Top AI stocks: What companies are leading the AI revolution?
14:55, 15 May 2023
AI stocks represent shares in companies that are heavily involved in the research, development, and deployment of artificial intelligence (AI). This can encompass a wide range of industries and applications, from autonomous vehicles and healthcare diagnostics to cloud computing and customer service automation.
Investors are often drawn to AI stocks due to the significant growth potential in this rapidly evolving sector. Their enthusiasm has boomed in late 2022 with the release of OpenAI’s ChatGPT, a smart AI-powered chatbot rooted in the transformer-based language model that’s able to generate human-like text.
Consequently, major companies are aligning with the burgeoning AI trend by introducing new products and enhancing their existing suites. Microsoft (MSFT), for example, invested heavily in OpenAI and uses its models in its own product range, while Alphabet (GOOGL) launched its own version of ChatGPT, Bard.
What are the top AI stocks right now and what are their newest offerings? We examine the highest-valued AI stocks based on market capitalisation and look at the industry trends and outlook.
Top AI stocks by market capitalisation
Below is the list of the biggest AI companies by market capitalisation, as of 15 May CoinMarketCap data. Note that the stocks in this list and their order may change anytime, depending on the market developments.
Top AI stocks by market capitalisation
| Name | Sell | Buy | 1D Chg, % | Buyers Sellers | |
|---|---|---|---|---|---|
| MSFT Microsoft Corp (Extended hours) | 435.47 | 436.04 | -0.420% | 94% 6% | |
| GOOGL Alphabet Inc - A (Extended hours) | 191.63 | 191.87 | +1.520% | 98% 2% | |
| NVDA NVIDIA Corp (Extended hours) | 134.59 | 134.72 | +2.780% | 92% 8% | |
| TSLA Tesla Inc (Extended hours) | 422.14 | 422.33 | -3.790% | 85% 15% | |
| IBM IBM Corp (Extended hours) | 222.17 | 223.54 | -1.000% | 86% 14% |
Microsoft
The Windows-developer Microsoft (MSFT) is the biggest Artificial Intelligence company as of May 2023. In May Microsoft unveiled a series of new AI features and initiatives to its product line. Among these are AI-powered enhancements for Edge and Bing AI, an AI-powered search engine.
The tech giant has previously announced multiyear, multibillion investment in the ChatGPT-creator OpenAI as part of their long-term partnership, and is deploying OpenAI models across its product range, including Microsoft’s Azure OpenAI Service. Meanwhile, Azure is OpenAI’s exclusive cloud provider.
Alphabet
Alphabet (GOOGL), the parent company of Google, has made several investments in the AI sector. In April CapitalG, Alphabet's venture capital subsidiary, led a $100m funding round in AI startup AlphaSense, furthering Alphabet's foothold in the AI arena. Google has also invested almost $400m in ChatGPT’s rival Anthropic, and has acquired Alter, an AI avatar start-up.
In its in-house product ecosystem, Google introduced an array of new generative AI tools, including Bard, its own ChatGPT analogue with real-time access to the web. The tech behemoth is also enhancing its Workspace suite with AI functionality, initially in Gmail and Google Docs.
NVIDIA
The computing and gaming giant NVIDIA (NVDA) has also introduced a wave of cutting-edge AI research that will enable developers and artists to bring their ideas to life — whether still or moving, in 2D or 3D, hyperrealistic or fantastical.
The fruits of the firm's research are frequently made available to developers via GitHub and subsequently integrated into their product line-up. Notable examples include NVIDIA's Picasso, the company's recently launched product designed for the creation of custom generative AI models in visual design.
Tesla
In contrast to technology juggernauts such as Microsoft and Alphabet, Tesla (TSLA) is deploying AI and robotics in the realm of electric vehicles (EVs). The company aspires to lead the adoption of self-driving cars, which they believe necessitates AI for visual processing and strategic planning. In this pursuit, Tesla is already building AI interference chips to run full self-driving software (FDS).
Apart from FSD chips, the company is also developing humanoid robots. In October 2022 Tesla’s CEO Elon Musk unveiled the highly anticipated robot “Optimus”. The billionaire has said a robot business will be worth more than its cars, hoping to expand beyond self-driving vehicles.
