10 Tech Stocks Benefiting From The AI Boom

In this article, we will be taking a look at 10 tech stocks benefiting from the AI boom.

The world of artificial intelligence (AI) these days is overwhelmingly dominated by discussions on generative AI and its implications. Simply put, generative AI is a form of machine learning through which AI software can produce text, video, images, and more. Basically, generative AI can produce any form of content on the basis of prompts. This form of AI became more widespread and renowned after the launch of ChatGPT and similar generative AI platforms, which revolutionized the AI sector while pulling in major tech companies to become part of the AI race.

This form of AI and its impact on the markets was discussed by Jim Stewart, a New York Times columnist, on CNBC’s ‘Squawk on the Street’ on June 16. According to Stewart, big tech companies, especially those that are AI beneficiaries, have been leading the recent stock market rally. These include companies such as Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and NVIDIA Corporation (NASDAQ:NVDA). Stewart claimed that he was bullish on AI, especially considering the fact that this technology could boost productivity gains across different fields, including journalism.

AI and the US Stock Market

In May, NVIDIA Corporation (NASDAQ:NVDA) joined the group of companies with valuations in trillions of dollars. Many financial professionals today are attributing the gains of the S&P 500 to AI, primarily, with the focus being on NVIDIA Corporation (NASDAQ:NVDA) and other big tech companies that have begun incorporating AI and generative AI in their products and services.

This overwhelming focus on a select few number of companies that can successfully play the AI boom and come out victorious has led to many investors worrying that the stock market in 2023 will turn into a selection of a few winners and a lot more losers. According to CNBC, the S&P 500 has “basically been the S&P 7,” a reference to the fact that only seven major tech companies have been calling the shots so far in 2023, leading the market to heavily rely on them and their gains.

“You Are At The Starting Line Of AI”

This reality has led many professionals and corporations to realize that the AI boom is very real and may be here to stay. Companies today will be bound to figure out where they stand in this environment and how they can integrate AI into their business models to reap the benefits of this technological revolution. NVIDIA Corporation’s (NASDAQ:NVDA) CEO, Jensen Huang, in an address at the National Taiwan University in May, stated that we are currently at “the starting line of AI” and that at this moment, we should run instead of walking. The implications of his statement are many, but perhaps the most obvious lesson to take away from Huang’s speech is that companies and individuals today shouldn’t be slow to join the AI race – they should try their best to become part of it and ensure they don’t end up getting left behind by their competitors.

Keeping the above-mentioned market dynamics and developments in mind, we have compiled a list of the top tech stocks to consider investing in to play the AI boom. We included the obvious stock picks because of their contributions to this industry so far, but we also attempted to find other companies that wouldn’t be the first to come to your mind when looking at AI beneficiaries today.

Pixabay/Public Domain

Our Methodology

To select our stocks, we looked at which companies analysts are expecting to benefit from the AI boom and shortlisted them based on the number of hedge funds holding stakes in them by using Insider Monkey’s hedge fund data for the first quarter of 2023. The stocks are ranked based on this metric, from the lowest to the highest number of hedge funds long each of them.

Tech Stocks Benefiting From The AI Boom

10. Oracle Corporation (NASDAQ:ORCL)

Number of Hedge Fund Holders: 67

On June 13, Keith Bachman at BMO Capital raised his price target on Oracle Corporation (NASDAQ:ORCL) from $96 to $132. The analyst also holds a Market Perform rating on the stock.

Oracle Corporation (NASDAQ:ORCL) is an information technology company based in Austin, Texas. The company’s products and services address enterprise information technology environments across the world.

We saw 67 hedge funds long Oracle Corporation (NASDAQ:ORCL) in the first quarter, with a total stake value of $2.9 billion.

TD Cowen’s John Blackledge expects Oracle Corporation (NASDAQ:ORCL) to benefit from the current AI boom because its cloud-computing platform can offer it some competitive advantages.

First Eagle Investment Management held 20.7 million shares in Oracle Corporation (NASDAQ:ORCL) at the end of the first quarter, making it the largest shareholder in the company.

Ariel Investments mentioned Oracle Corporation (NASDAQ:ORCL) in its first-quarter 2023 investor letter:

“Additionally, global leader in enterprise software, Oracle Corporation (NYSE:ORCL) traded higher in the quarter, driven by solid quarterly earnings, a material increase in the dividend as well as forward looking guidance that implies a substantial acceleration in organic cloud growth for full year 2023. We believe these results highlight ORCL’s ability to effectively cross-sell and upsell apps and infrastructure, as well as the emergence of the company’s cloud platform as a competitive offering.”

9. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)

Number of Hedge Fund Holders: 72

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is an information technology company offering cybersecurity products and services. It is based in Austin, Texas.

