In this article, we will discuss the 10 best machine learning stocks to invest in.
The Global Machine Learning Industry
According to an industry analysis report by Fortune Business Insights, the global machine learning industry was valued at $15.4 billion in 2021 and is expected to reach a value of over $21 billion in 2022. The machine learning industry is expected to grow at a compound annual growth rate of 38.8% from 2022 through 2029 and reach a value of $210 billion by the end of 2029. One of the major drivers of this growth is the increasing adoption of machine learning in a variety of industries including technology, healthcare, manufacturing, automotive, retail, advertising, automation, defense, and financial services among others.
While the machine learning industry is a high-growth industry and growth stocks have been getting hammered in 2022 due to high interest rates that are straining their earnings, long-term investors can in fact benefit from the recent weakness. As of September 30, the Nasdaq composite index has declined 33% year to date.
Investors that are in the stock market for the long term can rack up shares of leading companies in the space while they are still at or close to the bottom. Some of the biggest players in the machine learning industry include Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN).
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Our Methodology
To determine the 10 best machine learning stocks to buy now, we reviewed the industry and identified major players that develop software and hardware for machine learning applications. We narrowed down our selection to companies that had positive market sentiment and strong product pipelines. Along with each stock, we have mentioned the hedge fund sentiment, analyst ratings, and their products. We have ranked these stocks according to their popularity among elite hedge funds. The hedge fund sentiment was sourced from Insider Monkey’s database, which keeps track of roughly 900 elite hedge funds as of the second quarter of 2022.
10 Best Machine Learning Stocks To Invest In
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a pioneer in developing solutions for the development and deployment of machine learning models. The company’s IBM Watson Studio allows support for the development, training, and testing of machine learning models. The IBM Watson Studio is among the most popular data science platforms that is used by machine learning engineers worldwide.
International Business Machines Corporation is a leader in the artificial intelligence space and is one of the best machine learning stocks to buy now. On September 27, International Business Machines Corporation announced a strategic collaboration with the Saudi Data and Artificial Intelligence Authority to use artificial intelligence for carbon capture across the Kingdom of Saudi Arabia. The two entities will jointly leverage the technological advancements in AI and machine learning to detect, map, and mitigate carbon emissions across the country.
On August 16, Credit Suisse analyst Shannon Cross raised her price target on International Business Machines Corporation to $163 from $156 and assumed coverage of the stock with an Outperform rating. Over the past three months, the stock has received 5 Buy and 4 Hold ratings from Wall Street analysts and has an average price target of $145, which represents an upside of 22% from current levels.
At the close of the second quarter of 2022, 40 hedge funds were bullish on International Business Machines Corporation and held stakes worth $948 million in the company. As of June 30, Arrowstreet Capital owns more than 2.6 million shares of International Business Machines Corporation and is the largest shareholder in the company.
In addition to International Business Machines Corporation’s (NYSE:IBM) Watson Studio, some of the top cloud platforms that machine learning engineers build and train complex AI models on are offered by Microsoft Corporation, Alphabet Inc., and Amazon.com, Inc..
9. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 65
Snowflake Inc. (NYSE:SNOW) is a leading provider of cloud computing services and its cloud platform is optimized for running machine learning algorithms. The company’s platform is compatible with machine learning languages and environments such as Spark, R, Qubole, and Python. As of September 30, the company has free cash flows of $292.5 million and is therefore one of the best cash-rich machine learning stocks to buy right now.
On August 24, Snowflake Inc. released market-beating earnings for the fiscal second quarter of 2023. The company reported sales of $497.25 million, up 83% year over year, and beat Wall Street estimates by $30 million. The company reported earnings per share of $0.01 and beat expectations by $0.02.
Wall Street analysts are bullish on Snowflake Inc.. On September 22, MoffettNathanson analyst Sterling Auty initiated coverage of Snowflake Inc. with a $242 price target and a Buy rating. This September Needham analyst Mike Cikos initiated coverage of Snowflake Inc. with a $240 price target and a Buy rating.
At the end of the second quarter of 2022, 65 hedge funds were long Snowflake Inc. and held stakes worth $5.12 billion in the company. As of June 30, Altimeter Capital Management is the top shareholder in Snowflake Inc. and has stakes worth $2.36 billion in the company.
