In this article, we will be looking at 12 best artificial intelligence stocks to invest in right now.
The COVID-19 pandemic hastened the advent of AI technologies in our lives. According to a PwC AI survey, 33% of businesses had begun integrating limited AI use cases in 2021. On the other hand, 25% of surveyed businesses have fully AI-enabled business processes, up 18% year-over-year. These companies have obtained the rewards of AI adoption, as the technology helped them increase efficiency.
The AI industry has the potential to generate high revenue growth over time. According to a Deloitte study, AI-based revenues are expected to reach $100 billion by 2025 driven by the ongoing demand for machine learning, deep learning, and conversational AI applications. As a result, many tech startups are developing their own AI products and services to thrive in the rapidly growing field of artificial intelligence.
Snorkel AI, a California-based AI application developer recently raised $85 million in Series C funding at a $1 billion valuation. The AI startup is backed by investment giant BlackRock, Inc. (NYSE:BLK) and Alphabet Inc.’s (NASDAQ:GOOGL) venture capital arm, GV. Among the biggest companies that use Snorkel AI’s machine learning data labeling is Alphabet Inc. (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), and Intel Corporation (NASDAQ:INTC).
Likewise, Amazon.com, Inc. (NASDAQ:AMZN) is one of the biggest tech companies that offers automatic data labeling through its cloud service platform, Amazon Web Services (AWS). In June 2021, Amazon.com, Inc. (NASDAQ:AMZN) teamed up with global CRM leader salesforce.com, inc. (NYSE:CRM) to integrate AWS’ artificial intelligence and machine learning applications with CRM’s tools. Shares of Amazon.com, Inc. (NASDAQ:AMZN) jumped 5% in the last three months.
Some of the notable artificial intelligence stocks that are gaining the street’s attention include Facebook, Inc. (NASDAQ:FB), Microsoft Corporation (NASDAQ:MSFT), Nvidia Corporation (NASDAQ:NVDA), and Tesla, Inc. (NASDAQ:TSLA), among others. In March 2021, Facebook, Inc. (NASDAQ:FB) launched its new AI initiative “Learning from Videos,” which is aimed to improve the company’s core algorithms and generate entirely new services by learning from audio, visual, and textual input. Shares of Facebook, Inc. (NASDAQ:FB) gained 18% in the last three months.
Photo by Andy Kelly on Unsplash
Investing is becoming difficult by the day, even for smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Our Methodology
Insider Monkey tracks data of about 866 hedge funds, which we have used to pick the artificial intelligence stocks popular among hedge funds. We also chose stocks with a positive analyst rating, solid fundamentals, and growth catalysts. With this context in mind, here is our list of the 12 best artificial intelligence stocks to invest in right now.
Best Artificial Intelligence Stocks To Invest In Right Now
12. Palantir Technologies, Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 32
We start our list of the 12 best artificial intelligence stocks to invest in right now with Palantir Technologies, Inc. (NYSE:PLTR). The Colorado-based software company was founded in 2003 and went public in 2020. Palantir Technologies, Inc. (NYSE:PLTR) has over 149 customers in the commercial and government sectors including, the Central Intelligence Agency, the Defense Department, and the Internal Revenue Service. Palantir’s platform Gotham and Foundry provides a company with the end-to-end infrastructure required to support artificial intelligence by providing data needed to train AI algorithms.
Palantir Technologies, Inc. (NYSE:PLTR) saw its stock gain 10.13% on February 8th after the company announced its partnership with multinational technology company International Business Machines (NYSE:IBM). Tech giants IBM and PLTR entered a partnership to create AI-infused applications.
On May 12, Citi raised the price target of Palantir Technologies, Inc. (NYSE:PLTR) to $17 per share from $15 per share.
The company has a market cap of $42.26 billion. In the first quarter of 2021, Palantir Technologies, Inc. (NYSE:PLTR) reported an EPS of $0.4, meeting consensus estimates. In the first quarter, the company’s revenue grew 49% year-over-year to $341.23 million, beating revenue estimates by $9 million. The stock has gained 24% in the last three months.
