In this article, we discuss the 10 AI stocks billionaires are crazy about. To skip the detailed analysis of the AI industry, go directly to the 5 AI Stocks Billionaires Are Crazy About.
We are now at the end of 2023, and a lot of predictions made about the US economy experiencing a recession this year have not come true yet. The S&P 500 is up 20.40%, and the Nasdaq-100 has gained 48.07% year-to-date (YTD) as of December 8 market close. Technology stocks experienced a booming year, and most of the S&P 500’s gains have been on the back of the “Magnificent 7”. The Magnificent 7 are the seven top tech stocks listed on the US stock exchange that have returned massively over the last few years. Bank of America analyst Michael Hartnett coined the term.
Several analysts believe that the US economy will experience a “soft landing” in 2024, while some remain completely pessimistic. JP Morgan believes that the risk of a US recession is “delayed rather than diminished”. Analysts Marko Kolanovic and Bram Kaplan wrote:
“One should note that virtually all of the stock market’s gains this year came from a small number of tech stocks […] The rest of the market was largely in a ‘holding pattern,’ unsure of prospects for the economy. This led to a high concentration of index weight in a handful of the largest stocks, something not seen in 50 years.”
JPMorgan Chase expects the S&P 500 to decline by 8.8% from December 8 levels to 4,200 by the end of 2024. On the other hand, B. Riley’s Art Hogan is optimistic about the future and believes that the index will close 2024 somewhere around 4,800. In a Bloomberg interview, he said that 2024 could be one of the best years to own a 60/40 portfolio.
Along with some analysts, renowned investors also believe in this rising AI trend. Hedge fund billionaires such as Stanley Druckenmiller, Rajiv Jain, and Philippe Laffont gave the highest weightage to NVIDIA Corporation (NASDAQ:NVDA). Stanley Druckenmiller said:
“I do believe, unlike crypto, AI is real … it could be as transformative as the internet.”
The semiconductor company NVIDIA Corporation (NASDAQ:NVDA)’s stock gained 231.86% YTD at the December 8 market close and has been the top performer among the Magnificent 7.
Venture capitalists are also seeing the generative AI trend in a favorable light. GlobalData reports that in 2023, the total startup funding has been down 65% since 2021, while the generative AI funding has experienced a gain of 110% at $10 billion. Director of the Financial Markets team at GlobalData, Adarsh Jain expects AI startup funding to grow in the coming year as well. He said:
“GenAI startups are expected to continue to attract investment in 2024 and beyond because the technology is underpinned by solid drivers. For instance, apart from accelerating startup funding, patenting activity in GenAI registered 85% CAGR over the last five years, as per GlobalData’s patent analytics. Companies across sectors are ramping up human capital by aggressively hiring talent around GenAI, reveals GlobalData Job Analytics. Companies are getting more vocal about their GenAI strategy in their filing documents with 16x more mentions, as per GlobalData Filing analytics. From drug-development to spaceships, there is no sector which has not been touched by GenAI.”
Open AI’s ChatGPT has been in the limelight throughout the year as Microsoft Corporation (NASDAQ:MSFT) has invested around $13 billion in the company since its inception. However, the US Federal Trade Commission and the UK’s Competition and Markets Authority are examining the deal with regard to competition concerns.
Several people are concerned that the dramatic rise in AI stocks could just be another bubble. However, many analysts and experts believe that this trend is here to stay. Along with technology, AI is revolutionizing several industries, including defense, architecture, engineering, and legal. Additionally, the retail giant Walmart Inc (NYSE:WMT) is using AI to improve customer and employee experiences and increase the efficiency of its stores. In the health sector, Relay Therapeutics, Inc. (NASDAQ:RLAY) uses AI and machine learning for drug discovery.
A computer screen showcasing Artificial Intelligence and Machine Learning algorithms at work.
Our Methodology
For this article, we made a list of companies that are benefiting from the current surge in the AI trend. From that list, we picked 10 stocks with the highest number of billionaire investors. We collected the number of billionaire investors and the dollar value of their holdings from Insider Monkey’s database. We listed the stocks in ascending order of the number of billionaire investors.
AI Stocks Billionaires Are Crazy About
10. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Billionaire Investors: 20
Dollar Value of Billionaire Holdings: $5.316 billion
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the most valuable semiconductor companies in the world. It has recently marked significant gains due to the AI trend and the launch of the new iPhone. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s stock is up 35.55% YTD as of December 8.
Over the last three months, 8 out of 9 analysts that have covered Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) maintain a Buy or Overweight rating on the company stock. Their average price target of $112 shows an 11.61% upside to the company’s current stock price.
