Artificial intelligence (AI) is one of the fastest-growing markets in the world, with global revenues zooming from $3.22 billion in 2016 to an estimated $11.28 billion this year. AI sales are expected to more than double again by 2021, and rise to nearly $90 billion by 2025. Given that 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 couple years, the following three stocks have all more than doubled the market. And all three are coming off of huge Januarys.
As the global AI boom gains steam in the coming years, these artificial intelligence stocks should continue to outperform. One short-term caveat: Given how red-hot these stocks have been of late, you may want to buy on the dips.
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 this decade, and are expected to increase another 37% this year. Meanwhile, the company has turned profitable, with last year’s earnings per share expected to come in at $0.62, and analysts anticipating that number to nearly double (to $1.17) in 2019.
As for the stock, SPLK is up 41% in the last year and 25% in 2019 already! On the cusp of breaking to new all-time highs above 128, SPLK has serious momentum. Buy on dips.
Artificial Intelligence Stock #2: Tencent Holdings (TCEHY)
Chinese stocks have been out of favor for the better part of a year. But depending on what happens with the impending U.S.-China trade deadline, the clouds may be parting on Chinese stocks. And that bodes well for Tencent Holdings stock.
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. Meanwhile, TCEHY stock (an over-the-counter Chinese ADR) is up 17% in the last three months, bucking the fourth-quarter market correction and just poking back above its 200-day moving average.
You can buy on that momentum—and the promise of bigger things to come in its AI business.
Artificial Intelligence Stock #3: Twilio (TWLO)
Twilio is a favorite of our resident growth investing expert Mike Cintolo. So, to “sell” you on the stock, I’ll defer to him. Here’s what Mike recently told his Cabot Growth Investor subscribers about the stock:
“The firm’s one-of-a-kind communications platform (has) led to accelerating revenue growth and has monstrous potential as more clients sign up (61,153 at the end of September, up 32% from the year before) and current clients expand their usage (in Q3, same-client revenues rose a whopping 45% year-over-year), a trend that could pick up steam as Twilio’s newer offerings (like its Flex contact center application and, soon, its email-related offerings via the acquisition of Sendgrid) are adopted.
“…Some further ups and downs wouldn’t be surprising, but we think you can buy some around here or on dips. The next big event will be earnings, which are due out February 12.”
To learn what other growth stocks Mike likes, click here to become a Cabot Growth Investor subscriber.
In the meantime, it’s worth considering adding these three artificial intelligence stocks to your portfolio. 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.
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More