At the end of the first quarter of 2021, 32 hedge funds in the database of Insider Monkey held stakes worth $1.14 billion in Palantir Technologies, Inc. (NYSE:PLTR), down from 38 in the previous quarter worth $1.90 billion.
Guardian Fund mentioned Palantir Technologies, Inc. (NYSE:PLTR) in its Q2 2020 investor letter:
“The success of the private sector to innovate in order to help people through the lockdowns and to produce vaccines atrecord speed at scale has been impressive. The fact that almost every public institution was struggling to be effective no matter how hard some of the people worked, shows the fundamental need of the public sector to become data-driven and invest in data infrastructure.
Government institutions have to partner with enterprises such as Palantir to become digitalnative. The public sector will always struggle to attract the most talented engineers as compensations cannot be justified with tax money and therefore this must be a partnership with specialized private enterprises. This is a great opportunity for Palantir especially as it has already
shown to be capable of working with demanding and complex public institutions entrusting it to work on the most critical and sensitive matters.
The news section of Palantir’s website gives insight in where new business is coming from. The main opportunity is in enterprise software and the faster onboarding time and increased self-service of clients is a positive sign. We believe Palantir is becoming one of the more important global software companies.
In addition, Palantir has quietly become a significant investor, investing well over USD 200 million in eight companies. Thereby, it is following the lead of companies like Tencent, Alphabet, and Shopify of establishing valuable investment portfolios.”
11. International Business Machines (NYSE:IBM)
Number of Hedge Fund Holders: 41
International Business Machines (NYSE:IBM) is ranked eleventh on the list of 12 best artificial intelligence stocks to invest in right now. The New York-based multinational technology giant’s AI for business platform IBM Watson was established in 2010 and has over 100 million users worldwide including Mitsubishi Corporation (OTCMKTS:MSBHF) and Lumen Technologies, Inc. (NYSE:LUMN).
In April 2021, International Business Machines (NYSE:IBM) launched new IBM Watson features after receiving an IBM-commissioned survey showing that 84% of AI professionals prefer companies that are transparent with the framework of its AI models. Shares of IBM rose 11% in the last twelve months.
On July 20, Morgan Stanley analyst Katy Huberty raised the price target of International Business Machines (NYSE:IBM) and kept an Equal Weight rating on the stock noting that the company’s second-quarter results illustrate a more robust demand and improved performance.
The company has a market cap of $127.97 billion. In the second quarter of 2021, International Business Machines (NYSE:IBM) reported an EPS of $0.4, meeting consensus estimates. In the first quarter, the company’s revenue grew 49% year-over-year to $341.23 million, beating revenue estimates by $9 million. The stock has gained 12% year-to-date.
Just like BlackRock, Inc. (NYSE:BLK), Alphabet Inc. (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), Intel Corporation (NASDAQ:INTC), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), Facebook, Inc. (NASDAQ:FB), Nvidia Corporation (NASDAQ:NVDA), and Tesla, Inc. (NASDAQ:TSLA), International Business Machines (NYSE:IBM) is one of the best artificial intelligence stocks to invest in right now.
At the end of the first quarter of 2021, 41 hedge funds in the database of Insider Monkey held stakes worth $1.35 billion in International Business Machines (NYSE:IBM).
Distillate Capital mentioned International Business Machines (NYSE:IBM) in its Q2 2020 investor letter:
“AT&T and IBM exited the portfolio as they no longer met the quality criteria for inclusion with AT&T exceeding the debt limit and IBM falling out due to deteriorating long-term fundamental stability.”
10. DocuSign, Inc. (NASDAQ:DOCU)
Number of Hedge Fund Holders: 41
Electronic agreement management provider DocuSign, Inc. (NASDAQ:DOCU) is ranked tenth on the list of 12 best artificial intelligence stocks to invest in right now. The San Francisco-based artificial intelligence company provides its users a platform for e-signature technology and agreement management. DocuSign, Inc. (NASDAQ:DOCU) has over 1 million customers in over 180 countries including Microsoft Corporation’s (NASDAQ:MSFT) Microsoft Office 365.
