12 Best AI Stocks For 2023

Published on February 24, 2023 at 12:48 pm by Hamna Asim in Hedge Funds, News

In this article, we discuss 12 best AI stocks for 2023. If you want to see more stocks in this selection, check out 5 Best AI Stocks For 2023.

According to Precedence Research, as of 2022, the global AI market was valued at approximately $119.78 billion, and it is projected to reach $1,597.1 billion by 2030, with a compound annual growth rate of 38.1% from 2022 to 2030. In the upcoming years, the global artificial intelligence market is expected to experience significant growth due to increasing demand for the technology across various industries, including automotive, healthcare, banking and finance, manufacturing, food and beverages, logistics, and retail. Technological advancements have played a vital role in the growth of these industries.

The global AI market is experiencing significant growth, driven by the increasing demand for life-saving medical devices and self-driving capabilities in electric vehicles. The trend towards digitalization is also contributing to the growth. Major tech companies like Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT) are investing in the development and enhancement of AI applications. These companies are also striving to improve access to AI technology, which is expected to further fuel the growth of the AI market during the forecast period.

NVIDIA Corporation (NASDAQ:NVDA)’s shares surged by more than 14% following the company’s announcement of better-than-expected earnings. Analysts are optimistic about the company’s focus on artificial intelligence, with Rosenblatt Securities’ Hans Mosesmann stating that NVIDIA Corporation (NASDAQ:NVDA)’s AI strategy is growing rapidly and will have a significant impact on both its competitors and the wider world. NVIDIA Corporation (NASDAQ:NVDA) CEO Jensen Huang told the analysts in a recent meeting:

“AI adoption is at an inflection point. OpenAI’s ChatGPT has captured interest worldwide, allowing people to experience AI firsthand, showing what’s possible with generative AI.”

Investors can also check out 10 High Growth AI Stocks To Buy and 11 Best Small Cap AI Stocks To Buy.

Our Methodology

We selected the following AI stocks based on overall hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the fourth quarter of 2022. The list is arranged in ascending order of the number of hedge fund holders in each firm.

Photo by Jonathan Kemper on Unsplash

Best AI Stocks For 2023

12. C3.ai, Inc. (NYSE:AI)

Number of Hedge Fund Holders: 19

C3.ai, Inc. (NYSE:AI) is a California-based enterprise artificial intelligence software company in North America, Europe, the Middle East, Africa, the Asia Pacific, and internationally. On February 21, C3.ai, Inc. (NYSE:AI) announced that its expanded collaboration with Amazon Web Services (AWS) is aimed at leveraging the power of AI to help customers in industries such as defense and intelligence tackle their most pressing business challenges. As part of this collaboration, C3.ai, Inc. (NYSE:AI) will integrate its AI applications, including C3 AI Law Enforcement, with AWS services such as Amazon Comprehend.

On February 6, DA Davidson analyst Gil Luria initiated coverage of C3.ai, Inc. (NYSE:AI) with a Buy rating and a $30 price target. According to DA Davidson, C3.ai, Inc. (NYSE:AI) is a rare commodity in a crucial software sector and the emergence of generative AI is a game-changing application for AI. This presents an opportunity for C3.ai, Inc. (NYSE:AI) to capitalize on its significant investment and expertise in AI, as noted by the firm.

According to Insider Monkey’s Q4 data, 19 hedge funds were bullish on C3.ai, Inc. (NYSE:AI), compared to 18 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 1 million shares worth $11.6 million.

Like Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), C3.ai, Inc. (NYSE:AI) is one of the best AI stocks to invest in.

11. Palantir Technologies Inc. (NYSE:PLTR)

Number of Hedge Fund Holders: 28

Palantir Technologies Inc. (NYSE:PLTR) is a Colorado-based company that builds and deploys software platforms for the intelligence community in the United States to help with counterterrorism investigations and operations. It is one of the best AI stocks to monitor. On February 13, Palantir Technologies Inc. (NYSE:PLTR) reported a Q4 non-GAAP EPS of $0.04 and a revenue of $508.62 million, outperforming Wall Street estimates by $0.01 and $3.64 million.

On February 14, Mizuho analyst Matthew Broome raised the firm’s price target on Palantir Technologies Inc. (NYSE:PLTR) to $8 from $7 and kept a Neutral rating on the shares. In a research note to investors, the analyst described Palantir Technologies Inc. (NYSE:PLTR)’s Q4 results as “mixed,” with revenue slightly exceeding consensus and the company reporting GAAP profitability for the first time, which was surprising. However, the total contract value for the quarter was low, reflecting the unpredictable nature of the business, and remaining deal value decreased partly due to headwinds from the commercial strategic investment program, according to Mizuho. Furthermore, the firm noted that Palantir Technologies Inc. (NYSE:PLTR)’s revenue growth guidance for 2023 was lower than what was expected by the Street.

