In this article, we discuss the 11 stocks that will profit from AI evolution.
Artificial intelligence products like automated assistants, chatbots, robotics, and even self-driving vehicles have become all the rage in the media over the past few years, propelling the cutting edge tech industry to the forefront of global growth. According to a report by professional services firm PwC, the global AI market will contribute more than $15.7 trillion to the world economy by the end of this decade. This number is more than the economic output of powerhouses like China and India combined.
In the next few years, per an analysis by research firm Grand View Research, the AI market is poised to grow at a compound annual growth rate of a scary 37%. China and the United States are expected to lead this boom in the AI world. AI will contribute to a nearly 30% increase in total GDP output from China by 2030, with North America following behind at around 15%. AI growth trends can be seen in context of the ChatGPT craze. The application became the fastest-growing in history by hitting 100 million active users within a month of launch.
Some of the most promising applications for AI include uses in wearable technology, chip market solutions, self-driving cars, and automated medical procedures, among a host of other applications in the business world. Global Market Insights estimates that the wearable AI market will reach close to $200 billion in value by the end of next year. Similarly, more than 8 billion digital voice assistants could be in use worldwide by the end of this year. The global AI chip market will reach close to $100 billion in value within the next three years.
Big companies like Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), and Apple Inc. (NASDAQ:AAPL) are investing heavily in AI products to take advantage of this AI evolution. Tim Cook, the CEO of Apple Inc. (NASDAQ:AAPL), recently highlighted some of the efforts his company was making in this regard during the first quarter earnings call at the beginning of February.
“Recently, we have been on a tremendous pace of innovation. Since the introduction of Apple silicon in 2020, we’ve been proud to offer our users unmatched performance and power along with a remarkable Neural Engine for artificial intelligence and machine learning. This past fall, we had an amazing launch of the latest generation of Apple silicon for Mac, M3, M3 Pro, and M3 Max. These chips break new ground in power and performance empowering users to do more than they ever could before, whether they’re making a musical masterpiece using the latest features in Logic Pro, or beating their high score in a graphics intensive game.”
Our Methodology
The companies that stand to benefit from the increased adoption of AI products and related services were selected and ranked according to hedge fund sentiment. The analyst ratings of each stock are also discussed to provide readers with some context for their investment choices. The hedge fund sentiment around each stock was calculated using the data of around 900 hedge funds tracked by Insider Monkey in the fourth quarter of 2023. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.
A portfolio manager studying various stocks and other securities on a tablet.
Stocks That Will Profit From AI Evolution
11. AeroVironment, Inc. (NASDAQ:AVAV)
Number of Hedge Fund Holders: 15
AeroVironment, Inc. (NASDAQ:AVAV) designs, develops, produces, delivers, and supports a portfolio of robotic systems and related services for government agencies and businesses in the United States and internationally. In September last year, the company completed the purchase of Tomahawk Robotics, a leader in AI-enabled robotic control and integrated communications systems. This purchase was enabled by a more than 40% quarterly sales growth rate for the company that it has sustained for close to two years. As the demand for AI rises, the company, with contracts from NASA, the US Army, and foreign businesses allied to the US government, is well-positioned from benefit from the conducive environment.
On March 5, investment advisory RBC Capital maintained an Outperform rating on AeroVironment, Inc. (NYSE:AVAV) stock and raised the price target to $160 from $155.
At the end of the fourth quarter of 2023, 15 hedge funds in the database of Insider Monkey held stakes worth $199 million in AeroVironment, Inc. (NASDAQ:AVAV), compared to 21 in the previous quarter worth $192 million.
Just like Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), and Apple Inc. (NASDAQ:AAPL), AeroVironment, Inc. (NYSE:AVAV) is one of the stocks that will profit from AI evolution.
10. UiPath Inc. (NYSE:PATH)
Number of Hedge Fund Holders: 38
UiPath Inc. (NYSE:PATH) provides an end-to-end automation platform that offers a range of robotic process automation (RPA) solutions primarily in the United States, Romania, and Japan. The company has been growing as the AI-powered automation solutions it offers invite interest from across the globe. Earlier this month, the firm announced that the Saudi government, one of the richest in the world, would use the UiPath Business Automation Platform to further a national tourism strategy.
On January 12, investment advisory Barclays maintained an Equal Weight rating on UiPath Inc. (NYSE:PATH) stock and raised the price target to $23 from $21.
Among the hedge funds being tracked by Insider Monkey, St. Petersburg, Florida-based investment firm ARK Investment Management is a leading shareholder in UiPath Inc. (NYSE:PATH) with 43 million shares worth more than $1 billion.
9. Rockwell Automation, Inc. (NYSE:ROK)
Number of Hedge Fund Holders: 43
Rockwell Automation, Inc. (NYSE:ROK) provides industrial automation and digital transformation solutions. As labor shortages, wars, and climate change take a toll on the manufacturing world, Rockwell has been providing solutions to factory owners with AI-powered automation solutions to great success. The three main areas of investment include Autonomous Mobile Robots (AMRs), cobotics, and generative AI.