In 2020, DocuSign, Inc. (NASDAQ:DOCU) grew its AI-powered platform with its analytics solution DocuSign Analyzer which creates a streamlined process from preparing to managing agreements. Shares on DOCU grew 52% over the last twelve months.
On July 9, Piper Sandler analyst Rob Owens raised the firm’s price target from $300 per share to $330 per share and kept his Overweight rating on DocuSign, Inc. (NASDAQ:DOCU).
In the first quarter of 2021, DocuSign, Inc. (NASDAQ:DOCU) reported an adjusted EPS of $0.44, beating consensus by $0.16. The company’s revenue in the first quarter of 2021 came in at $469.1 million, a 58% increase year-over-year, beating consensus estimates of $437.81 million. In the second quarter of 2020, the company targets revenue of $479-$485 million. The stock has gained 37% year to date.
At the end of the first quarter of 2021, 60 hedge funds in the database of Insider Monkey held stakes worth $3.23 billion in DocuSign, Inc. (NASDAQ:DOCU).
ClearBridge Investments mentioned DocuSign, Inc. (NASDAQ:DOCU) in its Q2 2021 investor letter:
“We expect rapidly growing disruptors will comprise roughly a quarter of portfolio assets over time and repositioning over the next several quarters will focus on increasing our allocation to these stocks. Our objective with disruptors is to purchase companies early in the development of their market opportunity. DocuSign, a new purchase in the first quarter that we added to significantly over the last three months, is a company we have been following since it was private. Although the growth of its esignature business accelerated during COVID-19 lockdowns, DocuSign is targeting additional markets in today’s anywhere economy and its strong recent results eased fears that the company was simply a pandemic beneficiary.”
9. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 62
California-based electric vehicle firm Tesla, Inc. (NASDAQ:TSLA) operates its battery-powered cars through the use of artificial intelligence specifically for its Autopilot system and Full Self-Driving Beta technology (FSD). Tesla, Inc. (NASDAQ:TSLA) is ranked ninth on the list of 12 best artificial intelligence stocks to invest in right now.
Shares of Tesla, Inc. (NASDAQ: TSLA) rose 5.3% in the last week of July after Elon Musk announced that the business is moving to lithium-iron-phosphate (LFP) cells on a long-term basis.
On August 6, Piper Sandler analyst Alexander Potter reiterated an Overweight rating on Tesla, Inc. (NASDAQ: TSLA) with a $1,200 price target, highlighting the strong demand for battery electric vehicles.
The company has a market cap of $680 billion. In the second quarter of 2021, Tesla, Inc. (NASDAQ: TSLA) reported an EPS of $1.45, beating estimates by $0.47. The company’s second-quarter revenue came in at $11.96 billion, a 98% growth year-over-year, beating estimates by $559.3 million. Shares of Tesla, Inc. (NASDAQ: TSLA) jumped 151% over the last twelve months.
At the end of the first quarter of 2021, 62 hedge funds in the database of Insider Monkey held stakes worth $10.0 billion in Tesla, Inc. (NASDAQ: TSLA).
Baillie Gifford mentioned Tesla, Inc. (NASDAQ:TSLA) in its Q2 2021 investor letter:
“As many countries enjoy a relaxation of Covid restrictions, Mr Market is focussed on short-term beneficiaries of ‘the pleasure after the plague’. There are
interesting parallels with the Roaring 20s here, but to our minds, they extend beyond post-pandemic hedonism. Much of the new wealth created in the 1920s was patchily distributed and accompanied by a pervasive sense that the older generation had let down younger people. In 1920, John F. Carter, an irate 23-year-old wrote “the older generation had certainly pretty well ruined this world before passing it on to us. We have been forced to live in an atmosphere of ‘tomorrow we die,’ and so, naturally, we drank and were merry.”