Here is what Baron Funds had to say about Snowflake Inc. in its second-quarter 2022 investor letter:
“During the quarter, we added to three of our cloud infrastructure positions – Snowflake Inc., Cloudflare, Inc., and Datadog, Inc.While investors are concerned that a weakening macroeconomic environment will be a near term headwind to growth as customers may slow down their cloud expansions, we remain focused on the long term – duration of growth, competitive advantages, and innovative capabilities and are happy to increase our positions at a more attractive price. For example, Snowflake, the leading data cloud provider, during its recent user conference, announced several new products, which significantly expand its addressable market…” (Click here to see the full text)
8. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
Micron Technology, Inc. (NASDAQ:MU) is a leading manufacturer of semiconductors and memory storage products. The company’s products are used widely for machine learning and deep learning applications. Micron Technology, Inc.’s (NASDAQ:MU) deep learning accelerators allow for deep learning algorithms to run in a more energy-efficient and optimized manner. The company’s solid pipeline of hardware products for the most data-intensive applications in machine learning and high-performance computing justifies its inclusion among the best machine learning stocks to buy now.
On September 29, Micron Technology, Inc. announced earnings for the fourth quarter of fiscal 2022. The company reported earnings per share of $1.45 and outperformed Wall Street estimates by $0.08. The company’s revenue for the quarter amounted to $6.64 billion. As of September 30, Micron Technology, Inc. is trading at a PE multiple of 6x and has a trailing twelve-month operating margin of 31.70%, making it an undervalued and profitable machine learning stock to buy now.
Shortly after the company’s earnings release, JPMorgan analyst Harlan Sur reiterated his $65 price target and buy-side Overweight rating on Micron Technology, Inc.. On September 30, Needham analyst Rajvindra Gill revised his price target on Micron Technology, Inc. to $60 from $64 and maintained a Buy rating on the shares.
At the close of Q2 2022, 69 hedge funds were eager on Micron Technology, Inc. and held stakes worth $2.16 billion in the company. As of June 30, Matrix Capital Management owns 4 million shares of Micron Technology, Inc. and is largest shareholder in the company. The fund’s stakes are valued at $221 million and the investment covers 5% of the fund’s 13F portfolio.
Here is what Meridian Funds had to say about Micron Technology, Inc. in its second-quarter 2022 investor letter:
“Micron Technology, Inc. (NASDAQ:MU) is a leader in the production of DRAM and NAND memory. We invested in the stock in the third quarter of 2019 during a cyclical downturn in the memory industry. Our rationale was that, while the memory industry is cyclical, we believed there are strong secular drivers in place that will lead to higher peaks and long-term growth. Our secular thesis is based on our conviction that the quest for ever-increasing compute speeds will increasingly rely on memory to solve bottlenecks and that increased memory content in nearly everything from mobile phones to automobiles will drive demand. Micron’s stock traded lower during the quarter due to macroeconomic concerns that led to lower earnings expectations. We increased our stake in the company, as we believe our secular thesis remains intact. We wanted to take advantage of what we view as temporary cyclical concerns that caused the stock to trade at less than 10x reasonable trough earnings per share (EPS) estimates and less than 7x recent peak EPS.”
7. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 77
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leading American cybersecurity company that leverages the advancements in artificial intelligence and machine learning to provide intelligent endpoint security, threat intelligence, and cyberattack response services. The company is a pioneer in developing cybersecurity solutions backed by machine learning and deep learning algorithms and is therefore ranked high among the best machine learning stocks to buy now.
On September 30, Capital One analyst Connor Murphy started coverage of CrowdStrike Holdings, Inc. with a buy-side Overweight rating and a $235 price target. Over the past three months, CrowdStrike Holdings, Inc. has received 22 Buy ratings and 1 Hold rating from Wall Street analysts and has a consensus analyst rating of Strong Buy. The stock’s median price target sits at $236 and implies an upside of 43%.
At the end of Q2 2022, 77 hedge funds were bullish on CrowdStrike Holdings, Inc. and held stakes worth $4.10 billion in the company. As of June 30, Tiger Global Management LLC is the top shareholder in the company and has stakes worth $1.10 billion.