There were 72 hedge funds holding stakes in CrowdStrike Holdings, Inc. (NASDAQ:CRWD) at the end of the first quarter. Their total stake value in the company was $2.4 billion.

CrowdStrike Holdings, Inc. (NASDAQ:CRWD) may be an interesting stock pick to play the AI boom considering the company has recently announced new AI-powered indicators of attack (IoA) models. These models can combat advanced adversary tradecraft by using machine intelligence to stop breaches.

Tal Liani at Bank of America holds a Buy rating on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) shares as of June 16. The analyst also raised the firm’s price target on the stock from $162 to $190.

Artisan Partners made the following comment about CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its first-quarter 2023 investor letter:

“Top contributors to performance for the quarter included graphics semiconductor company Nvidia, Southeast Asian e-commerce platform Sea, Latin American marketplace MercadoLibre, online travel marketplace Airbnb, and endpoint security company CrowdStrike Holdings, Inc. (NASDAQ:CRWD). CrowdStrike rebounded as its financial results eased demand-related concerns in its core endpoint business, while adoption in platform adjacencies continued to rise.”

CrowdStrike Holdings, Inc. (NASDAQ:CRWD), like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and NVIDIA Corporation (NASDAQ:NVDA), is a tech stock that can benefit immensely during the AI boom.

8. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Hedge Fund Holders: 91

Advanced Micro Devices, Inc. (NASDAQ:AMD) was spotted in the portfolios of 91 hedge funds in the first quarter, with a total stake value of $4.9 billion.

Based in Santa Clara, California, Advanced Micro Devices, Inc. (NASDAQ:AMD) is a semiconductor company that operates globally.

Joseph Moore, an analyst at Morgan Stanley, raised his price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) shares on June 16 from $97 to $138. The analyst also holds an Overweight rating on the shares.

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a chipmaker that TD Cowen’s John Blackledge has picked as one of his tech stocks to play the AI boom. This is unsurprising considering the fact that this June, the company revealed its new AI chip in its race with NVIDIA Corporation (NASDAQ:NVDA). The new MI300X chip was described by Advanced Micro Devices, Inc. (NASDAQ:AMD) as “the world’s most advances accelerator for generative AI.”

Citadel Investment Group held 13.9 million shares in Advanced Micro Devices, Inc. (NASDAQ:AMD) at the end of the first quarter, making the fund the most prominent shareholder in the company for that quarter.

This is what Horizon Kinetics LLC said about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its first-quarter 2023 investor letter:

“It is among what are considered to be the great technology companies, like Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel, that one is apt to see some of the greatest confusion between short-term financial results and share price movements, on the one hand, and long-term financial results. The former are exceedingly difficult to predict. Long term results are relatively easy to predict, because they are bound by the limiting realities of the business model. In the case of AMD, that is the business of being a large-scale semi-conductor manufacturer with a more dominant competitor that has a scale economy advantage.

Here’s what people see, remember and act upon. In the past several years, AMD has been the best performing major technology stock. It’s outperformed Apple, Amazon, Google, Meta (Facebook) and Nvidia…” (Click here to read the full text)

7. Adobe Inc. (NASDAQ:ADBE)

Number of Hedge Fund Holders: 99

Adobe Inc. (NASDAQ:ADBE) is a diversified software and information technology company based in San Jose, California. The company’s flagship product is its Creative Cloud, a subscription service offering members access to its creative products.

John Blackledge at TD Cowen sees Adobe Inc. (NASDAQ:ADBE) as a smart AI play because the company has begun rolling out new generative-AI content creation tools.

An Outperform rating was reiterated on Adobe Inc. (NASDAQ:ADBE) shares on June 16 by Kirk Materne at Evercore ISI. The analyst also raised his price target on the stock from $475 to $590.

A total of 99 hedge funds were long Adobe Inc. (NASDAQ:ADBE) in the first quarter, with a total stake value of $7.3 billion.

Polen Capital mentioned Adobe Inc. (NASDAQ:ADBE) in its first-quarter 2023 investor letter:

“One area we are watching regarding Alphabet and Adobe Inc. (NASDAQ:ADBE) is AI systems and their capabilities, including generative AI. Interestingly, both Adobe and Alphabet could see benefits or threats from the emergence of generative AI and large language models (LLMs). Both companies already use generative AI to the benefit of their users in anticipating how content creators edit their work (Adobe) and in how search results are anticipated and generated (Google). At the same time, breakthrough technologies like AI can open the door to additional competition and/or impact a company’s profitability levels. We now see AI systems others are developing, including LLMs and generative AI offerings, that could be more competitive in the future. While we think it remains early days for ChatGPT and the capabilities of these types of LLMs and generative AI programs like DALL-E, the technology seems to be progressing at a fast rate and will at least require a strong response from incumbents.