In the field of energy meanwhile, Tesla has begun a pioneering shift away from using cobalt within its batteries. Its lithium iron phosphate (LFP) technology (already used in flagship energy storage products) could underpin not just the automotive ambitions but also the ramp up of Tesla’s grid-scale energy storage offering which will be key to accelerating the demise of dirty peaker plants.”
8. Nvidia Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 80
Nvidia Corporation (NASDAQ:NVDA) is ranked eighth on the list of 12 best artificial intelligence stocks to invest in right now. The California-based multinational technology company operates as one of the leading AI computing firms worldwide. One of the platforms Nvidia Corporation (NASDAQ:NVDA) operates is NVIDIA DGX Station, the world’s first personal supercomputer for developing cutting-edge AI.
In 2020, NVIDIA Corporation (NASDAQ:NVDA) announced its $40 billion acquisition of UK-based semiconductor producer Arm Holdings. However, the acquisition is still under regulatory approval. Shares of NVDA rose 81% over the last twelve months.
On August 6, Hans Mosesmann of Rosenblatt raised the price target of NVIDIA Corporation (NASDAQ:NVDA) to $250 per share from $200 per share and kept his Buy rating on the stock. The analyst believes Nvidia will have an earnings power of over $6 per share for the full year 2024. Shares of NVIDIA Corporation (NASDAQ:NVDA) climbed 42% in the last three months.
Just like BlackRock, Inc. (NYSE:BLK), Alphabet Inc. (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), Intel Corporation (NASDAQ:INTC), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), Facebook, Inc. (NASDAQ:FB), and Tesla, Inc. (NASDAQ:TSLA), Nvidia Corporation (NASDAQ:NVDA) is one of the best artificial intelligence stocks to invest in right now.
In the first quarter of 2021, NVIDIA Corporation (NASDAQ:NVDA) recorded an EPS of $3.66, beating estimates by $0.38. The company’s first-quarter revenue was $5.66 billion, an 84% increase year-over-year, beating revenue estimates by $25 million. The company expects second-quarter revenue to come in at $6.3 billion.
At the end of the first quarter of 2021, 80 hedge funds out of the 866 tracked by Insider Monkey held stakes in NVIDIA Corporation (NASDAQ:NVDA), worth roughly $6.20 billion.
Baillie Gifford mentioned Nvidia Corporation (NASDAQ:NVDA) in its Q2 2021 investor letter:
“Short-term share price movements are not a good measure of a company’s long-term value. Our focus is, as always, on the business fundamentals of companies over five to ten years and beyond.
Among the top contributors to Fund performance in the second quarter was NVIDIA. NVIDIA continues to deliver robust fundamental performance. Revenues grew 84% year-on-year, driven by growth in Gaming, Data Center and Professional Visualisation areas. Its data center business is expanding as different industries worldwide adopt NVIDIA AI to help with computer vision, conversational AI and natural language understanding. NVIDIA continues to innovate in many areas, from gaming, cloud computing, AI, robotics, self-driving cars, to genomics and computational biology. It is also progressing with its planned acquisition of semiconductor design company Arm, which if successful could unlock further growth potential.”
7. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 83
Multinational technology company Intel Corporation (NASDAQ:INTC) is ranked seventh on the list of 12 best artificial intelligence stocks to invest in right now. The California-based microprocessor provider also offers unparalleled AI ecosystems that provide end-to-end software resources.
In 2020, Intel Corporation (NASDAQ:INTC) grew its AI operations and acquired Israel’s machine learning startup Cnvrg.io. The purchase strengthened INTC’s AI and machine learning platform. Shares of Intel Corporation (NASDAQ:INTC) jumped 12% over the last twelve months.
On July 29th, Argus analyst Jim Kelleher raised the price target of Intel Corporation (NASDAQ:INTC) to $120 per share from $106 per share and kept his Buy rating on the stock.
The company has a market cap of $218.75 billion and offers a dividend yield of 2.58% In the second quarter of 2021, the company reported an adjusted EPS of $1.28 beating consensus estimates by $0.22. In the second quarter of 2021, the non-GAAP revenue of Intel Corporation (NASDAQ:INTC) came in at $18.5 billion, up 2% year-over-year and beating estimates of $17.84 billion. Intel Corporation (NASDAQ:INTC) is positive about the progress of the semiconductor industry given the growth in digitalization.
