Last Updated on 16/02/2024 by Carl-Peter Lehmann
AI and Investing 2024 including what we think are the best AI Stocks and the best AI stocks to buy: In this article, we try and unpack the AI and Investing landscape in more detail, by providing ideas around where to look. 2023 was the year AI was brought into public consciousness in a big way thanks to the advance of ChatGPT and LLMs, and 2024 is likely to be the year where more artificial intelligence applications find real world use cases.
When it comes to the AI investment landscape, there are 3 primary subsectors to consider placing your bets—semiconductors, software, and the hyperscalers (big cloud providers). Each has an important role to play in the AI value chain. And then there will be the second derivative applications beyond the tech companies, think healthcare, finance and industrials as industries that could benefit by adopting AI to make them more efficient and effective.
Now having an allocation to AI in an investment portfolio is something we believe everyone should have, but it shouldn’t be at any cost. Being patient, doing research and waiting for opportunities you have identified to buy names you like when valuations are reasonable is also important.
Suggested Reading: A Recap On What We Said About AI Investment Trends and Ideas in 2023
Best AI Stocks to Buy
When doing research on the best AI stocks and best AI stocks to buy, digging into the opportunities the chip sector, software, and cloud providers offer, is a great starting point.
Semiconductors: The Brain Behind AI
In the semiconductor realm, key players like Nvidia, AMD, and TSM are making significant strides are amongst the 3 best ways to participate in this space.
1.Nvidia, with its cutting-edge GPUs, is pioneering the processing power required for AI’s heavy lifting and has become the posterchild and market darling for AI as an investment theme. It’s H100 chips saw unprecedented demand last year, seeing it deliver record revenues and profits, with its share price up over 200% in the last year alone.
2.AMD is the upstart, hoping to gain some market share from Nvidia and there are high expectations for its new MI-300 accelerators that will be ramping this year, offering high-end processing solutions that will drive exceptional compute performance required for AI workloads. The Lisa Su led company has seen its share price rise by 135% over the last year, much of that built on the expectation on what AI will do for its performance this year.
3.And then there is TSM (probably the most important company in the world right now), the titan behind the scenes, because they manufacture the high-end chips for the biggest AI names in tech. Without them, none of the big semi-conductor companies get the chips they need to advance their AI solutions. Taiwan Semiconductor is up a more modest 25% over the last year and there are fears around what could happen on a China invasion.
Other names to consider include the chip manufacturers like ASML and Texas Instruments. They tend to be less volatile than the chip designers like Nvidia, but typically offer less growth.
For those looking to invest in a diversified portfolio of semiconductor stocks, the iShares Semiconductor ETF (SOXX) offers exposure to a broad range of companies in this sector, including Nvidia, AMD, and TSMC. As does the VanEck Semiconductores ETF (SMH).
Best AI Stocks in Software: More than Just Code
Of course there is overlap between the different subsectors, because Nvidia also has a compelling software solution and Microsoft is the biggest software provider in the world thanks to 365, and which it is now looking to advance further with Copilot. So here we are aiming to include a few sector specific software names that are perhaps less obvious and could rank among the best AI stocks to buy in the long-term.
Enter the world of innovative platforms like Snowflake (SNOW), Crowdstrike (CRWD), and Salesforce (CRM), reshaping how businesses leverage AI. Many names in the software space haven’t been public for very long and were synonomous with with unprofitable technology names that got hit particularly hard in 2022. Despite that, these are three names we think have outstanding long-term potential.
1. Snowflake’s data warehousing solutions are pivotal for companies looking to make data-driven decisions using AI. It offers a cloud-based platform that revolutionizes data storage and analysis. Unlike traditional systems, Snowflake removes tedious infrastructure management, companies focus on what matters: extracting insights. Its shares are up 32% in the last year.
2.Crowdstrike’s AI-driven cybersecurity services are essential in today’s digital age, offering robust protection against cyber threats. CrowdStrike is a cybersecurity powerhouse that stops breaches before they happen. Cyber crime is one of the biggest threats we face today and Crowdstrike is at the forefront of using AI driven solutions to help address this. It has seen a magnificent rise in its shares over the last year, delivering an almost Nvidia like return of 177%.
3.Salesforce, with its AI-integrated CRM solutions, helps businesses streamline operations and enhance customer engagement. Einstein, their AI offering, is woven into the very fabric of their platform, providing businesses with a powerful toolkit to optimize everything from sales and marketing to customer service and data analysis. Its shares are up almost 70% over the last year.
Other SAAS (software as a service) names we think offer potential and are worth looking at include companies like MongoDB (MDB), Cloudfare (NET) and ServiceNow (NOW).