In the AI field, the EV maker is also involved in Dojo chips and systems, neutral networks, autonomy algorithms, code foundations and evaluation infrastructure.
IBM
In May 2023 the computing giant IBM (IBM) announced Watsonx, a platform that will furnish developers with tools to create AI models, including machine learning tools, foundation models, hardware, and data storage. The tech titan has partnered with Hugging Face to ensure Watsonx.ai studio avails from Hugging Face’s open-source libraries and its thousands of open models and datasets.
In addition to its latest AI offering, IBM has been at the forefront of research into AI integration. Its Global AI Adoption Index delves into the AI adoption’s impact on business landscape and wider society.
What is your sentiment on MSFT?
How to select top AI stocks to invest in
While the AI wave can present lucrative prospects for adventurous investors, there may be an element of the “shiny toy syndrome”, and the excitement may fade over time. Therefore, when selecting top AI companies to invest in, it’s essential to conduct due diligence and look beyond the market boom. Some of the factors you may want to consider:
Company’s fundamentals: Fundamental analysis involves reviewing a company’s balance sheet, income and cash flow statements to evaluate its financial health and value. It takes into account key indicators such as price-to-earnings (P/E) ratio, return on equity (ROE), debt-to-equity (D/E) ratio, and more. The goal is to understand the company's financial health and profitability, and hence, its potential to deliver long-term shareholder value.
Technical analysis: If you are a trader looking for short-term exposure to AI stocks, you may consider using technical analysis to determine your strategy. It involves using technical indicators and candlestick charts to analyse price movements.
Analyst ratings: Traders and investors may also consider looking at the latest analyst ratings and commentary about a particular stock. Note, however, that their opinions and predictions may, of course, be wrong.
Latest company news: Keeping abreast of a company's latest news and innovations can provide insights into the firm's potential future growth and competitive positioning. Keep an eye for AI-related investments and acquisitions, research and development and new product offerings.
Key industry trends and outlook
Advancements in this arena show no signs of decelerating, with AI anticipated to be one of the fastest expanding sectors. A survey by the Pew Research Center suggested that by 2025, AI and robotics will pervade nearly every facet of our day-to-day existence.
According to McKinsey's annual research survey, the number of companies integrating AI into their operations has more than doubled since 2017, although the rate of adoption has somewhat stabilised in recent years, hovering between 50% and 60%. Firms that have adopted AI technologies affirm that they have witnessed significant reductions in costs and appreciable increases in revenue.
Meanwhile, the average count of AI functionalities harnessed by companies has seen a twofold increase in 2022. This encompasses a variety of AI applications, with the most popular being robotic process automation, computer vision, and understanding of natural-language text. The most common use cases were service operations optimisation, curation of new AI-based products and customer service analytics.
Final thoughts
In the rapidly evolving landscape of artificial intelligence, AI stocks are gaining prominence as investors recognize their significant growth potential. Market leaders such as Microsoft, Alphabet, Nvidia, Tesla and IBM are at the forefront of aligning their strategies and enhancing their product offerings to ride this AI wave.
Investing in AI, however, is not without its risks. The allure of this new frontier may evoke the shiny toy syndrome, where the excitement of the novel and cutting-edge can lead to hasty decisions. Therefore, a thorough examination of the potential investments is crucial. Sound investment decisions should be based on diligent research and a comprehensive understanding of both the company and the sector. As the AI landscape continues to evolve, staying informed will be key to successful investing in AI.
FAQs
How many AI companies are there?
The number of companies engaged in AI research and development is expansive and continues to grow. Some of the biggest players include Microsoft, Alphabet, NVIDIA, Tesla, and IBM.
Is AI stock a good buy?
AI stocks can offer growth potential due to the rapidly evolving sector. However, they also carry a degree of risk, and the investment's success can hinge on factors like the company's fundamentals, market trends, and the latest innovations. It's vital to conduct thorough research and due diligence before investing.
How to invest in AI stocks?
You can buy AI stocks with your broker or invest in AI-focussed thematic exchange-traded funds (ETFs). Remember that investing requires a comprehensive understanding of both the company and the industry. Key considerations include the company's financial health, analyst ratings, and the company's latest news and innovations. It's crucial to look beyond the hype and base investment decisions on diligent research.
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