At the end of the first quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $7.61 billion in Intel Corporation (NASDAQ:INTC).
6. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 100
Micron Technology, Inc. (NASDAQ:MU) ranks 6th on the list of 12 best artificial intelligence stocks to invest in right now. The Idaho-based semiconductor company markets memory and storage solutions. Micron Technology, Inc. (NASDAQ:MU) uses its multi-chip packages to power AI infrastructure.
Micron Technology, Inc. (NASDAQ:MU) first introduced its artificial intelligence development platform in 2019 with the purchase of artificial intelligence (AI) hardware and software technology startup FWDNXT. Early this year, Micron Technology, Inc. (NASDAQ:MU) invested in an in-house artificial intelligence platform that invested funds to earn superior returns.
On July 1st, KeyBanc analyst John Vinh upgraded the price target of Micron Technology, Inc. (NASDAQ:MU) from $115 per share to $120 per share and kept his Overweight rating on the stock. The analyst mentioned that the company’s strong quarterly results are expected to continue throughout 2022.
The company has a market cap of $92.31 billion and offers a dividend yield of 0.49%. In the fiscal third quarter of 2021, Micron Technology, Inc. (NASDAQ:MU) reported an adjusted EPS of $1.88, beating estimates by $0.17. The company’s fiscal third-quarter revenue came in at $7.42 billion, an increase from $5.44 billion in the same quarter of 2020 and beating revenue estimates of $7.23 billion.
Just like Alphabet Inc. (NASDAQ:GOOGL), Apple Inc. (NASDAQ:AAPL), Intel Corporation (NASDAQ:INTC), Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), Facebook, Inc. (NASDAQ:FB), Nvidia Corporation (NASDAQ:NVDA), and Tesla, Inc. (NASDAQ:TSLA), Micron Technology, Inc. (NASDAQ:MU) is one of the best artificial intelligence stocks to invest in right now.
There were 100 hedge funds that reported owning stakes in Micron Technology, Inc. (NASDAQ:MU) at the end of the first quarter. The total value of these stakes at the end of Q1 is $7.62 billion.
Bonsai Partners mentioned Micron Technology, Inc. (NASDAQ:MU) in its Q1 2021 investor letter:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 127
Apple Inc. (NASDAQ:AAPL) ranks 5th on the list of 12 best artificial intelligence stocks to invest in right now. The tech giant based in California is one of the leaders in the AI world with significant features such as FaceID, Handwriting recognition, Translate App, Sound recognition, and App Library suggestion integrated on its iOS, macOS, iPadOS, and watchOS.
Apple Inc. (NASDAQ:AAPL) has been investing heavily into tech startups. One of the most recent purchases of Apple Inc. (NASDAQ:AAPL) is AI startup Xnora.ai in 2020. Xnora.ai specializes in putting artificial intelligence on devices. Shares of AAPL rose 31% over the last twelve months.
On July 29th, Keybanc analyst Weston Twigg raised the price target of Apple Inc. (NASDAQ:AAPL) to $105 per share from $100 per share and kept his Overweight rating on the stock.
The company has a market cap of $2.42 trillion. In the fiscal third quarter of 2021, Apple Inc. (NASDAQ:AAPL) reported an EPS of $1.30, beating estimates by $0.30. In the third quarter, the company reported a revenue of $81.40 billion, up 36% year-over-year and beating revenue estimates by $8.47 billion.
At the end of the first quarter of 2021, 127 hedge funds in the database of Insider Monkey held stakes worth $130.9 billion in Apple Inc. (NASDAQ:AAPL).
ClearBridge Investments mentioned Apple Inc. (NASDAQ:AAPL) in its Q1 2021 investor letter:
“As we actively manage holdings and position sizes, we look to regularly recycle capital into more compelling opportunities. Maintaining our valuation discipline, we sharply reduced our position in Apple, whose shares more than doubled following our initial purchase in mid-2019 with an earnings multiple rising from the low-to-mid teens to nearly 30x.”