To capture the growth of leading software companies, consider the Global X Cloud Computing ETF (CLOU), which includes companies like Snowflake, Crowdstrike, and Salesforce, offering a diversified approach to investing in the software sector. Another possible ETF would be the iShares Expanded Tech-Software Sector ETF (IGV)
The Top AI Stocks amongst the Hyperscalers: The Cloud Titans
AI is all about data, and lots of it. Running AI workloads is simply impossible without the leading cloud computing players. And that’s why you can’t avoid looking at the mega cap tech names because building AI solutions is both expensive (which requires deep pockets) and the ability to train and inference large quantities of data. It’s impossible to look beyond these names when looking at which top AI stocks to consider buying.
So, when it comes to hyperscalers, Microsoft’s Azure, Amazon’s AWS, and Alphabet’s Google Cloud are at the forefront of cloud computing and AI integration.
1.Azure is known for its enterprise-focused services, providing powerful AI tools and solutions. Microsoft’s relationship with and investment in OpenAI is well documented and the integration of ChatGPT’s technology into its offering, saw many regard it as taking the lead in the AI arms race last year amongst the big tech names.Its shares are up about 62% in a year as a result seeing it join Apple in the $3 Trillion market cap club.
2.AWS leads with its vast array of services and deep learning capabilities, powering everything from startups to large enterprises. AWS AI offerings empower businesses of all sizes to embrace the power of artificial intelligence without getting bogged down in technical complexities. By offering a wide range of services, tools, and resources, AWS helps businesses unlock the immense potential of AI to transform their operations, optimize decision-making, and generate new value. Amazon shares after a difficult few years turned the corner last year, rising 60%.
3.Google Cloud stands out with its AI and machine learning services, helping businesses innovate and scale. Google Cloud AI unlocks the potential to extract deep insights and automate tasks, transforming business with the power of artificial intelligence. Its comprehensive suite of services, tools, and responsible AI practices equip you to confidently navigate the exciting world of AI, driving innovation and success. Alphabet’s share also saw a strong comeback over the last year after a tough 2022, seeing its shares appreciate 56%.
For investors looking to gain exposure to these tech giants and other cloud computing leaders, the First Trust Cloud Computing ETF (SKYY) offers a diversified portfolio that includes Microsoft, Amazon, and Alphabet, among others.
Consider Reading: Bitcoin’s Wild Ride and How Its Performed Over The Last Decade
AI and Investing: The Best AI Shares to Buy in 2024
Further Reading: 10 Best Shares to Buy to Achieve Financial Freedom
When considering which are the best AI shares to buy in 2024, understanding that there are different ways and places to invest in, will allow you to create a diversified investment portfolio that stands to benefit from the broader artificial intelligence eco-system. Whether it be one of the leading edge chip-makers like Nvidia or AMD, to the software companies like Crowdstrike or Salesforce, there are so many ways to participate.
And before long, we should see the impact of AI being felt in industries like healthcare, which could have massive implications for drug development and finding cures for things like cancer.
Unlike previous iterations in the technology revolution that favoured innovative upstarts – due to the highest costs involved and large quantities of data needed – it’s hard to imagine the mega cap tech players like Microsoft not being at the forefront of the growth in artificial intelligence.
So, if we had to choose which the 3 best AI shares to buy in 2024 would be (on any sizeable pullback) based on their long-term potential, we’d go with Nvidia, Microsoft and Crowdstrike. They’re all supported by significant secular growth tailwinds and should do well over the long term. But we’d wait for their shares to fall to more reasonable valuations before investing.
AI and Investing 2024 Conclusion: Blurring Lines and Navigating Risks
The boundaries between semiconductors, software, and hyperscalers are increasingly indistinct. Companies like Nvidia and Broadcom aren’t confined to hardware; they’re also orchestrating the software symphony. Similarly, hyperscalers like Amazon and Google are venturing beyond cloud services, designing their own AI chips.
Navigating the AI and Investing 2024 landscape requires more than just identifying winners; it demands strategic, patient investing. Begin with modest positions, think long-term, and be ready to adapt. Despite the inherent volatility of the tech sector and the potential impact of global events, a well-informed, diversified, and balanced approach is pivotal for capitalizing on the AI investment revolution.
In conclusion, this piece offers a vivid exploration of the dynamic AI investment realm, complete with actionable investment insights across semiconductors, software, and hyperscalers, complemented by diversified ETF options. Whether you’re a seasoned tech aficionado or just starting your journey, understanding the landscape and making informed decisions is key to navigating this exhilarating path. Happy investing!
Suggested Reading: Your Guide to Investing Offshore in 2024
Carl-Peter Lehmann
Carl-Peter is a Director and Partner at Henceforward. He has over 20 years investment experience and has been a passionate investor in the AI space in his personal capacity for the last 7 years. Providing his clients with opportunities to add AI to their investment portfolios in a responsible manner is something he is always exploring.
