5 Stocks Jumping On The Generative AI Wagon

In this article, we will be taking a look at 5 stocks jumping on the generative AI wagon. To read our detailed analysis of the developments taking place within the AI sector, you can go directly to read about the 10 Stocks Jumping On The Generative AI Wagon.

5. Snowflake Inc. (NYSE:SNOW)

Number of Hedge Fund Holders: 63

Snowflake Inc. (NYSE:SNOW) entered into a partnership with NVIDIA Corporation (NASDAQ:NVDA) this June, the aim of which is to make it easier to build generative AI applications by using stored unstructured data in the cloud and running it on NVIDIA Corporation’s (NASDAQ:NVDA) GPUs.

On June 30, Keith Weiss at Morgan Stanley reiterated an Overweight rating on Snowflake Inc. (NYSE:SNOW) shares while also maintaining a $215 price target on the stock.

We saw 63 hedge funds long Snowflake Inc. (NYSE:SNOW) in the first quarter, with a total stake value of $5 billion.

In its first-quarter 2023 investor letter, The Ithaka Group said the following about Snowflake Inc. (NYSE:SNOW):

“Snowflake Inc. (NYSE:SNOW) is a dominant player in the Data Warehousing market, offering customers the ability to break down data silos and derive value from rapidly growing data sets through Snowflake’s analytical database product, the Data Cloud. The company’s base business is benefitting from a number of secular tailwinds, the three most prevalent being: 1) data-driven decision making, 2) cloud adoption, and 3) the exponential growth of corporate data. The company’s visionary management team, headed by industry veteran Frank Slootman, plans to capture its fair share of this growth through: 1) executing on its land and expand model, 2) acquiring new customers, 3) growing internationally, and 4) expanding its nascent partner network. The stock’s negative contribution in the quarter was due to the timing of Ithaka’s purchase (mid-February) and its small portfolio weighting (100bps).”

4. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 132

Louis Miscioscia at Daiwa Capital upgraded NVIDIA Corporation (NASDAQ:NVDA) from Neutral to Outperform on June 30.

NVIDIA Corporation (NASDAQ:NVDA) is a chip producer that has revolutionized AI. The company’s many contributions to the generative AI space include the NVIDIA Picasso, a cloud service for building generative AI-powered visual applications.

NVIDIA Corporation (NASDAQ:NVDA) had 132 hedge funds long its stock in the first quarter, with a total stake value of $12.3 billion.

Here’s what The Ithaka Group said about NVIDIA Corporation (NASDAQ:NVDA) in its first-quarter 2023 investor letter:

“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence, machine learning, and autonomous driving. The stock’s appreciation in the quarter was twofold. First, the stock benefi ted from tremendous excitement surrounding the release of more advanced chatbots, specifi cally ChatGPT, and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future. Second, Nvidia posted a clean beat and raise quarter in mid-February, with investors becoming increasingly convinced the company and its suppliers are adequately working through the build up in channel inventories, which is reducing overall fears of ongoing inventory write-offs.”

3. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 155

Alphabet Inc. (NASDAQ:GOOG) is a big tech company that entered the generative AI race soon after the launch of ChatGPT with Bard, the company’s own AI chatbot. Bard is considered to be a rival AI platform for ChatGPT at Bing.

As of June 15, BofA analyst Justin Post maintains a Buy rating on Alphabet Inc. (NASDAQ:GOOG) shares.

There were 155 hedge funds long Alphabet Inc. (NASDAQ:GOOG) in the first quarter. Their total stake value was $18.6 billion.

The London Company said the following about Alphabet Inc. (NASDAQ:GOOG) in its first-quarter 2023 investor letter:

“Alphabet Inc. (NASDAQ:GOOG) – GOOG rebounded during Q1 along with other large technology companies. While the industry is facing a pullback in ad spending, GOOG continues to find ways to monetize the business and improve efficiency. Management is committed to reengineering the cost structure and growing revenues faster than expenses. GOOG continues to invest in ways to expand its ecosystem (search, cloud, Al, and hardware) with a larger focus on privacy and security. GOOG continues to repurchase shares, maintains a solid balance sheet, and is the share leader in its primary markets.”

2. Amazon.com, Inc. (NASDAQ:AMZN)

Number of Hedge Fund Holders: 243

A total of 243 hedge funds held stakes in Amazon.com, Inc. (NASDAQ:AMZN) at the end of the first quarter, with a total stake value of $25.8 billion.

Amazon.com, Inc. (NASDAQ:AMZN) is another big tech company on our list. The company is using generative AI to summarize product reviews, while Amazon Web Services is also using generative AI to reinvent applications, create new customer experiences, increase productivity, and more.

Needham’s Laura Martin holds a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) shares as of June 28.

L1 Capital made the following comment about the company in its first-quarter 2023 investor letter:

“We commented in the December 2022 Quarterly Report “sentiment towards many high-quality technology and ecommerce related businesses like Amazon and Alphabet is negative. Capital flows and an over-emphasis on short-term challenges is driving share prices well below fair value, providing compelling investment opportunities for longer term investors”. In that report we outlined in detail why Amazon’s share price has been oversold and offered compelling value.

During the March 2023 quarter the share price of many large capitalisation technology companies increased significantly. The Fund has investments in Alphabet, Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft and their share prices increased 17%, 23% and 20% (in U.S. dollars), respectively. While we continue to see value in these privileged, high-quality businesses, share prices are no longer trading at materially oversold levels and we have selectively started to trim some of the Fund’s exposure.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 289

Microsoft Corporation’s (NASDAQ:MSFT) foray into the generative AI area started with a $3 billion investment in OpenAI, the company behind ChatGPT. The company has added the integration of the Bing chatbot in Windows 11 to its generative AI contributions as well.

In total, 289 hedge funds were long Microsoft Corporation (NASDAQ:MSFT) in the first quarter. Their total stake value was $57.9 billion.

On June 15, Gregg Moskowitz at Mizuho maintained a Buy rating on Microsoft Corporation (NASDAQ:MSFT) shares.

L1 Capital mentioned Microsoft Corporation (NASDAQ:MSFT) in its first-quarter 2023 investor letter:

“We commented in the December 2022 Quarterly Report “sentiment towards many high-quality technology and ecommerce related businesses like Amazon and Alphabet is negative. Capital flows and an over-emphasis on short-term challenges is driving share prices well below fair value, providing compelling investment opportunities for longer term investors”. In that report we outlined in detail why Amazon’s share price has been oversold and offered compelling value.

During the March 2023 quarter the share price of many large capitalisation technology companies increased significantly. The Fund has investments in Alphabet, Amazon and Microsoft Corporation (NASDAQ:MSFT) and their share prices increased 17%, 23% and 20% (in U.S. dollars), respectively. While we continue to see value in these privileged, high-quality businesses, share prices are no longer trading at materially oversold levels and we have selectively started to trim some of the Fund’s exposure. Microsoft was trimmed due to share price performance and position size.”

See also How to Play The AI Boom And NASDAQ Rally and 11 Best AI ETFs to Invest In 2023.