Are these the best AI stocks to watch in April 2024?

2024 may now be following 2023 as the second year of AI. The NASDAQ 100 has continued its inexorable rise, and has already increased by 10.6% to 18,298 points year-to-date. Much of this growth has been fuelled by the so-called ‘magnificent seven’ — with Nvidia alone up by nearly 2,500% over the past five years to a near $2.3 trillion market capitalisation.

While it’s yet to be seen whether this is just another market bubble — or the start of a new era of heavyweight tech consolidation — there is no argument that artificial intelligence is developing at breakneck speed.

While AI has been in use in some form for decades, it is becoming ever more embedded into daily life and corporate methods. Every Netflix recommendation, every supermarket rewards purchase, and every football match is analysed ever more relentlessly in order to provide more and better data. And analysts think the sector will only grow.

For context, ChatGPT was released well under two years ago. But consumers now have access to freely available AI tools covering multiple generative applications across text, imagery and video. There are even rumours that OpenAI has developed a model approximating Artificial General Intelligence (AGI) — capable of surpassing human-like intelligence with the ability to self-teach.

And then there’s the employee question: many companies are already laying off staff in favour of AI-based replacements, and this trend could be set to continue.

As ever, while there may be significant growth opportunities, there are also risks. Past performance is not an indicator of future returns. And as the dotcom bubble shows, there can be very large bumps in the road when technology investment cycles boom.

Best AI stocks to watch

There is some disagreement on what constitutes an AI stock — and whether it must be the main focus of a company or simply be a significant growth area. Here we have listed the top AI stocks in the US based on companies where AI is a growth area and ordered by market capitalisation.

1. Microsoft
2. Apple
3. Nvidia
4. Amazon
5. Meta Platforms

Microsoft

Microsoft is the original global computing power, so it makes sense that the US behemoth tops the list of the best AI stocks to watch — and is now the most valuable company in the world. The business already had a strong relationship with OpenAI prior to the ChatGPT launch and has invested $13 billion into the company since 2019.

In Q2 results, revenue increased by 18% year-over-year to $62 billion, while net income rose by 33% to $21.9 billion. CEO Satya Nadella enthuses that ‘we’ve moved from talking about AI to applying AI at scale. By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.’

On the other hand, Copilot has reportedly disappointed some early adopters. In addition, an AI engineer at the company recently published a letter alleging that its AI image generator currently lacks basic safeguards against violent and sexualised imagery — highlighting the risks that come with rapid advancement.

Market Capitalisation: $3.09 trillion

Apple

Apple is in the middle of a sea change — sales in China of the company’s flagship iPhone fell by 24% in the first six weeks of 2024, according to research from Counterpoint. For context, is the same period, competitor Huawei saw sales in the country jump by 64%.

And in Q1 results, Apple saw revenue rise by 2% year-over-year to $119.6 billion, while quarterly earnings per diluted share increased by 16% to $2.18. CEO Tim Cook noted the company’s ‘all-time revenue record in Services’ and also enthused that the company’s ‘installed base of active devices has now surpassed 2.2 billion, reaching an all-time high across all products and geographic segments.’

The company is also dealing with regulatory issues in the European Union, including its shutdown of Fortnite maker Epic Games on the App store, alongside a €1.8 billion fine for abusing its ‘dominant position’ by preventing consumers from accessing alternative music subscription services.

Further, Mizuho analyst Jordan Kelin has warned that the stock could be ‘slaughtered’ if Berkshire Hathaway continues to trim its stake, having sold off about 1% of its holding in Q4 2023.

Market Capitalisation: $2.66 trillion

Nvidia

Nvidia is arguably the prime beneficiary of the AI boom, with a wide economic moat as the ‘picks and shovels’ stock for the artificial intelligence age. The company shot through the ranks of the largest companies in the United States in short order.

In Q4 2024 results, the company saw revenue rise by 265% year-over-year and 22% quarter-on-quarter to a record $22.1 billion, driven by Data Centre revenue which increased by 409% in the year to $18.4 billion.

CEO and founder Jensen Huang enthuses that ‘Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations… NVIDIA RTX, introduced less than six years ago, is now a massive PC platform for generative AI, enjoyed by 100 million gamers and creators.’

Wedbush Securities has now raised its price target on Nvidia to £1,000, expecting some more good news at the company’s Global Technology Conference next week.

Market Capitalisation: $2.20 trillion

Amazon

Amazon is well-known as the largest e-commerce retailer in the world, but the company is also a growing operator in the AI space. It offers several cutting-edge AI tools within its AWS business, including Code Whisperer and SageMaker — and clients can customise Amazon’s own machine learning model.

Of course, competitors have their owns services, but Amazon is by far the largest cloud computing company, with circa a third of the global market share.

Within its e-commerce offering, Amazon uses AI to identify consumer trends, manage inventory and also make personalised product recommendations — including targeted advertising. Then there’s the smart devices, including Alexa and the Fire tablets. CEO Andy Jassy enthuses that the AI opportunity will be ‘tens of billions of dollars of revenue for AWS over the next several years.’
Q4 net sales increased by 14% year-over-year to $170 billion.

Market Capitalisation: $1.81 trillion

Meta Platforms

Meta Platforms now boasts monthly active users of 3.98 billion people across its ‘family’ of apps, comprising Facebook, Instagram, threads and WhatsApp — an increase of 6% compared to Q4 2023. This is more than half of people alive today.

2023 full-year results saw ad impressions across the family rise by 28% year-over-year, while the average price per advert dropped by 9%. Accordingly, revenue rose by 1% to $134.9 billion. CEO Mark Zuckerberg enthuses that ‘our community and business continue to grow. We've made a lot of progress on our vision for advancing AI and the metaverse.’

The CEO continues to invest heavily in his metaverse vision, and is also spending on AI developments. But the next catalyst could well come externally — with US politicians considering a ban on competitor TikTok unless parent ByteDance sells the app to a non-Chinese company.

Market capitalisation: $1.23 trillion

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Past performance is not an indicator of future returns.