Here is what Carillon Tower Advisers had to say about CrowdStrike Holdings, Inc. in its second-quarter 2022 investor letter:
“CrowdStrike Holdings, Inc. (NASDAQ:CRWD), a security software platform for protecting information technology assets and cloud workloads, delivered strong earnings results, with solid recurring revenue, customer growth, and profitability. Some investors, however, hoped for bigger numbers on the annual recurring revenue metric. Additionally, CrowdStrike has shown a desire to continue to hire to fuel growth, and so the expected increase in future profitability will be held back somewhat in the near term. We remain positive on the company’s prospects, as current geopolitical tensions make cyber security mission-critical.”
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is the world’s biggest manufacturer of high-end graphics processing units and semiconductors. The company’s products are vital to computer vision, deep learning, and machine learning applications. Moreover, NVIDIA Corporation also provides is GPU power over the cloud for machine learning engineers to develop apps on Azure, Google Cloud Platform, and Amazon Web Services. NVIDIA Corporation is leading the artificial intelligence industry with its next-generation hardware and is one of the best machine learning stocks to invest in.
This September, JPMorgan analyst Harlan Sur reiterated his $220 price target and buy-side Overweight rating on NVIDIA Corporation. The analyst noted that NVIDIA Corporation “continues to be 1-2 steps ahead of its competitors”. On September 21, Barclays analyst Blayne Curtis maintained an Overweight rating and his $190 price target on NVIDIA Corporation.
At the end of the second quarter of 2022, 84 hedge funds were long NVIDIA Corporation and held stakes worth $3.31 billion in the company. Of those, Fisher Asset Management was the largest shareholder in the company with stakes worth $1.15 billion. The investment covers 0.81% of Ken Fisher’s 13F portfolio.
Here is what Baron Funds had to say about NVIDIA Corporation in its second-quarter 2022 investor letter:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them were large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…” (Click here to see the full text)
Some of the top beneficiaries of secular growth trends in machine learning and artificial intelligence include Microsoft Corporation, Alphabet Inc., Amazon.com, Inc., and NVIDIA Corporation.
5. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 87
Advanced Micro Devices, Inc. (NASDAQ:AMD) offers EPYC CPUs and Radeon Instinct GPUs, two of the world’s top-tier hardware products that facilitate the deployment of the most demanding machine learning applications and makes Advanced Micro Devices, Inc. rank high among the best machine learning stocks to buy now. On September 27, Advanced Micro Devices, Inc. launched the next-generation Ryzen Embedded V3000 Series processors that offer superior CPU performance, DRAM memory transfer rate, CPU core count, and I/O connectivity compared to the company’s V1000 series.
This September, Stifel analyst Ruben Roy initiated coverage of Advanced Micro Devices, Inc. with a $122 price target and Buy rating. The analyst noted that the company has a “strong product roadmap”. On September 23, Morgan Stanley analyst Joseph Moore revised his price target on Advanced Micro Devices, Inc. to $95 from $102 and maintained a buy-side Overweight rating on the shares.
At the end of Q2 2022, 87 hedge funds were bullish on Advanced Micro Devices, Inc. and held stakes worth $4.84 billion in the company. Of those, Fisher Asset Management was the leading shareholder and owned over 25 million shares of the company, which amounts to a stake of $1.92 billion.
Here is what Baron Funds had to say about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its second-quarter 2022 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global fabless semiconductor company focusing on high-performance computing technology, software, and products. AMD designs leading high-performance central and graphics processing units (known as CPUs and GPUs) and integrates them with hardware and software to build differentiated solutions for customers.
AMD has been gaining meaningful share in personal computing and server end markets over the past several years driven by the performance of its processors and technology and strong execution against its technology roadmap, and we believe share gains will continue over the coming years from a combination of AMD’s continued advancements and Intel’s stumbles in developing its leading-edge technology.