According to Insider Monkey’s Q4 database, 28 hedge funds were bullish on Palantir Technologies Inc. (NYSE:PLTR), compared to 35 funds in the earlier quarter. D E Shaw is the biggest investor in the company.

Here is what Tao Value has to say about Palantir Technologies Inc. (NYSE:PLTR) in its Q4 2021 investor letter:

“We have no new position this quarter and have made below changes to our portfolio. We also sold Palantir (PLTR) as I identified it subject to high retail bubble risk (using above method) and are not part of our core “Mindful Compounder” holdings.”

10. EPAM Systems, Inc. (NYSE:EPAM)

Number of Hedge Fund Holders: 35

EPAM Systems, Inc. (NYSE:EPAM) provides digital platform engineering and software development services worldwide. The company provides AI-powered platforms for data acquisition, intelligent automation solutions, and conversational AI for revolutionizing banking. EPAM Systems, Inc. (NYSE:EPAM) is one of the premier artificial intelligence stocks to invest in. In Q4 2022, the company reported a Q4 non-GAAP EPS of $2.93, beating market estimates by $0.25. The revenue of $1.23 billion climbed 11.2% year-over-year, in-line with Wall Street consensus.

On February 21, Barclays maintained an Overweight rating on EPAM Systems, Inc. (NYSE:EPAM) but lowered the firm’s price target on the shares to $380 from $400 ahead of the Q4 earnings report.

According to Insider Monkey’s Q4 data, EPAM Systems, Inc. (NYSE:EPAM) was part of 35 hedge fund portfolios, compared to 34 in the last quarter. Stephen Mandel’s Lone Pine Capital is the largest stakeholder of the company, with a position worth $197.5 million.

Here is what White Falcon Capital Management has to say about EPAM Systems, Inc. (NYSE:EPAM) in its Q3 2022 investor letter:

“Half of the portfolio had positive realized and unrealized gains for the year. Out of these, EPAM Systems and Maxar were the largest positive contributors to performance. In addition, our weight in the commodity sector, including the precious metals hedge, produced substantial positive returns.

EPAM Systems is an IT services company. We initiated a position in EPAM after it sold off when Russia invaded Ukraine. The concern was that EPAM had a large part of its workforce in Ukraine, Belarus and Russia. Until then, EPAM had been a high quality compounder whose stock price had gone up 10x in the previous 10 years. It was a strong company that had come across some temporary headwinds and our analysis (Q1 2022 letter) confirmed that the risks are manageable. We bought the stock at $210 per share in Q1 and sold about a quarter of our position in the $400-450 range in Q3. EPAM remains a top 10 position and closed the year at $330 per share.”

9. SentinelOne, Inc. (NYSE:S)

Number of Hedge Fund Holders: 38

SentinelOne, Inc. (NYSE:S) was incorporated in 2013 and is headquartered in Mountain View, California. It operates as a cybersecurity provider in the United States and internationally. Its Singularity XDR Platform offers an artificial intelligence-powered autonomous threat prevention, detection, and response capabilities across a company’s endpoints and cloud workloads.

On February 21, Andrew Nowinski, an analyst at Wells Fargo, lowered his rating on SentinelOne, Inc. (NYSE:S) from Overweight to Equal Weight and set a price target of $18. The downgrade is due to concerns about declining demand trends and recent departures of key executives. According to the firm, these issues will likely make it more challenging for SentinelOne to achieve significant profitability.

According to Insider Monkey’s Q4 data, SentinelOne, Inc. (NYSE:S) was part of 38 hedge fund portfolios, compared to 30 in the last quarter. Dan Loeb’s Third Point is the biggest position holder in the company, with 14.70 million shares worth $214.4 million.

Here is what ClearBridge Investments SMID Cap Growth Strategy has to say about SentinelOne, Inc. (NYSE:S) in its Q4 2021 investor letter:

“We added six new positions in the fourth quarter. We see next-generation cybersecurity provider SentinelOne, although early in its growth lifecycle, as capable of taking share from legacy players in the antivirus and broader cybersecurity industry.”

8. Baidu, Inc. (NASDAQ:BIDU)

Number of Hedge Fund Holders: 40

Baidu, Inc. (NASDAQ:BIDU) offers internet search services in China. Baidu, Inc. (NASDAQ:BIDU) on February 22 shared additional information about its highly anticipated intelligent Ernie Bot, which is considered as the company’s equivalent to ChatGPT. Ernie Bot will also provide services to the public through Baidu AI Cloud. The Ernie Bot is developed based on Baidu’s extensive language model Ernie, which was introduced in 2019.

On February 22, Baidu, Inc. (NASDAQ:BIDU) reported a Q4 non-GAAP EPADS of $2.21, beating market estimates by $0.16. The revenue of $4.8 billion outperformed estimates by $170 million. Free cash flow was $859 million, and free cash flow excluding iQIYI stood at $736 million.

