We recently compiled a list of the 7 Unstoppable Artificial Intelligence (AI) Stocks To Buy Now. In this article, we are going to take a look at where AppLovin Corp. (NASDAQ:APP) stands against the other unstoppable AI stocks.
Is Predictive AI Taking Over GenAI?
Generative AI is taking the world by storm. This groundbreaking technology is capable of creating new content, such as text, images, and even music, based on the patterns it learns from existing data. The impact of this advancement in AI on businesses has been profound, with businesses using it to automate tasks, improve efficiency, and generate innovative solutions through personalized content.
While there are still challenges, GenAI’s potential is undeniable. AI companies have rolled out GenAI platforms, integrating large language models in them, that are a click away from the general public’s access. We talked about this earlier in our article about the 10 Best Small Cap AI Stocks to Buy According to Short Sellers. Here’s an excerpt from it:
“Large language models are a type of AI that uses deep learning techniques and massive datasets to understand, generate, and predict human language. They’re trained for all of this through statistical relationships from vast amounts of text. The reason why they became so popular in such a short time is because they can be fine-tuned for specific tasks or understand language better through specific prompts. LLMs like Gemini and ChatGPT-4 are Multimodal AI platforms that allow processing and generating multiple types of data simultaneously, such as text, audio, and visual inputs.”
GenAI has been popular recently due to advancements that have brought us models like ChatGPT-4, but predictive AI (or enterprise machine learning) has been prevalent in the business world for a longer period. It’s been used extensively for tasks like fraud detection, customer churn prediction, and market analysis. GenAI excels at creating new content, but predictive AI is better suited for tasks that involve forecasting future trends or predicting outcomes based on historical data.
Mature organizations with streamlined processes use predictive AI as it helps deliver high returns and improve the customer experience. Forbes reported that UPS saves $35 million annually by optimizing package delivery planning. A medium-sized bank could save $16 million annually by predicting fraudulent transactions. A marketing campaign could increase profit 5x by predicting consumer behavior.
GenAI spending was less than 7% of predictive AI last year. However, predictive AI’s potential remains largely untapped due to challenges in operationalization. It can operate autonomously, while GenAI often requires human oversight. It is also cheaper and has a smaller footprint than the latter. The global predictive AI market is expected to grow from $14.9 billion in 2023 to $108 billion by 2033, with a CAGR of 21.9% from 2024 to 2033, according to a report published by market.us.
Google AI’s investment of $100 billion in responsible AI initiatives, focusing on areas like healthcare, climate change, and cybersecurity, indicates this sector’s importance and potential. Similarly, SoftBank’s $3.5 billion fund for predictive AI startups and Sequoia Capital’s substantial investment in PreCog are also examples of this. In 2023, the Large Enterprises segment captured more than a 65% share in the Predictive AI market.
Predictive AI is used for large-scale operations, learning from data to predict outcomes and behaviors, and guiding millions of daily operational decisions. Such use cases are further a testament to how artificial intelligence is now an integral part of major industries of the world, whether directly or indirectly.
Methodology
To compile our list, we sifted through ETFs, online rankings, and internet lists to compile a list of 15 AI stocks. We then selected the 7 stocks that were the most popular among elite hedge funds and had gained at least 30% year to date. The stocks are ranked in ascending order of the year-to-date performance, as of September 4.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A close-up of a mobile device, showing an advertiser reaching out to a consumer via a software-based platform.
AppLovin Corp. (NASDAQ:APP)
Number of Hedge Fund Holders: 54
Performance (Year-to-Date) as of September 4: 121.15%
AppLovin Corp. (NASDAQ:APP) makes technologies that help app publishers of any size connect to their ideal customers by providing end-to-end software and AI solutions for publishers to reach, monetize, and grow their global audiences. Its products are used by both its gaming advertisers and the connected television market which relies on the Internet.
The company’s platform is gaining traction and attracting higher spend from advertisers, however, they are still working on finding users who meet revenue goals of the advertisers. As its technology improves, the company will find more users which will lead to increased ad spend and growth. Management aims to grow the software business by 20-30% long-term.
In-app advertising has a lot of growth potential. CEO Adam Foroughi emphasized the MAX platform’s role in driving this growth by transitioning from inefficient waterfall methods to programmatic bidding. He expressed optimism about maintaining steady growth rates of 5% to 7% quarter-over-quarter in the software business.
By the end of the second quarter, the company was held by 54 hedge funds. The largest one is valued at $1,105,913,583 by GQG Partners. During Q2, improvement in the company’s software platform generated $711 million in revenue, while app revenue was $369 million. The overall revenue for Q2 2024 was $1.08 billion, a 43.98% year-over-year increase.
AppLovin Corp. (NASDAQ:APP) is well-positioned for growth in the mobile advertising market with its AI-powered platform and strong partnerships. Management has plans to invest in organic growth, focusing on engineering and business development to support AXON technology and e-commerce expansion.
ClearBridge Select Strategy stated the following regarding AppLovin Corporation (NASDAQ:APP) in its first quarter 2024 investor letter:
“We also added AppLovin Corporation (NASDAQ:APP), a disruptor in the IT sector that helps developers market and monetize their mobile apps. Powered by its proprietary targeting engine, the company’s software segment grew robustly in 2023 and should benefit from improving AI efficiency. We believe growth of the company’s targeting engine is still in the early innings as precision continues to improve, its adoption and dataset grow and AppLovin starts to license the engine to e-commerce advertisers, which could open up a brand new multibillion dollar market.”
Overall APP ranks 1st on our list of the unstoppable AI stocks to buy. While we acknowledge the growth potential of APP as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than APP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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