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 couple years, the following three stocks have all more than doubled the market. And all three are coming off very strong years in 2019, despite some early 2020 wobbles as Wall Street comes to grip 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 slight (-1.6%) decline in the current (2021) fiscal year, but bounce back with a vengeance in a (hopefully post-pandemic) fiscal year 2022, with 25.6% growth expected. The company is not yet profitable, though that’s expected to change in the coming years.
As for the stock, SPLK is up roughly 48% year to date, versus an 8.7% gain in the S&P 500, and has been in almost a constant uptrend since early April.
That’s an encouraging trend, and one that looks particularly buyable now that shares are starting to form a new leg up after building a base for the last month.
Artificial Intelligence Stock #2: Tencent Holdings (TCEHY)
Chinese stocks have been out of favor for more than a year, 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 45% this year, going totally against the grain of most stocks. Trading at 70, it’s just down from all-time highs above 72, 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:
“The company has been quiet on the news front since a big ($1.25 billion) share offering earlier this month, though it will be added to the MSCI U.S. Large Cap Index (likely not a big deal for the stock). Fundamentally, there are some worries that revenue growth has decelerated over the past two quarters (from 86% in Q4 to 46% in Q2 and 40% expected in Q3), but we’re not reading too much into that—Twilio has emerging blue chip written all over it as companies of all sizes automate communications (text, email, video) and move to cloud-based call centers.”
As for TWLO stock, it topped out around 286 a month ago before retreating as low as 240 in mid-August. Since then, however, the stock has recovered nicely, rising to 273 as of this writing. For the year, TWLO is up a whopping 178%. The trend is quite clear, making TWLO stock worth buying on dips.
In the meantime, it’s worth considering adding these three top AI stocks to your portfolio, especially now that all three are in a big uptrend. 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.