Four AI-focused companies worth considering for investment
The world of artificial intelligence (AI) and machine learning technology continues to dominate the stock market, with significant growth seen over the past two years. As the AI market expands, investors are looking beyond the well-known "Magnificent Seven" (Nvidia, Microsoft, Alphabet, Meta, Amazon, Tesla, and Apple) to find promising opportunities. Here are some top AI stocks to consider for investment in 2023 and beyond.
C3.ai (AI) is an enterprise AI software provider with a platform for predictive maintenance, fraud detection, and energy management. With strategic partnerships with Microsoft and Google Cloud, C3.ai aims for profitability by 2025. Despite its high-risk, high-reward nature due to volatility, the company benefits from growing enterprise AI adoption.
Palantir Technologies (PLTR) is another strong contender, specializing in big data analytics and AI-powered solutions. Palantir has shown impressive one-year performance, with returns nearing 500%.
Quantum Computing Inc. (QUBT) is a smaller company focused on quantum computing and AI, with extremely high one-year returns. AppLovin Corp. provides AI-driven mobile app marketing and analytics solutions, while Cerence Inc. supplies AI and voice recognition tech for automotive and other industries. SoundHound AI, Inc. specializes in voice AI technologies, and Symbotic, Inc. uses AI for robotics and automation in supply chain and warehouse management.
Datadog, not in the Magnificent Seven, is positioned to grow via AI tool adoption, improving its cloud monitoring and analytics platform. These companies offer a mix of "pure play" AI exposure and AI integration within specific sectors such as enterprise software, cloud analytics, voice recognition, or quantum computing.
In the semiconductor industry, Vertiv stands to benefit from the expected increase in data center demand due to the AI boom, without being directly affected by potential semiconductor supply disruptions. Vertiv provides power, cooling, and infrastructure services to data centers, and its forward P/E is 35.46, with a reasonable five-year price to earnings growth ratio for the AI space.
Cambridge-based Arm is another semiconductor company with a strong reputation in the AI chip industry. Volex produces cable equipment, including power cables and cords for use in data centers, offering exposure to potential increase in data center demand without being directly at-risk from semiconductor supply issues.
While some of these companies carry higher volatility, they also offer greater upside potential amid AI expansion. Investors should pay close attention to their financial health, growth prospects, and AI integration progress before making any investment decisions.
AI is expected to revolutionize various sectors, including drug discovery and cybersecurity. For instance, Palo Alto Networks uses AI to identify discrepancies in IT systems for cybersecurity purposes, and companies like Darktrace, a leading exponent of AI-driven cybersecurity, have shown significant growth before their recent acquisition.
In conclusion, for diversified AI investments beyond the Magnificent Seven, consider companies like C3.ai, Palantir, Quantum Computing Inc., AppLovin, Cerence, SoundHound AI, Symbotic, and Datadog, while keeping an eye on Vertiv and Arm in the semiconductor sector. The total global AI market is projected to grow at a compound annual growth rate of 36.6% from 2024 to 2030, making it an exciting time for AI investments.
[1] Investopedia: Top AI Stocks to Buy for 2023
[2] Motley Fool: Top AI Stocks to Buy in 2023
[4] Seeking Alpha: Beyond the Magnificent Seven: 7 AI Stocks to Watch
- Investors interested in AI stocks beyond the well-known "Magnificent Seven" may consider C3.ai, a company that benefits from growing enterprise AI adoption and aims for profitability by 2025.
- Palantir Technologies, another strong AI contender, has displayed impressive one-year performance with returns nearing 500%.
- Investors should also look into Quantum Computing Inc., a smaller company specializing in quantum computing and AI, which has shown extremely high one-year returns.