Bernstein named Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) its Best Idea for 2024. On November 29, the firm reaffirmed an Outperform rating on the company stock and raised its price target to $125 from $113.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the best AI stocks billionaires are crazy about, along with Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN).
Wedgewood Partners talked about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its third quarter 2023 investor letter. Here is what it said:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) detracted from performance, as revenues declined 10% from a year ago. The Company is lapping revenue growth of over +40% (compared to 2022) during every quarter of 2023, so it is more instructive to look at the health of the business through the lens of a multi-year timeframe. Most of the Company’s customers have seen near-term weakness in demand due to pandemic normalization. However, we think the longer-term trend of more silicon per device is still very much intact, and the Company is well-positioned to serve this, given its commanding market share in leading edge capacity. The Company’s aggressive investment in leading-edge equipment combined with tight development with fabless IC designers, plus the embrace of open development libraries, should continue to foster a superior competitive position and attractive long-term growth.”
9. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Billionaire Investors: 21
Dollar Value of Billionaire Holdings: $3.12 billion
Intuitive Surgical, Inc. (NASDAQ:ISRG)’s flagship product, da Vinci Surgical System, is a robotic surgical system for minimally invasive surgeries. The system uses AI and machine learning technologies.
On November 17, HSBC started coverage of Intuitive Surgical, Inc. (NASDAQ:ISRG)’s stock with a Buy rating and a $318 price target. The firm believes that the company covers the majority of the market share of its segment, and its rivals are significantly smaller. Furthermore, the firm expects Intuitive Surgical, Inc. (NASDAQ:ISRG)’s recurring revenue to grow from the current 70% to 77% in 2024.
In the third quarter, 21 billionaires had investments worth $3.12 billion in Intuitive Surgical, Inc. (NASDAQ:ISRG). It is one of the best AI stocks that billionaires are crazy about.
Baron Fund mentioned Intuitive Surgical, Inc. (NASDAQ:ISRG) in its Q3 2023 investor letter. Here is what it said:
“Intuitive Surgical, Inc. manufactures and markets the da Vinci Surgical System, a robotic system used for minimally invasive procedures. The stock declined 14.5% during the third quarter due to investor concerns about a slowdown in systems sales and procedures in China, where the government has embarked upon an anti-corruption campaign that may cause disruption in the region. Investors have also reacted to management’s commentary about a potential slowdown in bariatric procedures due to the increased adoption of obesity medications such as Wegovy. We think disruption in China is temporary; meanwhile bariatric procedures represent a small fraction of the overall range of procedures Intuitive targets. We believe the long-term outlook for the company is positive. Procedure growth on Intuitive systems is rising at a solid rate, and we think the business will continue advancing its technological lead as it invests heavily in research and development.”
8. Alibaba Group Holding Limited (NYSE:BABA)
Number of Billionaire Investors: 22
Dollar Value of Billionaire Holdings: $1.6 billion
Alibaba Group Holding Limited (NYSE:BABA) is a Chinese company that offers e-commerce and technology infrastructure services, including its AI large language model known as Tongyi Qianwen.
Out of the 20 Wall Street analysts that covered Alibaba Group Holding Limited (NYSE:BABA) over the last three months, 18 kept a Buy rating on the stock. The average price target of $125.92 represents an upside of 74.55% at the time of writing on December 8.
On December 1, Loop Capital analyst Rob Sanderson lowered the price target on Alibaba Group Holding Limited (NYSE:BABA)’s stock to $115 from $125 and kept a Buy rating.
L1 Capital commented on Alibaba Group Holding Limited (NYSE:BABA) in its second quarter 2023 investor letter. Here is what it said:
“Alibaba Group Holding Limited (NYSE:BABA) (Long -18%) shares weakened in recent months as Chinese reopening strength faded and macro-economic datapoints began sequentially declining. Nevertheless, we believe the Chinese government will use consumption as a key lever to reinvigorate the economy post-COVID lockdowns. Alibaba remains a high-quality business with leading positions in both eCommerce and Public Cloud, and management is taking proactive steps to unlock shareholder value. It has announced plans to split into six major business groups – Cloud Intelligence, Taobao Tmall, Local Services, Global Digital, Cainiao Smart Logistics and Digital Media, and Entertainment Group. Each group will be managed independently, with a separate CEO and board, have the flexibility to raise external capital and potentially pursue separate IPOs. We believe this restructure will be a strong positive catalyst to unlock the sum-of-the-parts valuation upside in the company.”