As of now, we believe Alphabet and Adobe are leaders in their own right in these areas and have a clear path to improving their existing offerings with AI advancements, which would allow them to be net beneficiaries of AI. There are also significant barriers to building leading AI offerings in these areas. As a result, our position sizes in Adobe and Alphabet remain sizeable. For Adobe, the status of its pending $20 billion-plus Figma acquisition is also uncertain. There is a good chance, in our view, that it will be blocked by regulators, which would mean the future opportunity to expand its offerings to the developer community (beyond designers) may not occur.”

Adobe Inc. (NASDAQ:ADBE), like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and NVIDIA Corporation (NASDAQ:NVDA), is a smart stock pick to play the AI boom.

6. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 131

Apple Inc. (NASDAQ:AAPL) may not be the first big tech company that comes to your mind when looking for AI plays, but with the company’s new Vision Pro headset, some believe it may be getting involved in the machine learning space more than before.

Analysts at Bernstein hold a Market Perform rating and a $175 price target on Apple Inc. (NASDAQ:AAPL) shares as of June 14.

Our hedge fund data for the first quarter shows 131 hedge funds long Apple Inc. (NASDAQ:AAPL). Their total stake value was $165 billion.

Holding 915.6 million shares in the company, Berkshire Hathaway was the largest stakeholder in Apple Inc. (NASDAQ:AAPL) at the end of the first quarter.

Silver Ring Value Partners made the following comment about Apple Inc. (NASDAQ:AAPL) in its first-quarter 2023 investor letter:

“Exited the Apple Inc. (NASDAQ:AAPL) put options position, as I came to the conclusion that I was wrong about the degree to which the stock is overvalued. While I still believe it’s optimistically priced, the fundamentals over the last few years made me believe that my initial decision to buy the put options was wrong.”

5. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 132

Morgan Stanley holds an Overweight rating on NVIDIA Corporation (NASDAQ:NVDA) shares as of June 16. The firm also raised its price target on the stock from $450 to $500.

In the first quarter, 132 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA). Their total stake value was $12.3 billion.

NVIDIA Corporation (NASDAQ:NVDA) may be the first stock that comes to one’s mind when looking for AI plays at this time. The company is a leader in generative AI chip-making.

Saltlight Capital mentioned NVIDIA Corporation (NASDAQ:NVDA) in its first-quarter 2023 investor letter:

“In May 2021, we shared our thoughts on AI with a particular focus on NVIDIA Corporation (NASDAQ:NVDA), expressing our belief that it was poised to become a significant enabler of AI technology. At the time, it felt like our insights were being carried away by the wind.

Our thesis hinged on the idea that NVIDIA’s GPUs would form the fundamental computing hardware for neural networks. This hardware would not only develop AI tools and infrastructure but also democratise access to AI technology.

At the end of that letter, we included a substantial excerpt from an interview with NVIDIA’s CEO, Jensen Huang. Looking back, his words now seem eerily prophetic. He suggested, albeit vaguely, a solution to the complexity problem. He said:

“But finally, we have this piece of this new technology called artificial intelligence that can write that complex software so that we can automate it. The whole goal of writing software is to automate something. We’re in this new world where, over the next 10 years, we’re going to see the automation of automation””…(Click here to read the full text)

4. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 155

Alphabet Inc. (NASDAQ:GOOG) is a big tech company that is an obvious choice to play the AI boom since it has been adopting AI features across its software portfolios. It is one of TD Cowen’s top AI picks so far.

As of June 8, Wells Fargo holds an Equal Weight rating on Alphabet Inc. (NASDAQ:GOOG) shares.

Our hedge fund data shows 155 funds long Alphabet Inc. (NASDAQ:GOOG) in the first quarter, with a total stake value of $18.6 billion.

Mairs & Power made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its first-quarter 2023 investor letter:

“As we have mentioned in previous months, we have slowly reduced our underweight position in the Technology sector over the past several years, as we have added a number of names that fit our investment strategy. Many of the these investments had impressive returns in the quarter and our relative performance in the tech sector was a bright spot. Four out of our top 5 performing names in the quarter were either Technology or Technology-related names, including: NVIDIA (NVDA), Alphabet Inc. (NASDAQ:GOOG), Littelfuse (LFUS), and Microsoft (MSFT). The stocks all benefited from a positive shift in investor sentiment in the quarter toward growth stocks, reversing last year’s trend. NVIDIA, Alphabet, and Microsoft also all benefited from their exposure to artificial intelligence and the headlines garnered from the widespread launch of ChatGPT a large language model developed by Microsoft partner, OpenAI. In the current tight labor market, there is a lot of enthusiasm around the efficiency this technology could bring to many industries. Alphabet and Microsoft are working furiously to build it into their products and NVIDIA has benefited as it currently has the best hardware to train and run large AI algorithms.”

3. Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 220

Meta Platforms, Inc. (NASDAQ:META) was found in the 13F holdings of 220 hedge funds at the end of the first quarter, with a total stake value of $25.1 billion.

Meta Platforms, Inc. (NASDAQ:META) is expected to benefit from the AI boom since it has been spending immensely on generative AI software. John Blackledge at TD Cowen believes AI can, in particular, boost the company’s ad sales across all its social networks.

As of June 5, Oppenheimer holds an Outperform rating on Meta Platforms, Inc. (NASDAQ:META).

Here’s what Baron Funds said about Meta Platforms, Inc. (NASDAQ:META) in its first-quarter 2023 investor letter:

“Shares of Meta Platforms, Inc., the world’s largest social network, were up 76.0% this quarter due to decisive cost discipline actions, improving adoption of new advertising products, the company’s work in generative artificial intelligence (AI), and the broader rally in technology stocks. Meta is the mega-cap technology company most focused on profitability through cost cutting, including layoffs of more than 20% of its staff and reductions in its data center and office footprint. On the top line, Meta continues growing its user base with daily average users up 5% year-over-year in the last quarter. Engagement remains healthy with impressions up 23% year-over-year, and newer advertising formats (like Instagram Reels) are reportedly picking up steam with 40% of advertisers now using Reels. Longer term, we believe Meta will utilize its leadership in mobile advertising, massive user base, innovative culture, and technological scale to sustain durable growth for years to come, with further monetization opportunities ahead in newer areas such as WhatsApp.”

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

Number of Hedge Fund Holders: 243

Justin Post at Bank of America holds a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN) as of June 12.

John Blackledge at Cown holds that Amazon.com, Inc. (NASDAQ:AMZN) provides many AI tools to Amazon Web Services customers, meaning the company can benefit from increasing demand for cloud-computing services.

There were 243 hedge funds long Amazon.com, Inc. (NASDAQ:AMZN) in the first quarter. Their total stake value was $25.8 billion.

This is what Baron Funds said about Amazon.com, Inc. (NASDAQ:AMZN) in its first-quarter 2023 investor letter:

“Amazon is probably the best example of a company that was built with an ability to rapidly adapt to change from its very inception. We have written a lot over the years about how Amazon’s culture and organizational structures prioritize and enable rapid innovation. Historically, programming code was written in a sequential waterfall fashion, creating significant interdependencies between different developer teams in the organization and slowing down innovation. Amazon famously required all developers to expose their work externally via standardized Application Programming Interfaces (APIs). A novel and risky approach, it enabled development teams to work in parallel, created a rapid feedback loop with customers, and turned Amazon into one of the most innovative companies in the world. The culture of constant experimentation and the willingness to take risks and fail fast (remember the Amazon Fire phone?) became the core pillars of the company’s culture and led to revolutionary ideas like third-party sales (letting competitors sell similar products alongside your own), Amazon Prime Video, and Amazon Web Services (AWS), making the company a disruptor and leader in multiple multi-trillion-dollar industries.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 289

Microsoft Corporation (NASDAQ:MSFT) is another obvious AI beneficiary considering it has also been adopting AI features across its platforms.

Microsoft Corporation (NASDAQ:MSFT) was spotted in the portfolios of 289 hedge funds in the first quarter, with a total stake value of $57.9 billion.

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

Mairs & Power made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its first-quarter 2023 investor letter:

“As we have mentioned in previous months, we have slowly reduced our underweight position in the Technology sector over the past several years, as we have added a number of names that fit our investment strategy. Many of the these investments had impressive returns in the quarter and our relative performance in the tech sector was a bright spot. Four out of our top 5 performing names in the quarter were either Technology or Technology-related names, including: NVIDIA (NVDA), Alphabet (GOOG), Littelfuse (LFUS), and Microsoft Corporation (NASDAQ:MSFT). The stocks all benefited from a positive shift in investor sentiment in the quarter toward growth stocks, reversing last year’s trend. NVIDIA, Alphabet, and Microsoft also all benefited from their exposure to artificial intelligence and the headlines garnered from the widespread launch of ChatGPT a large language model developed by Microsoft partner, OpenAI. In the current tight labor market, there is a lot of enthusiasm around the efficiency this technology could bring to many industries. Alphabet and Microsoft are working furiously to build it into their products and NVIDIA has benefited as it currently has the best hardware to train and run large AI algorithms.”

See also 10 Technology Dividend Stocks Billionaires Are Loading Up On and 10 Internet of Things (IoT) Stocks Billionaires Are Loading Up On.

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Disclosure: None. 10 Tech Stocks Benefiting From The AI Boom is originally published on Insider Monkey.