Additionally, the recently closed acquisitions of Xilinx and Pensando enhance AMD’s positioning within the data center, a key growth engine for the semiconductor industry, and Xilinx specifically opens up several new growth opportunities in new end markets like industrial, automotive, and communications. The company also generates significant cash flow, giving it capital allocation optionality for further M&A and returning capital to shareholders.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 128
Apple Inc. (NASDAQ:AAPL) makes some of the world’s top-tier computing products and the company’s MacBook is specifically built for machine learning. The company’s M1 and M1 Max processors are specifically designed for machine learning and outperform benchmarks by 11x. The company’s latest M2 chip is 1.4x faster than the M1. Apple Inc. is expected to lead the machine learning industry in the coming years and is therefore one of the best machine learning stocks to buy now.
Wall Street is bullish on Apple Inc.. On September 29, UBS analyst David Vogt maintained his Buy rating and $185 price target on Apple Inc.. On September 30, Evercore ISI analyst Amit Daryanani reiterated his $190 price target and buy-side Outperform rating on Apple Inc..
At the close of the second quarter of 2022, 128 hedge funds were long Apple Inc. and held stakes worth $143 billion in the company. As of June 30, Berkshire Hathaway is the top shareholder in Apple Inc. and has stakes worth $122 billion in the company. The investment covers 40% of Warren Buffett’s 13F portfolio.
Here is what Distillate Capital Partners LLC had to say about Apple Inc. in its second-quarter 2022 investor letter:
“Apple was largest new purchase in the quarter, at a 2% weight. Apple underperformed the overall market last quarter, and given very minimal debt, this price weakness translated into a commensurate fall in its enterprise value. For stocks with higher debt levels, it takes a disproportionately bigger market cap drop to achieve the same valuation improvement and this is a key reason we avoid highly leveraged names where significant price weakness can be experienced during a revaluation process. Alongside this decline in EV for Apple, its estimated free cash flows have risen steadily throughout the year. This contrast between a falling enterprise value and rising free cash flow, which is highlighted in Figure 12, made the stock sufficiently better valued such that it entered the portfolio. While Apple’s valuation is now attractive enough to warrant inclusion in the portfolio, it still ranks in the bottom quartile of the portfolio’s holdings and so the stock’s initiating weight is capped at a 2%. This contrasts significantly with Apple’s near-7% position in the S&P 500 benchmark, and reflects both our preference to avoid too much concentration risk as well our goal of ensuring that the overall portfolio valuation is as attractive as possible while balancing characteristics of stability and low indebtedness.”
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 153
Alphabet Inc. is the owner and operator of one of the three biggest cloud platforms in the world, the Google Cloud Platform, and is one of the best machine learning stocks to buy now. Alphabet Inc.’s (NASDAQ:GOOG) cloud platform provides machine learning developers with various services including pre-trained models, datasets, and machine learning libraries, through which developers can build, test, and deploy their custom models.
Wall Street sees upside to Alphabet Inc.. This August, Tigress Financial analyst Ivan Feinseth raised his price target on Alphabet Inc. to $186 from $183 and maintained a Strong Buy rating on the shares. Over the past three months, Alphabet Inc. has received 10 Buy ratings from Wall Street analysts and has a consensus Strong Buy rating. The stock’s median price target of $145 represents an upside of 51% from current levels.
At the end of Q2 2022, 153 hedge funds disclosed ownership of stakes in Alphabet Inc.. The total value of these stakes amounted to $22.29 billion. As of June 30, TCI Fund Management owns more than 2.4 million shares of Alphabet Inc. and is the largest shareholder in the company.
Here is what Lakehouse Capital had to say about Alphabet Inc. in its second-quarter 2022 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) reported another strong quarterly result despite the tough macroeconomic conditions. Revenue increased by 13% as Search proved resilient, primarily led by strength in the travel and retail verticals. YouTube advertising growth was lighter and moderated due to a tough comparison period and a general softening in brand advertising spend. That said, YouTube’s user engagement and time spent still continues to grow which bodes well for future monetisation opportunities. Google Cloud outpaced the company’s overall growth with revenue increasing by 36% and while it has yet to show any signs of profitability, we remain supportive of Alphabet continuing to reinvest in its cloud business given the size of the market opportunity ahead. On the cost front, the company added another 10,000 employees during the quarter, but notably, the CFO mentioned that hiring will likely slow down over the next twelve months as the company focuses on greater operating efficiency. Overall, we’re pleased with how the company has performed and are confident that management will be able to control costs, if or when the economic environment becomes more challenging.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 252
Up next among the best machine learning stocks to buy now, we have Amazon.com, Inc. (NASDAQ:AWS), the owner and operator of Amazon Web Services. Amazon Web Services is one of the most widely used cloud platforms for machine learning and deep learning. On September 29, Amazon.com, Inc. announced that its cloud division, Amazon Web Services, has entered into a strategic agreement with SK Telecom by which the two will jointly develop a new set of computer vision services.
