You Already Know the Names of the Biggest AI Stocks. These 3 Have Superior Growth Potential.
Artificial intelligence (AI) is one of the fastest-growing markets in the world, with global revenues zooming from $9.5 billion in 2018 to an estimated $118.6 billion by 2025. Given that exploding growth, it makes sense to invest in artificial intelligence stocks.
But you can’t just invest in the usual suspects. Those include the likes of Alphabet (GOOG), Microsoft (MSFT), IBM (IBM), Salesforce.com (CRM) and Nvidia (NVDA). Don’t get me wrong—those are all fine companies and some are solid investments (to varying degrees). But they’re not artificial intelligence stocks, per se; in other words, they’re large and diversified enough companies that AI is just one segment—albeit a fast-growing one—of what they do.
The purer artificial intelligence plays are less diversified, and highly levered to the AI boom. As the artificial intelligence industry has exploded in the last few years, the following three stocks have all more than doubled the market. And all three are coming off very strong years in 2020, despite some early-year wobbles as Wall Street came to grips with the global COVID-19 fallout.
The only, and I repeat, the only flaw I can see in this stock is that few investors know about it. Yet, it is making money hand over fist behind the scenes and it has been for years.
Why, long before COVID-19 hit, this stock was on a tear, handing investors 100% more profits than Amazon, Apple, Facebook and Google—that’s 230% to 76%, 105%, 16% and 32%, respectively.
This company’s market leadership will continue for years to come.For details, click here.
Still, the artificial intelligence industry is less impacted by the pandemic than most. And as the global AI boom gains steam in the coming years, these artificial intelligence stocks (or AI stocks, for short) should continue to outperform.
3 Artificial Intelligence Stocks to Buy
Artificial Intelligence Stock #1: Splunk (SPLK)
Splunk specializes in something called “machine learning”—a form of artificial intelligence. Specifically, Splunk provides artificial intelligence for information technology (IT) operations, enabling organizations to reduce costs by automating normal IT functions (without having to hire an entire IT department).
Splunk’s sales have risen double-digits every year in the last decade, are expected to dip to a modest (-8.1%) decline in the current (2021) fiscal year, but bounce back with a vengeance in a (hopefully post-pandemic) fiscal year 2022, with 21% growth expected. The company is not yet profitable, though that’s expected to change in the coming years.
As for the stock, SPLK has risen by double digits in each of the last four years, though the 2020 return (11.7%) was more modest. The stock has been in a downtrend for more than four months since topping out above 220 in early September, though it appears to have bottomed a month ago. This may be a nice entry point into a solid long-term artificial intelligence play.
Artificial Intelligence Stock #2: Tencent Holdings (TCEHY)
Chinese stocks have been out of favor in recent years, dragged down first by the trade war and then when the coronavirus outbreak began in China. But Tencent Holdings stock has held up well.
China’s biggest social media company—inventors of the WeChat app—Tencent recently built an artificial intelligence lab in Seattle, with the intent of expanding its voice-to-text and virtual assistant offerings. TCEHY stock, meanwhile, is up more than 47% in the last year. Trading at 75, it’s just down from all-time highs above 80, and comfortably above its 50- and 200-day moving averages.
Artificial Intelligence Stock #3: Twilio (TWLO)
Here’s what Mike Cintolo, our resident growth investing expert, wrote about Twilio last week:
“Twilio is continuing its two-steps-forward, one-step-back advance, with its recent 13% correction being met with strong buying (in the last week). The stock has gotten a little more analyst love of late, with more coming around to the view that the firm’s positioning at the heart of so many trends (work-from-home, personalized marketing, etc.) will drive rapid growth for many years.”
You may want to wait for the next mini-dip after this week’s swift recovery. But the long-term trend in TWLO stock is clear, with shares up a whopping 212% in the last year.
In the meantime, it’s worth considering adding these three top AI stocks to your portfolio, especially the latter two, which are in big uptrends. Bigger picture, the AI trend has been a boon for these stocks the last couple years, and could be even better in the coming years as the global AI marketplace becomes increasingly mainstream, and the global economy recovers from the current virus crisis.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
Note: This post has been updated from an original version, published in 2019.