4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 185
Alphabet Inc. (NASDAQ:GOOGL) ranks 4th on the list of 12 best artificial intelligence stocks to invest in right now. The California-based multinational tech giant utilizes AI in Google’s search engine, Google’s Ads and Doubleclick, Google Maps, Gmail, Google Drive, Google Calendar, Google Translate, among others.
Alphabet Inc. (NASDAQ:GOOGL) acquired over 30 AI startups since 2009 including PittPatt, DeepMind, Onward, and AppSheet. One of the most recent acquisitions of the company was the smartwatch company Fitbit. Alphabet Inc. (NASDAQ:GOOGL) has soared 81% in the twelve months.
On July 29th, Argus analyst Joseph Bonner raised the price target of Alphabet Inc. (NASDAQ:GOOGL) from $2,800 per share to $3,100 per share and kept his Buy rating on the stock. The analyst highlighted GOOGL’s notable second-quarter results.
The company has a market cap of $1.81 trillion. In the second quarter of 2021, Alphabet Inc. (NASDAQ:GOOGL) reported an EPS of $27.26, beating estimates by $8.05. The company’s second-quarter revenue came in at $61.88 billion, beating revenue estimates of $56.02 billion. Shares of Alphabet Inc. (NASDAQ:GOOGL) increased 54% in the year-to-date.
There were 185 hedge funds that reported owning stakes in Alphabet Inc. (NASDAQ:GOOGL) at the end of the first quarter. The total value of these stakes at the end of Q1 is $24.57 billion.
Baillie Gifford mentioned Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2021 investor letter:
“Whilst several sources of upside remain, namely in the cloud business, hardware, and YouTube subscriptions, we have waning conviction in Alphabet‘s ‘moonshot’ bets (such as Waymo), substantial success in which would likely be required to produce a 5x return from here. Given the reduction in our assessment of the probability-adjusted upside, and with strong competition for capital in the portfolio, we therefore sold the Alphabet holding.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ:AMZN) ranks 3rd on the list of 12 best artificial intelligence stocks to invest in right now. The Washington-based multinational technology company specializes in e-commerce, digital streaming, and artificial intelligence. The company was founded in 1994 and operates its cloud computing business through its AI-powered Amazon Web Services (AWS).
Amazon Web Services (AWS) sales accounted for 12.5% of the overall revenue for Amazon.com, Inc. (NASDAQ:AMZN) in the quarter ended April 2021, totaling $13.5 billion, a 32% increase year-over-year.
Earlier this year, the company acquired communication tech firm Wickr. The collaboration allowed its users to enjoy additional security features across messaging, phone and video chatting, file sharing, and collaboration.
The company has a market cap of $1.69 trillion. In the second quarter of 2021, Amazon.com, Inc. (NASDAQ:AMZN) reported an EPS of $15.12, beating consensus estimates by $2.9. The company’s second-quarter revenue came in at $113.1 billion, an 27% increase year-over-year. Shares of AMZN jumped 5% over the last twelve months.
There were 243 hedge funds that reported owning stakes in Amazon.com, Inc. (NASDAQ:AMZN) at the end of the first quarter. The total value of these stakes at the end of Q1 is $50.42 billion.
Argosy Investors mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2021 investor letter:
“So how are our largest holdings affected in a world of higher wage inflation? As a general rule, I will evaluate current and potential future holdings on their capital intensivity and their ability to raise prices. Amazon is now (a part of) our top 5 largest equity holdings. Amazon is a more complex story. Their AWS business is largely a similar story to Facebook. Their first-party retail business is very asset-and labor-intensive given their extensive warehousing footprint. I think Amazon would have more pricing power than any other player, and despite being one of the largest employers in the US, bricks-and-mortar retail is likely still more asset- and labor-intensive than Amazon’s ecommerce footprint. With all that said, overall Amazon’s first-party business would be adversely impacted by inflation, but the combination of Amazon’s AWS and advertising business should provide fairly robust inflation protection.”
