Friday, February 23, 2024
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The 3 Hottest Stocks to Watch in the Artificial Intelligence Race

Despite recent caution expressed by the Federal Reserve, there are positive indicators for the future of the U.S. economy. The Fed scaling back “quantitative tightening” is a strategic approach to maintaining a balance between economic stimulus and inflation-fighting measures. Additionally, the resilience of the job market, reflected in consistent job creation and moderating compensation growth, suggests a stable economic foundation. These factors, in addition to the Fed’s intention to carefully navigate interest rate decisions, gives investors optimism for the coming months. The year is looking strong, innovation will only continue and the AI boom is where this innovation is focused. Let’s dive into the AI stocks to watch.

Nvidia (NVDA)

Nvidia (NASDAQ:NVDA) is the pioneer of GPU-accelerated computing. It specializes in products and platforms for the large, growing markets for gaming, professional visualization, data canter and automotive. NVDA’s current stock value of $663 grew 205% this year. 

The semiconductor market size is projected to grow from $573.44 billion in 2022 to $ 1,380.79 billion by 2029, with a 12.2% CAGR during the forecast period.

NVDA experienced historical growth in Q3 2023. NVDA reported a revenue increase of 205.51% YOY to $18.12 billion in revenue. Net income and diluted EPS, $9.24 billion and $3.71 respectively, increased over 1,250% YOY. Q3 2023 was successful for NVDA overall, beating the expectations on EPS and revenue by 18.73 % and 12.47% respectively. 

Investors must be wondering if Nvidia can maintain this momentum in 2024. Although the AI market is already expected to expand, Nvidia has more potential for exponential growth later in 2024: its relationship with Nintendo (OTCMKTS:NTDOY). Nintendo’s best-selling gaming console, the Switch, runs on Nvidia’s Tegra X1 system on a chip. The rumored launch of the Switch 2 which would significantly boost Nvidia’s Tegra series this year. 

NVDA will sustain or even enhance its momentum in 2024, making it one of the AI stocks to watch. 

Meta (META)

Meta (NASDAQ:META) is an international technological blockbuster company. It’s responsible for household enterprises such as Facebook, Instagram, WhatsApp and more. After a successful 2023, META is currently valued at $480.27.

META has continuously reported strong performances financially, including a strong Q3 2023. Starting with revenue, META boasted $34.2 billion in revenue, marking a YOY increase of 23.21%. Further, net income also jumped up to $11.58 billion, or YOY 163.55%. With YOY growth in every key metric, META especially shines in net change in cash with an increase of 356.63%.

As artificial intelligence continues to expand in daily consumer life, META aims to keep up with the trend by creating rivals to widespread products such as ChatGPT. With the release of Meta’s Llama, an open-language chatbot that communicates directly to users, META is expecting heavy intelligence integration with its already-established products. As META expands Llama’s capabilities, developing and releasing newer versions for public use, Meta aims to expand technological power in social media presence like Facebook and Instagram, creating further ease of access to appeal to a more widespread audience. As META continues to invest in AI, expect its valuation to parallel growth.

Advanced Micro Devices (AMD)

Last on the list of AI stocks to watch is Advanced Micro Devices (NASDAQ:AMD). AMD develops computer processors and related technologies for consumer and business markets. Up 123.14% in the past year, 29 analysts are bullish on the stock with a median 12-month price target of $192.00, representing a 14.50% increase from its current price of $167.69. 

Valued at $14.90 billion in 2022, the global artificial intelligence chip market is expected to reach $383.70 billion by 2032, exhibiting a CAGR of 38.20%. 

AMD, a key player in the artificial intelligence chips market, has capitalized on the AI boom. In Q4 2023, the chipmaker reported revenue of $6.2 billion, up 10% YOY. Furthermore, the company’s levered FCF margin of 10.61%%, above the sector median of 8.88%, shows strong profitability capabilities. This potential is reflected in the near doubling of management’s 2024 revenue forecast for its artificial intelligence processors to $3.5 billion.

With ample room to grow, AMD is positioned at the forefront of AI chip sales. Last quarter, the launch of its MI300x GPU chipset targeted chief rival Nvidia’s A100 and H100 chips. Tech giants including Meta, Microsoft, and OpenAI welcomed this move, announcing they will use AMD’s GPUs for their AI products. This positive response indicates the market’s confidence in AMD’s chips and positions the company for robust future performance.

On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments.

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