNOW EPS LT Growth Estimates data by YCharts
Snowflake's rapid growth backs that up. The company's revenue has multiplied over the past several years, and analysts believe profits could compound at over 60% annually on average. Snowflake's data marketplace could someday be the go-to channel where companies access the data needed for their AI models.
4. Palantir Technologies
AI has become critical to the world's political powers. Palantir answers that bell. It has built and sold custom software to the U.S. government for years. Government business is over half of Palantir's revenue. The company is rapidly expanding its commercial business, too.
PLTR EPS LT Growth Estimates data by YCharts
Most importantly, Palantir last year released AIP, a platform for implementing AI models. Management has noted that more than 300 organizations have tried AIP in the first five months since its launch. How big could AIP be in a few years? Palantir's tremendous expansion opportunities could mean that top- and bottom-line growth continues well into the future.
NASDAQ: ASML
Key Data Points
5. ASML
Many people don't realize that companies like Nvidia don't build the high-tech chips they sell. Factories, called fabs, make them. In those factories are cutting-edge machines that ASML creates. It's fair to say ASML has a monopoly. It virtually owns an estimated 90% market share for extreme ultraviolet lithography machines used to make advanced semiconductor chips.
ASML EPS LT Growth Estimates data by YCharts
If advancing AI models need top-notch chips to power them, manufacturers will need more of ASML's machines to make them. That's already shown up in ASML's revenue growth, which hit a spurt in 2023. Analysts expect a healthy 22% average annual earnings growth, so investors should buckle up. Investors should continue looking at ASML stock for as long as its machines build those high-tech chips powering AI.
