In this article, we will take a look at 10 best AI stocks.
AI, which stands for artificial intelligence, is already helping companies make better decisions. For retailers, AI is helping price items so companies sell more items. For internet companies, artificial intelligence is helping companies sell more ads more efficiently. For banks, the technology is helping financial institutions make better loans.
For the future, AI will likely make possible many new technologies that could benefit society. For the car industry, AI could make possible autonomous driving that could lower costs. For the education industry, it could offer even better personalized learning that could make education more efficient. For the pharmaceutical industry, AI could help create new medicines that improve the lives of billions.
Given how transformative AI could be, PwC estimates worldwide GDP will be 14% higher by the end of the decade thanks to AI as the technology increases productivity gains.
For the decades beyond 2030, it is likely AI’s contribution will be even greater. In the future, AI progress could accelerate if quantum computing ever becomes feasible. With quantum computing, computers can do certain tasks far faster than any traditional computer can and the faster computing could help AI be even more productive.
Given the vast potential of AI, many of the world’s leading tech companies are working on making the technology better.
Some companies like International Business Machines Corporation (NYSE:IBM) are working on building quantum computers while others like NVIDIA Corporation (NASDAQ:NVDA) are working on building more efficient semiconductors that power machine learning algorithms. Yet others like Tesla, Inc. (NASDAQ:TSLA) are working on building autonomous driving vehicles.
2022 has been a challenging year in the markets as the Federal Reserve has raised interest rates six times this year alone. As a result, demand for many companies has declined and the broader market has declined.
Year to date, the S&P 500 has declined 16.6% and the Nasdaq has declined 29% year to date. If economic data fails to meet expectations, there could be more downside.
Given the uncertainty, it could be a good idea for long term investors to own a well diversified portfolio of stocks across many different sectors.
Methodology
For our list of 10 Most Advanced AI Companies, we picked 10 leading tech companies that did AI research.
Given which company is more advanced than another is subjective, we decided to use market capitalization as a way to rank the best AI stocks since a company having a larger market capitalization can generally mean it has more potential resources to perform AI research.
We also included the number of hedge funds in our database that owned shares of the same stock at the end of the third quarter.
For those of you interested, also check out 15 Biggest Global Tech Companies by Market Cap.
10 Most Advanced AI Companies
10. International Business Machines Corporation (NYSE:IBM)
Market Capitalization as of 12/5: $133.28 billion
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a tech giant that’s famous for ‘IBM Watson’, an AI that famously defeated Jeopardy Champions Ken Jennings and Brad Rutter in 2011. International Business Machines Corporation (NYSE:IBM) is also known for working on quantum computers which could one day help make AI even more productive. According to the company, the “nascent technology is widely expected to solve valuable problems that today’s most powerful classical supercomputers cannot solve and never will.” Out of the 920 hedge funds in our database at the end of the third quarter, 40 were long shares of International Business Machines Corporation (NYSE:IBM).
Alongside Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL), International Business Machines Corporation (NYSE:IBM) is a leading tech company that does a lot of AI research that many hedge funds in our database owned at the end of Q3 2022.
9. Salesforce, Inc. (NYSE:CRM)
Market Capitalization as of 12/5: $133.93 billion
Number of Hedge Fund Holders: 117
In terms of artificial intelligence, Salesforce, Inc. (NYSE:CRM) is an enterprise cloud company that offers its customers AI that helps them better predict business outcomes, augments business processes, and better handle customer service. Partly as a result of its AI software, Salesforce, Inc. (NYSE:CRM) sales and earnings have increased substantially over the years.
For the future, it’s likely that Salesforce, Inc. (NYSE:CRM) will continue to improve its AI offerings given that the company spent $4.47 billion in total research and development expense in fiscal year 2022, up from $3.6 billion in fiscal year 2021. 117 hedge funds in our database owned shares of Salesforce, Inc. (NYSE:CRM) at the end of Q3. The company ranks #9 on our list of best AI stocks given its market capitalization of $133.93 billion as of 12/5.