7. Uber Technologies, Inc. (NYSE:UBER)
Number of Billionaire Investors: 23
Dollar Value of Billionaire Holdings: $2.97 billion
Uber Technologies, Inc. (NYSE:UBER) is a California-based tech company that provides ride-hailing services. While Uber AI previously developed AI techniques and algorithms, the company announced in August 2023 that it is working on its AI chatbot. Additionally, Uber Technologies, Inc. (NYSE:UBER) also partnered with Alphabet Inc. (NASDAQ:GOOGL)’s autonomous car company, Waymo, to roll out autonomous vehicles in Phoenix earlier this year.
On November 7, Uber Technologies, Inc. (NYSE:UBER) announced its Q3 earnings result with a GAAP EPS of $0.10 and revenue of $9.29 billion, which grew 11.4% year-over-year (YoY). During the quarter, gross bookings were $35.3 billion, an increase of 21% YoY.
According to Insider Monkey’s proprietary database, 23 billionaires had investments in Uber Technologies, Inc. (NYSE:UBER)’s stock at a combined value of $6.2 billion.
RiverPark Advisors mentioned Uber Technologies, Inc. (NYSE:UBER) in its third quarter 2023 investor letter. Here is what it said:
“Uber Technologies, Inc. (NYSE:UBER): UBER was the top contributor in the quarter following a better-than-expected 2Q23 earnings report and 3Q23 guidance. Gross bookings of $33.6 billion were up 16% year over year. Mobility gross bookings of $17 billion grew 25% over last year driven by a combination of product innovation and driver availability. Delivery gross bookings of $16 billion were up 12% from last year. 2Q Adjusted EBITDA of $916 million, up $552 million year over year, significantly beat Street estimates of $845 million and the company generated $1.1 billion of free cash flow. Management guided to continuing growth in 3Q Gross Bookings (17%-20% growth) and Adjusted EBITDA (of $975-1,025 million).
UBER remains the undisputed global leader in ride sharing, with a greater than 50% share in every major region in which it operates. The company is also a leader in food delivery, where it is number one or two in the more than 25 countries in which it operates. Moreover, after a history of losses, the company is now profitable, delivering expanding margins and substantial free cash flow. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its 130 million users (by comparison, Amazon Prime has 200 million members) and penetrate new markets of on-demand services, such as package and grocery delivery, travel, and worker staffing for shift work. Given its $4.3 billion of unrestricted cash and $4.4 billion of investments, the company’s enterprise value of $95 billion equates to just over 20x next year’s estimated free cash flow.”
6. Salesforce, Inc. (NYSE:CRM)
Number of Billionaire Investors: 23
Dollar Value of Billionaire Holdings: $6.2 billion
Salesforce, Inc. (NYSE:CRM) is a California-based company that offers enterprise cloud computing solutions, including Einstein AI Solutions and Einstein GPT.
On November 29, Salesforce, Inc. (NYSE:CRM) posted Q3 non-GAAP EPS of $2.11, topping the analysts’ estimates by $0.05. The revenue increased by 11.2% YoY to $8.72 billion. In the quarter, the company returned $1.9 billion to stockholders in share repurchases.
According to Insider Monkey’s database that tracks 910 elite hedge funds, 122 hedge funds held a stake in Salesforce, Inc. (NYSE:CRM)’s stock in Q3, the same as the previous quarter, but the total investment value increased to $10.517 billion from nearly $7.2 billion. The biggest stakeholder in the company was Nellore Capital Management, with 460,939 shares worth $93.469 million.
Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN) are some of the top AI stocks that billionaires are crazy about besides Salesforce, Inc. (NYSE:CRM).
Harding Loevner commented on Salesforce, Inc. (NYSE:CRM) in its second-quarter 2023 investor letter. Here is what it said:
“Salesforce, Inc. (NYSE:CRM), a company we’ve owned since 2019, recently added ChatGPT-like capabilities onto its existing Al module, Einstein, to support its internal sales efforts and customer-facing software. For example, Einstein GPT can help generate marketing emails tailored to specific clients by using Salesforce’s customer database and past email correspondence to learn the most effective approach for each client. Einstein GPT is also different from off-the-shelf LLMS in three important ways: It keeps personal identifiable information private and secure, compared with external tools that retain anything a user enters. It employs the latest data in Salesforce’s system, as opposed to the sometimes-stale public data that train generic models. And generative Al capabilities can be integrated with other Salesforce offerings; the company has already introduced Slack GPT and Tableau GPT, Al-equipped versions of its workplace collaboration and analytics tools.”
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Disclosure. None. 10 AI Stocks Billionaires Are Crazy About is originally published on Insider Monkey.