On February 1, investment advisory Citi maintained a Buy rating on Rockwell Automation, Inc. (NYSE:ROK) stock and lowered the price target to $330 from $351.
At the end of the fourth quarter of 2023, 43 hedge funds in the database of Insider Monkey held stakes worth $853 million in Rockwell Automation, Inc. (NYSE:ROK), up from 34 the preceding quarter worth $644 million.
In its Q3 2023 investor letter, TimesSquare Capital Management, an asset management firm, highlighted a few stocks and Rockwell Automation, Inc. (NYSE:ROK) was one of them. Here is what the fund said:
“In the Industrials sector we gravitate towards business service companies, those focused on automation & efficiency improvements, and essential infrastructure services. Rockwell Automation, Inc. (NYSE:ROK) is a new addition this quarter. They provide industrial automation and digital transformation solutions. There is secular growth stemming from a rapid push towards automated and connected manufacturing; as well as offering an offset to rising labor costs.”
8. Microchip Technology Incorporated (NASDAQ:MCHP)
Number of Hedge Fund Holders: 43
Microchip Technology Incorporated (NASDAQ:MCHP) develops, manufactures, and sells smart, connected, and secure embedded control solutions in the Americas, Europe, and Asia. In September last year, the company announced that it would be teaming up with Intelligent Hardware Korea to develop an analog compute platform for edge AI/ML inferencing. This tech enables 10 to 20 lower power consumption and faster processing speeds.
On February 2, investment advisory Needham maintained a Buy rating on Microchip Technology Incorporated (NASDAQ:MCHP) stock and raised the price target to $90 from $85.
Among the hedge funds being tracked by Insider Monkey, Sydney-based investment firm Platinum Asset Management is a leading shareholder in Microchip Technology Incorporated (NASDAQ:MCHP) with 1.5 million shares worth more than $141 million.
In its Q3 2023 investor letter, Weitz Investment Management, an asset management firm, highlighted a few stocks and Microchip Technology Incorporated (NASDAQ:MCHP) was one of them. Here is what the fund said:
“We added a new position in Microchip Technology, Inc., (NASDAQ:MCHP) to the Fund during the quarter. Microchip is a leading provider of mixed signal microcontrollers and analog semiconductors to a broad range of industrial, data center, automotive, communication and consumer appliance customers. The company enjoys favorable product characteristics that help drive strong profitability, and it benefits from several long-wave demand tailwinds such as electronification, automation, and growth in data communications. While Microchip is not immune from semiconductor cycles, its cash flows have been durable through cycles. The multi-year outlook is solid, and we think the company is poised to further boost per-share value growth through increasing share repurchases at discounted prices.”
7. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 55
Honeywell International Inc. (NASDAQ:HON) operates as a diversified technology and manufacturing company worldwide. The firm has several AI-based products in the works. One of the most promising products is the development of AI-powered digital assistants and a human-AI collaboration framework to support both extended minimum-crew operations and single-pilot operations. As geopolitical tensions rise, these products are increasing in demand.
On March 6, investment advisory Berenberg upgraded Honeywell International Inc. (NASDAQ:HON) stock to Buy from Hold with a price target of $240.
At the end of the fourth quarter of 2023, 55 hedge funds in the database of Insider Monkey held stakes worth $1.6 billion in Honeywell International Inc. (NASDAQ:HON), compared to 60 in the previous quarter worth $2.2 billion.
6. Cadence Design Systems, Inc. (NASDAQ:CDNS)
Number of Hedge Fund Holders: 72
Cadence Design Systems, Inc. (NASDAQ:CDNS) provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. Late last year, the company announced that the launch of a next-generation AI-powered OrCAD X platform. The platform has cloud scalability and AI-powered placement automation technology. It is capable of reducing design turnaround time.
On March 6, investment advisory Needham maintained a Buy rating on Cadence Design Systems, Inc. (NASDAQ:CDNS) stock with a price target of $320.
At the end of the fourth quarter of 2023, 72 hedge funds in the database of Insider Monkey held stakes worth $3.5 billion in Cadence Design Systems, Inc. (NASDAQ:CDNS), compared to 58 in the preceding quarter worth $2.9 billion.
Along with Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), and Apple Inc. (NASDAQ:AAPL), Cadence Design Systems, Inc. (NASDAQ:CDNS) is one of the stocks that will profit from AI evolution.
5. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 78
QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells foundational technologies for the wireless industry. Chip stocks are poised to benefit from the AI boom as AI products require high-end chips that only big companies like QUALCOMM Incorporated (NASDAQ:QCOM) are capable of manufacturing. These chips process data faster and are smaller in size. The prices of these products have increased considerably since the pandemic.
On March 4, investment advisory Cantor Fitzgerald maintained a Neutral rating on QUALCOMM Incorporated (NASDAQ:QCOM) stock with a price target of $150.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm Citadel Investment Group is a leading shareholder in QUALCOMM Incorporated (NASDAQ:QCOM) with 2.9 million shares worth more than $425 million.
4. Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holders: 82
Intuitive Surgical, Inc. (NASDAQ:ISRG) develops, manufactures, and markets products that enable physicians and healthcare providers to enhance the quality of and access to minimally invasive care. On January 25, investment advisory Barclays maintained an Overweight rating on Intuitive Surgical, Inc. (NASDAQ:ISRG) stock and raised the price target to $430 from $385.
At the end of the fourth quarter of 2023, 82 hedge funds in the database of Insider Monkey held stakes worth $6 billion in Intuitive Surgical, Inc. (NASDAQ:ISRG), compared to 78 in the preceding quarter worth $5 billion.
In its Q3 2023 investor letter, ClariVest Asset Management, an asset management firm, highlighted a few stocks and Intuitive Surgical, Inc. (NASDAQ:ISRG) was one of them. Here is what the fund said:
“Intuitive Surgical, Inc. (NASDAQ:ISRG) provides robotic-assisted surgical solutions and invasive care through a comprehensive ecosystem of products and services. Management expects the backlog of deferred surgical procedures to take several quarters to recover, with bariatric surgery growth potentially slowing down with the increasing use of weight loss drugs.”
3. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 173
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. The powerful chips manufactured by the company are world leaders in terms of their computing ability. Businesses using AI products necessarily need the speed, power, and efficiency offered by NVIDIA Corporation (NASDAQ:NVDA) products. On March 7, investment advisory Mizuho maintained a Buy rating on NVIDIA Corporation (NASDAQ:NVDA) stock and raised the price target to $1,000 from $850.
Among the hedge funds being tracked by Insider Monkey, Florida-based investment firm Citadel Investment Group is a leading shareholder in NVIDIA Corporation (NASDAQ:NVDA) with 15.4 million shares worth more than $7.6 billion.
In its Q4 2023 investor letter, Fred Alger Management, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“NVIDIA Corporation (NASDAQ:NVDA) is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super- computing parallel processing techniques for solving complex computational problems. Simply put, Nvidia’s computational power is a critical enabler of Al and therefore critical to Al adoption, in our view. During the period, shares contributed to performance as Nvidia reported solid fiscal third quarter results well above analyst expectations, driven by strong demand from data centers. Growing Al data center workloads are driving demand for the increased interconnections and fully accelerated software stacks, thereby enabling leading application performance and fast result times.”
2. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 131
Apple Inc. (NASDAQ:AAPL) is a consumer electronics firm. AI products on iPhones, iPads, and Mac devices are set to revolutionize the way people interact with the outside world in the coming years. As Apple Inc. (NASDAQ:AAPL) brings more AI-based software offerings to the billions of these devices already in the hands of people around the world, it will benefit from the AI boom. On March 5, investment advisory Wedbush maintained an Outperform rating on Apple Inc. (NASDAQ:AAPL) stock with a price target of $250.
At the end of the fourth quarter of 2023, 131 hedge funds in the database of Insider Monkey held stakes worth $205 billion in Apple Inc. (NASDAQ:AAPL), compared to 134 in the previous quarter worth $179 billion.
In its Q4 2023 investor letter, Horizon Kinetics LLC highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“The full point is that if BYD has turned its attention from its domestic market to direct global competition, then other Chinese companies can do the same. The next most visible example of Chinese commercially applied technological prowess relates to the 2nd highest-weight company in the S&P 500, Apple Inc. (NASDAQ:AAPL).
In September 2023, Huawei Technologies introduced its Mate 60 Pro smartphone. It uses its own, internally developed 5G enabled chip that is apparently competitive with the Apple A17 chip. For practical purposes it has the functionality of the iPhone 15 Pro. This came as a great surprise – perhaps even shock – to the U.S. technology community, because four years ago the U.S. placed strict sanctions on China’s access to state-of-the-art semiconductor manufacturing technology…” (Click here to read the full text)
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 302
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based technology company. The demand for PCs, data centers, and smart devices has increased sharply as AI products need the hardware and software offered by these devices to unleash their full potential. Microsoft Corporation (NASDAQ:MSFT) remains a leader in all these categories.
On March 6, investment advisory Jefferies maintained a Buy rating on Microsoft Corporation (NASDAQ:MSFT) stock with a price target of $500.
Among the hedge funds being tracked by Insider Monkey, Texas-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ:MSFT) with 25 million shares worth more than $9.5 billion.
In its Q4 2023 investor letter, Fred Alger Management, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. Microsoft’s CEO expects technology spending as a percent of Gross Domestic Product (GDP) to jump from about 5% now to 10% in 10 years and that Microsoft will continue to capture market share within the technology sector. The company operates through three segments: Productivity and Business Processes (Office. LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices. Gaming, and Search). During the quarter, the company reported strong fiscal first quarter results, where revenues and earnings beat analyst estimates, driven in large part to growing Al demand. Regarding Intelligent Cloud segment, management noted Azure optimizations were similar to the previous quarter, but new Al and traditional workloads are helping drive greater consumption growth, which resulted in their first reacceleration since March 2022. We believe the strong Azure performance suggests diminishing cost optimization headwinds and growing strength in Al service consumption.”
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Disclosure. None. 11 Stocks That Will Profit From AI Evolution is originally published on Insider Monkey.