Analysts are bullish on Amazon.com, Inc.. This September, Truist analyst Youssef Squali revised his price target on Amazon.com, Inc. to $170 from $180 and maintained a Buy rating on the shares. On September 29, Citi analyst Ronald Josey maintained his Buy rating and $185 price target on Amazon.com, Inc..
At the end of Q2 2022, 252 hedge funds were eager on Amazon.com, Inc. and held stakes worth $30 billion in the company. As of June 30, Fisher Asset Management owns more than 46 million shares of Amazon.com, Inc. and is the most prominent investor in the company.
Here is what Lakehouse Capital had to say about Amazon.com, Inc. in its second-quarter 2022 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN) proved resilient in the face of ongoing macro pressures and delivered a strong quarterly result along with “better-than-feared” guidance for the third quarter. Net sales increased 7% year-on-year (10% constant currency) to $121.2 billion, while operating profit declined 57% to $3.3 billion. The drop in operating profit was attributable not only to external macro factors, such as elevated shipping and fuel costs, but also lower productivity and efficiency costs as a result of some overcapacity on the back of its recent investment cycle. It was pleasing to see that the company has begun to make progress on the more controllable costs, particularly productivity and staffing, with headcount, for example, down almost 100,000 over the quarter. We continue to believe Amazon is well positioned to manage these short-term issues and remains on track to deliver significant profit improvements over the next twelve months.
Management also confirmed that they have not seen any deterioration in Prime membership growth or retention following the 17% increase in Prime fees put through earlier in the year. This is not surprising to us, as in our view, the price increase was more than justified given the tremendous amount of customer value that has been added since the last price increase was implemented back in 2018, which includes the doubling of its fulfilment network and workforce, significant expansion of free same-day delivery and considerable investments in video and music content. Ultimately, we remain positive about Amazon’s future and believe that the company’s scale and market leadership will continue to drive growth for many years to come.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 258
Microsoft Corporation is an industry leader in artificial intelligence software. The company offers Microsoft Azure, a cloud-computing platform that is heavily used by machine learning developers and data scientists across the world. Microsoft Corporation has the pricing power and brand recognition to maintain Azure’s dominant position in the machine learning industry and as the industry booms, Microsoft Corporation is expected to be among the key beneficiaries and is, therefore, one of the best machine learning stocks to buy now.
Wall Street is bullish on Microsoft Corporation and the stock has a consensus Strong Buy rating. On September 29, Raymond James analyst Andrew Marok resumed coverage of Microsoft Corporation with a buy-side Outperform rating and a $300 price target. Over the past three months, Microsoft Corporation has received 27 Buy ratings and 3 Hold ratings and has an average price target of $325, which implies an upside of 39% from current levels.
At the end of Q2 2022, 258 hedge funds were bullish on Microsoft Corporation and held stakes worth $56 billion in the company. Of those, Fisher Asset Management was the most prominent investor in the company and held stakes worth $7.36 billion. The investment covers 5.21% of Ken Fisher’s 13F portfolio.
Here is what Baron Funds had to say about Microsoft Corporation in its second-quarter 2022 investor letter:
“Shares of Microsoft Corporation, a leading global provider of software solutions, declined 16.6% in the quarter along with the broader software group as well as due to growing concerns of a potential macro-driven slowdown. This is despite the company posting strong quarterly financial results and successfully absorbing headwinds from the war in Ukraine. The company had 21% revenue growth, 23% operating income growth, and 35% growth in Microsoft Cloud (all year-over-year in constant currency), which now represents 47% of total revenues.
As discussed above, we continue to believe Microsoft remains a durable and growing business as companies across all industries look to digitally transform, taking advantage of the continuously expanding solution set Microsoft has to offer.”
You can also take a look at 13 Best Cybersecurity Stocks To Buy and 12 Best AI Stocks To Buy.
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