In this article, we discuss the 10 buzzing AI stocks according to Goldman Sachs.
The Goldman Sachs Communacopia + Technology Conference 2024, held earlier this month, brought several significant updates on the technology sector for investors, particularly focusing on innovation and financial growth across growth industries. Key discussions revolved around energy-efficient computing, artificial intelligence (AI), and advanced semiconductor technologies, signaling critical transformations in tech and telecommunications. At the conference, companies working in the tech universe outlined their strategic outlooks, emphasizing the role of energy-efficient computing in driving semiconductor growth, with industries like AI, IoT, robotics, and autonomous vehicles fueling multi-trillion-dollar shifts.
Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.
One of the highlights of the conference was the appearance of NVIDIA CEO Jensen Huang, who appeared alongside Goldman Sachs CEO David Solomon to discuss the AI industry in great detail. Quizzed about the recent US export controls on chips to China and the rise in geopolitical tensions potentially harming supplies, Huang outlined that his company was confident that if Taiwan Semiconductor Manufacturing Company, the Taiwan-based leading supplier of advanced AI chips to NVIDIA, was compromised, the chip supply would continue, even though it would not be as good. Huang stressed that NVIDIA possessed enough intellectual property to transfer chip production from one plant to another, if need be.
NVIDIA has lost more than 15% of market capitalization since it issued third quarter guidance numbers that raised worries about slowing earnings growth. In particular, there were concerns about the concentration of hyperscalers in the NVIDIA business model, with four large customers representing nearly half of the revenue of the firm in relation to the AI boom. Following the appearance of Huang at the conference, Goldman Sachs semiconductor analyst Toshiya Hari reiterated a Buy rating on the stock, backing the company to pick up sales in the coming months as demand for accelerated computing continued to be really strong and broadened into enterprise and sovereign states.
Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and AI News You Should Not Have Missed.
Our Methodology
For this article, we selected AI stocks by combing through the proceedings of the Goldman Sachs 2024 Communacopia and Technology Conference. These stocks are also popular among hedge funds. 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 senior executive looking up at a large boardroom filled with the stocks their company manages.
Buzzing AI Stocks According to Goldman Sachs
10. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 81
ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. Skip Miller, a senior executive of the firm, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, noting that the market recovery so far this year and the growth were primarily AI related. He added that this was the case for both the Logic and the Memory markets. However, per Miller, the other more traditional PC, smartphone, and auto industrial markets were a bit slower to recover. Miller stressed that there were clear indicators that with inventory levels coming down, litho tool utilization was going up to give investors some confidence in the recovery.
The ASML Holding N.V. (NASDAQ:ASML) bigwig underlined that AI was not like a new thing that popped up, rather it had long-term trends and secular trends that his firm had been talking about for a number of years. He said that AI was moving beyond server and cloud to different end devices, creating a significant opportunity for businesses.
9. KLA Corporation (NASDAQ:KLAC)
Number of Hedge Fund Holders: 55
KLA Corporation (NASDAQ:KLAC) markets process control and yield management solutions for the semiconductor industry. Bren Higgins, the CFO of the firm, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, noting that advanced packaging within the semi space was a greater than $500 million opportunity in 2024 compared to about $300 million last year. Per Higgins, Overall, 2024 had been a transition year for the industry, even as the market saw some legacy investment. He added that the chip universe was starting to see more leading edge investment in the second half of the year, a factor that translated into what a pretty good expansion environment for KLA into next year.
Higgins remarked that the strategic goals for KLA Corporation (NASDAQ:KLAC) was preparing for growth as a leading edge solutions provider. He added that his firm was encouraged about prospects of WFE growth across the different players as well, based on a sort of bottom-up and top-down analysis. On the legacy front, per Higgins, the investment levels in China were more or less stable.
8. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) supplies semiconductor infrastructure software solutions. Charlie Kawwas, the president of the firm, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, saying that increased spending by the large Tier-1 hyperscalers would drive growth in the AI semiconductor business of Broadcom in fiscal 2025. In light of this, per Kawwas, Broadcom had positively revised its fiscal 2024 AI semiconductor revenue outlook from $7.5 billion at the beginning of fiscal 2024 to $12 billion earlier this month Kawwas also reiterated Broadcom’s deep focus on markets where it could build a sustainable franchise founded on technological leadership.
Kawwas shared that Broadcom Inc. (NASDAQ:AVGO) had a central engineering team that developed foundational technologies like accelerators. He noted that custom accelerators had benefits over merchant solutions like GPUs, particularly when addressing internal workloads at hyperscalers with consumer platforms. He also predicted that Ethernet would prevail as the preferred AI networking protocol for hyperscalers due to its open-sourced nature and superior power efficiency.
7. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 52
NXP Semiconductors N.V. (NASDAQ:NXPI) makes and sells various products related to semiconductors. Jeff Palmer, a senior executive at the company, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, dismissing concerns about the increasing competition for the company in China and the rising geopolitical tensions. Palmer acknowledged that there were Chinese startups in the automotive business, and those that owned consumer microcontroller plants, but stressed that there were not any indigenous Chinese companies in the semiconductor space of NXP. Palmer said even if there was not a boogeyman in China who was popping up, his company had to remain ahead of the competitors, like in any other market.
NXP Semiconductors N.V. (NASDAQ:NXPI) has a huge business in China, with nearly 35% of all sales coming from the Asian country. Palmer, while discussing geopolitical tensions and US export controls on chips to China, said there was a split between sales to China-based companies and international companies with factories there. Palmer also discussed the issue of inventory oversupply, which was keeping growth slower than anticipated in the automotive and industrial segments, noting that oversupply was related to the 2023 supply crunch.