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 251
Microsoft Corporation (NASDAQ:MSFT) ranks 2nd on the list of 12 best artificial intelligence stocks to invest in right now. The Washington-based tech giant produces software, electronics, and computers, among others. Microsoft Corporation (NASDAQ:MSFT) also operates its AI-powered technology through Azure AI services and GitHub.
Microsoft Corporation’s (NASDAQ:MSFT) AI for Earth is one of the company’s recent AI investments. AI for Earth is a five-year program that funds projects that use cutting-edge technology to solve environmental problems. Over 137 individuals and organizations in 47 countries have already benefited from the program.
In April, Microsoft Corporation (NASDAQ:MSFT) announced a $19.7 billion deal to acquire speech recognition and AI service provider Nuance. MSFT’s presence in the AI in the health care market will be boosted as a result of this acquisition. Shares of Microsoft Corporation (NASDAQ:MSFT) jumped 14% in the last three months.
On July 28th, BMO Capital analyst Keith Bachman raised the price target of Microsoft Corporation (NASDAQ:MSFT) to $325 per share from $290 per share and kept his Outperform rating on the stock. According to the analyst, The company’s fiscal fourth-quarter results were a positive move with margins above his expectations.
The company has a market cap of $2.18 trillion and offers a dividend yield of 0.77%. The company’s fiscal fourth-quarter EPS came in at $2.17, beating consensus estimates by $0.27. Microsoft Corporation (NASDAQ:MSFT) reported revenue in the fiscal fourth quarter of 2021 was $46.15 billion, a 21% increase year-over-year, beating consensus estimates of $44.1 billion. Shares of Microsoft Corporation (NASDAQ:MSFT) increased 30% year to date.
By the end of the first quarter of 2021, 551 hedge funds out of the 866 tracked by Insider Monkey held stakes in Microsoft Corporation (NASDAQ:MSFT), worth roughly $58.9 billion.
1. Facebook, Inc. (NASDAQ:FB)
Number of Hedge Fund Holders: 257
Topping the list of 12 best artificial intelligence stocks to invest in right now is American energy company Facebook, Inc. (NASDAQ:FB). The social media platform Facebook has over 2.89 billion active users.
Facebook, Inc. (NASDAQ:FB) recently developed its AI system DeepFace. Deepface is an AI-powered platform that assists users in recognizing people in photographs and tag people they know. Another AI-powered platform that Facebook developed is the Facebook translation feature which allows users to stay more connected by translating posts that appear on their newsfeed.
On July 29th, Truist analyst Youssef Squali raised the price target of Facebook, Inc. (NASDAQ:FB) to $425 per share from $400 per share and kept his Buy rating on the stock, highlighting the company’s strong Q2 results driven by the growth of higher advertising prices amid macroeconomic improvements and continued strength in commerce.
Facebook, Inc. (NASDAQ:FB) has a market cap of $1.02 trillion. In the second quarter of 2021, Facebook, Inc. (NASDAQ:FB) reported an EPS of $3.61, beating estimates by $0.59. The company’s second-quarter revenue came in at $29.08 billion, beating consensus estimates of $27.82 billion. Shares of FB increased 25% in the last twelve months.
At the end of the first quarter of 2021, 257 hedge funds in the database of Insider Monkey held stakes worth $40.96 billion in Facebook, Inc. (NASDAQ:FB).
SaltLight Capital Management mentioned Facebook, Inc. (NASDAQ:FB) in its Q2 2021 investor letter:
“At SaltLight, we’re giddy with excitement when we uncover businesses that the market has not “discovered” yet. Our composure also weakens when we find a business that is ‘hiding in plain sight’ and market participants are underestimating the duration of a moat or under-appreciating a strategic shift into a new business (our heart skipped a beat with Transaction Capital’s recent acquisition of WeBuyCars).