8. Oracle Corporation (NYSE:ORCL)
Market Capitalization as of 12/5: $214.16 billion
Number of Hedge Fund Holders: 67
Oracle Corporation (NYSE:ORCL) is an enterprise software company that offers its customers “a collection of services with prebuilt machine learning models that make it easier for developers to apply AI to applications and business operations. The models can be custom-trained for more accurate business results.” Oracle Corporation (NYSE:ORCL) also uses AI to make its existing enterprise software even more useful. Given its market capitalization of $214.16 billion, Oracle Corporation (NYSE:ORCL) ranks #8 on our list of best AI stocks.
7. Meta Platforms, Inc. (NASDAQ:META)
Market Capitalization as of 12/5: $324.63 billion
Number of Hedge Fund Holders: 177
Meta Platforms, Inc. (NASDAQ:META) has invested a lot into artificial intelligence given the company is competing with TikTok in short videos. Meta Platforms, Inc. (NASDAQ:META) has also used AI to serve up more useful ads to its users and to create AI chatbots that could one day be useful for businesses. In the third quarter of 2022, Meta Platforms, Inc. (NASDAQ:META) spent $9.17 billion on research and development, up from $6.32 billion in the same quarter of 2021. 177 hedge funds owned shares of Meta Platforms, Inc. (NASDAQ:META) at the end of Q3.
6. NVIDIA Corporation (NASDAQ:NVDA)
Market Capitalization as of 12/5: $408.61 billion
Number of Hedge Fund Holders: 89
NVIDIA Corporation (NASDAQ:NVDA) is a leading semicoductor company that could benefit from the growth of AI in the future given its GPUs can speed up computational processes for machine learning. Baron Funds described NVIDIA Corporation (NASDAQ:NVDA)’s AI potential in a Q3 2022 investor letter,
NVIDIA Corporation (NASDAQ:NVDA) is a fabless semiconductor company and a leader in gaming and accelerated computing. NVIDIA is powering the growth of AI from the data center to the edge. Shares detracted due to inventory right sizing in NVIDIA’s gaming segment coupled with the broader market sell-off in growth stocks. Given NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, we believe the company can sustain its growth trajectory. See further discussion of NVIDIA in the top net purchases section below.
During the third quarter, we took advantage of its stock sell-off to add to NVIDIA Corporation, a fabless semiconductor mega cap that is a global leader in gaming cards and accelerated computing hardware and software. The sell-off was driven by a near-term inventory correction in gaming as a result of a COVID-related pull forward in demand as well as the shift in the Ethereum cryptocurrency from proof-of-work to proof-of-stake. Additionally, investors are concerned over the potential slowdown in data center revenues as a result of a weaker macroeconomic environment as well as the recently announced limitations on semiconductor shipments to China. Despite the near-term uncertainty, we believe that NVIDIA’s end-to-end AI platform and its leading market share in gaming, data centers, and autonomous machines, along with the size of these markets, would enable the company to benefit from durable growth for years to come and therefore view the stock price where we added shares as a compelling value for long-term investors. With demand for computing power doubling every one to two years, and Moore’s Law slowing down, there is more need for computing than ever. At the same time, “near free” supply growth (that was possible thanks to Moore’s Law) has slowed dramatically. NVIDIA’s accelerated architecture, with parallel computing at scale, answers that need.
As of December 5, NVIDIA Corporation (NASDAQ:NVDA) has a market capitalization of $408.61 billion, ranking #5 on our list of best AI stocks.
Like NVIDIA Corporation (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Apple Inc. (NASDAQ:AAPL) are leading tech companies that do AI research that many hedge funds in our database were long at the end of the third quarter.
5. Tesla, Inc. (NASDAQ:TSLA)
Market Capitalization as of 12/5: $571.70 billion
Number of Hedge Fund Holders: 88
Tesla, Inc. (NASDAQ:TSLA) is a leading EV maker that’s working on autonomous vehicles using AI which to CEO Elon Musk is essential. Musk said in 2022, “But the overwhelming focus is on solving full self-driving…That’s essential. It’s really the difference between Tesla being worth a lot of money or worth basically zero.” In 2021, the company spent $2.593 billion on research and development up from $1.491 billion in 2020.