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 108
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor manufacturer. The CEO of the firm, Lisa Su, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, stressing that the market was at the start of a multiyear AI PC cycle. According to the CEO, AI was the most significant innovation that had come to the PC market in the last 10-plus years. She noted that AI tech in PCs could be used as productivity tools, giving the example of the work AMD did with the AI PCs of tech giant Microsoft in this regard. Looking ahead, she predicted that AI PCs would be a driver of the commercial refresh cycle for the company next year.
Lisa Su also commented on the recent Advanced Micro Devices, Inc. (NASDAQ:AMD) purchase of ZT Systems, noting that combining the high-performance Instinct AI accelerator, EPYC CPU, and networking product portfolios of AMD with the industry-leading data center systems expertise of ZT Systems would enable AMD to deliver end-to-end data center AI infrastructure at scale within the ecosystem of OEM and ODM partners.
5. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 77
Applied Materials, Inc. (NASDAQ:AMAT) provides equipment, services, and software for the semiconductor industry. Gary Dickerson, the chief of Applied Materials, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, noting that the whole industry was focused on energy efficient computing as the biggest global inflections ever were driving the semiconductor growth, like AI, IoT, Industrial Automation, Robotics, EVs, Autonomous Vehicles, and Renewable Energy,. Per Dickerson, these were all just really big multi-trillion dollar inflections.
Dickerson, who worked for KLA Corp before joining Applied Materials, Inc. (NASDAQ:AMAT), predicted that datacenters would pass PCs and smartphones in wafer starts over the next few years. He underlined that everyone was focused on the race for energy efficient computing in the semiconductor industry, with people talking about a 10,000 times improvement in energy efficient computing over the next 15 years.
4. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 165
Alphabet Inc. (NASDAQ:GOOG) is a California-based technology company that owns and runs the internet search engine Google. Thomas Kurian, the CEO of Google Cloud, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, noting how his company had been way ahead of the others in building AI infrastructure over the past decade. Kurian underlined that these investments were now starting to bear fruit. For example, he revealed that 90% of AI unicorns run on cloud services offered by Google for training and inference. 60% of all AI funded start-ups ever use AI infrastructure developed by Google for training or inference.
Kurian, who was at software firm Oracle before joining Alphabet Inc. (NASDAQ:GOOG), added that traditional companies were also now building both high-performance and generative AI models on the Google Cloud. Kurian gave the example of carmaker Ford Motor Company, detailing that Ford was using the deep learning technology of Google to build simulations for wind tunnel and for virtual wind tunnel simulation, replacing a traditional approach called computational fluid dynamics.
3. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The CEO of Amazon Web Services, Matt Garman, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, noting that AI was going to completely change almost every single industry in a fundamental way. Garman detailed that the early splashes of generative AI, like that of a cool chatbot, or cloud call call centers, were great but investors were missing the actual value proposition of the new technology. He said that generative AI would force companies into thinking about the core of their business, and industry-specific solutions would be unlocked through AI that were not possible before.
Amazon.com, Inc. (NASDAQ:AMZN) has been investing in data centers, servers, network and global infrastructure to stay ahead of the curve when it comes to AI tech. Garman said in response to a question about the AI growth of the Amazon cloud business that investments in custom infrastructure, especially in networking and chip domains, over the past decade had helped the tech giant reduce costs associated with AI development, putting it on a path to sustainable growth.
2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a Washington-based technology company. The CTO of the company, Kevin Scott, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, remarking that it was super important for the business world to bring down the cost of compute associated with AI development. Scott underlined how one of the things that had supported all of the previous platform revolutions – personal computing, internet, smartphone, and cloud – had been the ability to move from silicon to networks to the low-level software layers that empowered the layers running on top of them to get exponentially cheaper over time. He noted that this was happening with AI, as evidenced by GPT-4 getting 12 times cheaper per token to do inference in May than at launch time.
Scott, who was an intern at Microsoft Corporation (NASDAQ:MSFT) before rising all the way to the top, noted that AI infrastructure had catalyzed a lot of similarities to big tech revolutions of the past. He detailed that because AI was a platform revolution, it was not narrow, where some company had a secret stash of infrastructure that only they had, but instead there was a huge community of people being inspired in a bunch of different ways by what the AI infrastructure was going to allow them to do. Scott said that trillion-dollar companies that are brand new were getting created due to these developments.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. The CEO of the firm, Jensen Huang, spoke at the Goldman Sachs 2024 Communacopia and Technology Conference earlier this month, highlighting the importance of NVIDIA to the AI revolution and asserting that the hardware the company made was translating into fantastic returns for companies that were using it. Huang said that the infrastructure players like his firm and all the cloud service providers put the AI infrastructure in the cloud so that developers could use the machines to train and fine-tune their AI models. He noted that for every dollar a cloud service provider spent with NVIDIA, it translated to $5 worth of rentals.
Huang also stressed that the days of every line of code being written by software engineers were completely over. He instead forecast a future where every NVIDIA Corporation (NASDAQ:NVDA) employee – the firm presently has around 32,000 employees – would be supplemented by 100x more digital engineers. He claimed that the first trillion dollars of data centers was going to get accelerated and invent this new type of software called generative AI, which was not just a tool but a skill.
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA Corporation (NASDAQ:NVDA) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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