Whilst an investment in Facebook is unlikely to win awards for being original, we must remind ourselves that our job is to find durable and indispensable businesses that have great odds in creating long term returns for investors who trust us with their hard-earned capital. We cannot think of a better company than Facebook.
Our incongruous path to working on Facebook came after exploring Southeast Asian and Japanese B2C companies (a story for another day). In discussions with these businesses, the common challenge confronting them is acquiring new customers (particularly during the COVID period). Facebook and Google kept coming up as the most effective way for targeting new customers. This spicy insight was the indispensability that we were looking for.
The share price was unreconcilable to the implied value over the next 3–5 years and, optionality that exists with new initiatives. The decision to deploy capital became rather easy.
Critics will argue that Facebook has a deep market penetration already (almost half the world’s population of 3.5bn monthly active users across Facebook, Instagram and WhatsApp) and an obvious question to ask is – how much juice is left?
Our view is that the growth of users is less important; monetising the strong network effects across its platforms and the balancing act of capturing value vs. facilitating value is the more important question for future returns.
Our broad thesis rests on (1) moving down the transaction stack, (2) monetising WhatsApp, (3) enhancing discovery and (4) the optionality around the “next consumer platform”.
Regulatory challenges will always be a potential headwind. The impact of Apple’s changes to IOS (App Tracking Transparency) is still unknown. However, the question to also ask is: what’s in the price. Our letter is on what we think is not in the price.
The Advertising Engine
First, it is helpful to give a brief overview of the current profit engine. Digital advertising has essentially democratised ad buying – from blue chips right down to SMEs and increased the surface area of targeting high-propensity-to-buy customers. The true genius of the online advertising model is:
• Long-tail of potential customers: The potential ad inventory is so much larger (e.g., women in their 20s within a 10km radius who are away from home)
than the inventory from a print magazine or TV commercial slot (e.g. the ten LSM categories)
• Quantitative measurement of ROI: Advertisers can measure the performance of ad spend at a very granular level vs. the ‘spend and pray’ approach to traditional advertising. Facebook makes it simple and affordable to reach customers that a business truly wants. Much of Facebook’s revenue comes from direct response advertising such as joining a list, buying a product, visiting a store, or installing an app.
Their advertising distribution base (from blue-chip companies to SMEs) combined with advanced algorithms fed with data from 3.5 bn users creates an incredibly durable moat. This 2020 survey2 demonstrates how effective social commerce on Facebook is compared to other platforms. Despite its rapid adoption, TikTok still trails behind Facebook platforms considerably.
Readers will recall that, across its platforms, Facebook shows a targeted ad (figure 1 show that their ad targeting is impeccably tuned to our interests), and the user clicks the ad to which they jump onto another site.
Once on the seller’s site, the user’s experience varies greatly and is highly dependent on the seller’s technical sophistication. For SME’s, this is not their
core competence. And for buyers, painfully, they need to keep entering their credit card details for each new website (with the associated risk of fraud with each new entry)
Over the last year, management has been strategically developing products to move up (discovery) and down (checkout and payments) the eCommerce stack.
In 2020, Instagram shops were launched where a user can purchase directly via an Instagram account. The only part of the transaction left for the merchant is shipping.
These features have taken off considerably in one year. As of June 2021, they already had 300 million monthly Shops visitors and over 1.2 million monthly active Shops.
Monetising WhatsApp
Our thesis over the next few years is that WhatsApp will be increasingly monetised (Zuckerberg is playing the long game after buying it back in 2014!) and will be an integral part of the Facebook/Instagram shopping architecture.
At this stage, WhatsApp is virtually unmonetised and therefore is not meaningfully appearing in the income statement (and valuation multiples).
Since we have invested, the pace of monetisation of WhatsApp is gaining steam.
• Consumer to business interactions over chat.
• Payments from WhatsApp are already available in Brazil and India.
• Shopping directly on WhatsApp
Monetisation here is likely to still be predominantly ad revenue, however, management is disclosing a 5% take rate on GMV4 on its Facebook marketplace and shops products. This is likely to carry across to the WhatsApp store.”
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