Given its market capitalization of $571.70 billion as of December 5, Tesla, Inc. (NASDAQ:TSLA) will need to make substantial progress in autonomous driving to justify its current valuation. The company ranks #5 on our list of best AI stocks.
4. Amazon.com, Inc. (NASDAQ:AMZN)
Market Capitalization as of 12/5: $928.45 billion
Number of Hedge Fund Holders: 269
Amazon.com, Inc. (NASDAQ:AMZN) has a leading cloud business in AWS that offers customers machine learning and artificial intelligent services on demand to meet their business needs. As a result, companies use AWS AI to enhance their customer service, create personalized web experiences, and also automate data extraction and analysis. Furthermore, Amazon.com, Inc. (NASDAQ:AMZN) uses AI to increase the efficiency of its e-commerce business and sell more items. As of 12/5, Amazon.com, Inc. (NASDAQ:AMZN) has a market capitalization of $928.45 billion, ranking #4 on our list of best AI stocks.
3. Alphabet Inc. (NASDAQ:GOOG)
Market Capitalization as of 12/5: $1.29 trillion
Number of Hedge Fund Holders: 156
Alphabet Inc. (NASDAQ:GOOG) uses AI to sell more ads, improve its search results, and to serve up more interesting videos for YouTube shorts. Given its Waymo business, Alphabet Inc. (NASDAQ:GOOG) is also working on autonomous driving that’s powered by AI. Furthermore, Alphabet Inc. (NASDAQ:GOOG) is one of the leaders in quantum computing.
In terms of total research and development which includes AI spending, Alphabet Inc. (NASDAQ:GOOG) spent $31.562 billion in R&D in 2021, also ranking among the leaders in that metric. 156 hedge funds in our database were long Alphabet Inc. (NASDAQ:GOOG) at the end of Q3.
2. Microsoft Corporation (NASDAQ:MSFT)
Market Capitalization as of 12/5: $1.87 trillion
Number of Hedge Fund Holders: 269
Microsoft Corporation (NASDAQ:MSFT) uses AI to improve its enterprise productivity software and to offer its customers AI services via Azure AI. Microsoft Corporation (NASDAQ:MSFT) is also making progress on quantum computing given its Azure quantum computing research team recently invented “a new kind of qubit” that could be a faster way to making industrial sized quantum computers. In the long term, Microsoft Corporation (NASDAQ:MSFT) has a goal of making a computer with one million qubits which could do computing faster than many other computers for certain types of tasks.
1. Apple Inc. (NASDAQ:AAPL)
Market Capitalization as of 12/5: $2.33 trillion
Number of Hedge Fund Holders: 140
Apple Inc. (NASDAQ:AAPL) ranks #1 on our list of best AI stocks given its market capitalization of $2.33 trillion. In terms of artificial intelligence, Apple Inc. (NASDAQ:AAPL) uses AI to power its personal assistant for iPhones, Siri. Apple Inc. (NASDAQ:AAPL) is also using AI to make an autonomous driving car that the company plans to launch in 2024 or later. For the fiscal 2022 year, Apple Inc. (NASDAQ:AAPL) spent $26.25 billion in R&D.
Wedgewood Partners commented on Apple Inc. (NASDAQ:AAPL) in a Q3 2022 investor letter,
Apple Inc. (NASDAQ:AAPL) grew revenues +5% (foreign exchange adjusted and excluding Russia) driven by record iPhone revenues that were up about +3% on an exceptional year ago comparison of +50%. Apple’s installed base is over 1.8 billion devices which helps drive a software and services business that has generated almost $80 billion of revenue over the past 4 quarters. As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially ICs) as well as software, continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.
140 hedge funds owned shares of Apple Inc. (NASDAQ:AAPL) at the end of Q3.
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Disclosure: None. 10 Most Advanced AI Companies is originally published on Insider Monkey.