Benchmark analyst Fawne Jiang on February 23 raised the firm’s price target on Baidu, Inc. (NASDAQ:BIDU) to $210 from $200 and kept a Buy rating on the shares after the company reported better than expected Q4 results and highlighted an improving ad outlook in Q1 as mobility returns to normal in China.

According to Insider Monkey’s Q4 data, 40 hedge funds were long Baidu, Inc. (NASDAQ:BIDU), compared to 43 funds in the prior quarter. John W. Rogers’ Ariel Investments is the largest stakeholder of the company, with 2.85 million shares worth $326.3 million.

Ariel Investment made the following comment about Baidu, Inc. (NASDAQ:BIDU) in its Q3 2022 investor letter:

“China’s internet search and online community leader Baidu, Inc. (NASDAQ:BIDU) also weighed on relative results in the quarter. Continuing macro headwinds driven by China’s Zero-Covid policy are resulting in sluggish advertising trends. Looking ahead, the company remains committed to sustainable, profitable growth as management works to improve overall operational efficiency, executing on its strategic commitments around technological innovation and the transition to a green economy. We also continue to be enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”

7. International Business Machines Corporation (NYSE:IBM)

Number of Hedge Fund Holders: 43

International Business Machines Corporation (NYSE:IBM) is an American multinational technology corporation that specializes in advanced computer chips, quantum computing, artificial intelligence, and data infrastructure. The company provides AI for customer service, AI for business automation, and explainable AI. On January 31, International Business Machines Corporation (NYSE:IBM) declared a quarterly dividend of $1.65 per share, in line with previous. The dividend is payable on March 10, to shareholders of record on February 10. It is one of the best AI stocks for 2023.

On February 6, Logan Purk, an analyst at Edward Jones, lowered International Business Machines Corporation (NYSE:IBM)’s rating from Buy to Hold, without providing a price target. In a research note to investors, the analyst stated that with IBM’s business transformation now complete and the stock rising on the potential for accelerated growth, the shares are correctly valued.

According to Insider Monkey’s data, International Business Machines Corporation (NYSE:IBM) was part of 43 hedge fund portfolios at the end of December 2022, compared to 40 in the prior quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is a prominent stakeholder of the company, with 919,590 shares worth $129.5 million.

In its Q1 2022 investor letter, St. James Investment Company, an asset management firm, highlighted a few stocks and International Business Machines Corporation (NYSE:IBM) was one of them. Here is what the fund said:

“IBM was not the first company to build computers. The distinction belongs to Sperry-Rand’s subsidiary UNIVAC, which introduced the first commercially successful computers in the early 1950s. In this era, IBM did possess the largest research and development department of the business machines industry and quickly caught up, introducing cost-competitive computers a few years after UNIVAC. By the late 1950s, IBM held the dominant market share in computers. IBM also touted a vastly superior sales organization, which used a sales tactic called “paper machines” (the equivalent of today’s “vaporware”). If a competitor’s product was selling well in a market segment that IBM had yet to penetrate, the company would announce a competing product and start taking orders for the “paper machine” long before it was available. (read more)

6. Intel Corporation (NASDAQ:INTC)

Number of Hedge Fund Holders: 62

Intel Corporation (NASDAQ:INTC) designs, manufactures, and sells computing and related products worldwide. It operates through Client Computing Group, Data Center and AI, Network and Edge, Accelerated Computing Systems and Graphics, Intel Foundry Services, and Other segments.

On February 23, Joseph Moore, an analyst at Morgan Stanley, raised Intel Corporation (NASDAQ:INTC)’s rating from Underweight to Equal Weight, with a price target of $28, down from $29.50. According to the analyst, the rumors of a dividend cut have had a negative impact on the stock, but it is the right decision to make. Despite the material underperformance of the stock in late 2022 and year-to-date, and the negative impact of the dividend cut, the firm believes that the current share levels present a balanced risk-reward situation. Additionally, Morgan Stanley now sees limited downside risk in Intel’s shares.

According to Insider Monkey’s fourth quarter database, 62 hedge funds were bullish on Intel Corporation (NASDAQ:INTC), compared to 69 funds in the earlier quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a prominent stakeholder of the company, with 11.2 million shares worth $297.3 million.

In addition to Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT), Intel Corporation (NASDAQ:INTC) is one of the premier AI stocks to monitor.

ClearBridge Investments made the following comment about Intel Corporation (NASDAQ:INTC) in its Q3 2022 investor letter:

“Also on the detractor side, Intel Corporation (NASDAQ:INTC) delivered a disappointing revenue miss and lowered full-year revenue and earnings guidance as COVID-19-driven demand for PCs abated (where Intel enjoys half its sales) and a delay in its flagship Sapphire Rapids CPU hurt its data center business. Despite these issues, we still believe Intel is an economically sensitive turnaround story with substantial upside.”

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