In this article, we will take a detailed look at the 14 Best Stocks To Buy According to AI. For a quick overview of such stocks, read our article 5 Best Stocks To Buy According to AI.
When the generative AI boom started, investing circles brushed aside the possibility of AI picking stocks for humans to maximize returns. It’s too complex and subjective a job for any AI model, they said. Fast forward a few months, more and more investment experts and firms are deploying AI for stock picking. Bloomberg in February reported that Vanguard Group was using AI in several of its products that use quant investing techniques. Among the funds where Vanguard has deployed machine learning models include the Vanguard Strategic Equity Fund, the Vanguard Strategic Small-Cap Equity Fund and the Vanguard Market Neutral Fund. The Bloomberg report said that the Vanguard Strategic Equity Fund and the Strategic Small-Cap Fund beat their benchmarks and outperformed industry peers last year.
Machine learning and algorithms have long been at play in the investing game for quant funds. But the generative AI boom is making the power of mathematical, AI-powered analysis available for everyone. Using AI in investing would no longer be limited to quant funds. Financial services company Mercer conducted a survey to find out the penetration of AI among investment managers across its Global Investment Manager Database. Nine out of 10 surveyed managers said they are already using or planning to use AI in their investment process. A whopping 54% of the investment managers said they are already using AI to assist their decision making, while 37% plan to use the technology in the near future.
Mercer said in its report that the investment managers it surveyed said that the use of AI would give a whopping $14 trillion boost to the global economy by 2030.
Since generative AI and machine learning in investing is currently in its early stages, there are some challenges for investment managers who are trying to use the technology to their advantage. Data quality and data availability are among the biggest challenges these managers are facing.
Humans VS Robots in the Stock-Picking Game
But robots are not taking over the investing game (for now). Almost no one in the survey said they are completely outsourcing the investing-related decision-making to AI. They are using AI-powered models just for assistance, idea generation, data analysis and other important tasks in the investing process. Final decision-making still rests with humans. The report added:
“Just a small minority of managers report fully automated statistical, ML and DL models, reinforcing AI and ML technologies as tools that support managers, rather than replacing the role of manager judgment and intervention. Among managers currently using AI, around one in 10 report full automation of statistical models (11%), ML (14%) and DL models (6%), while a third report infrequent monitoring of these processes (33%, 32% and 33%, respectively). Across all three areas, a significant proportion of current AI processes remain reliant on constant human intervention, reinforcing the role of AI and ML technologies as a supportive “tool” rather than a direct replacement of humans across the investment process.”
Methodology
This article is a performance evaluation of the stocks recommended by ChatGPT last year. We wanted to see whether ChatGPT is any good at stock picking. For that we reverted to our experiment with ChatGPT conducted in March 2023 where we asked ChatGPT to recommend some stocks that would make one rich over the next 10 years. We also consulted Finder.com’s experiment with AI in which researchers at the comparison website asked ChatGPT to create a “portfolio of stocks from high-quality businesses with criteria taken from the leading 10 funds it is competing against.” This portfolio was also created back in March 2023. In this article we picked 14 stocks from these two ChatGPT-recommended portfolios with the highest number of hedge fund investors. With each stock we mentioned its performance since the date it was picked up by ChatGPT. The idea is to assess the performance of ChatGPT when it comes to stock picking.
ChatGPT Stock Picks: Performance Overview After One Year
14. Johnson & Johnson (NYSE:JNJ)
Stock Performance Since ChatGPT Recommended The Stock Last Year: Almost flat
Johnson & Johnson (NYSE:JNJ) was also among the stocks recommended by ChatGPT to finder.com during the website’s experiment last year. Since the AI model’s recommendation till date the stock price has remained almost flat.
As of the end of the fourth quarter of 2023, 81 hedge funds had stakes in Johnson & Johnson (NYSE:JNJ).
ClearBridge Large Cap Value Strategy made the following comment about Johnson & Johnson (NYSE:JNJ) in its Q3 2023 investor letter:
“The health care space provided some opportunities in the quarter, as we increased our exposure to medical device company Becton, Dickinson as well as large cap pharmaceutical company Johnson & Johnson (NYSE:JNJ). Johnson & Johnson recently spun out its consumer health care business, becoming a more focused yet broadly diversified pharmaceutical and medtech company.”
13. Tesla Inc (NASDAQ:TSLA)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +6%
Benzinga asked ChatGPT to make a stock portfolio to beat the leading equity funds in the US backed in May 2023. Tesla Inc (NASDAQ:TSLA) was one of the stocks recommended by ChatGPT at the time. Since then through March 27, 2024, Tesla Inc (NASDAQ:TSLA) shares have gained just 6% as Tesla Inc (NASDAQ:TSLA) continues to battle growth issues amid a slowdown in EV demand.
Alger Spectra Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its fourth quarter 2023 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) is an electric vehicle manufacturer with a significant technological lead in its large and rapidly growing addressable market. Tesla is a transportation company that is setting the pace for industry innovation, in our view. During the quarter, the company reported weaker-than-expected fiscal third quarter earnings, where gross margins were negatively impacted by factory downtime and ramping production volumes at new manufacturing plants. However, the company noted that they remain confident by the amount of data that Tesla’s established and growing fleet of vehicles has gathered, which may bode well for the company’s full self-driving capabilities.”
12. Apple Inc (NASDAQ:AAPL)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +11%
Apple Inc (NASDAQ:AAPL) shares have gained about 11% since March 16, 2023, when ChatGPT recommended the stock to Insider Monkey’s researchers when they asked the chatbot to suggest stocks that have the potential to make one rich. Apple Inc (NASDAQ:AAPL) has been late to the AI game and perhaps that’s why its stock gains aren’t that impressive. Apple Inc’s (NASDAQ:AAPL) business in China is also facing challenges. Analysts expect Apple Inc (NASDAQ:AAPL) to reveal its AI projects in the upcoming developer conference scheduled for June.
Orbis Global Equity Strategy stated the following regarding Apple Inc. (NASDAQ:AAPL) in its fourth quarter 2023 investor letter:
“Never before has following the crowd made so much money. Nor, in our estimation, so little sense. But just look at the opportunities the crowd has left for those of us willing to take a different view. We could wax lyrical about the glaring difference in value between Korean banks priced at 4 times earnings, versus Apple Inc. (NASDAQ:AAPL) at 28 times, despite diverging fundamentals—Apple is increasingly at risk of bans in China, while Korean banks could double their dividends.”
11. Procter & Gamble Co (NYSE:PG)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +14%
Procter & Gamble Co (NYSE:PG) is one of the stocks recommended by ChatGPT last year when Insider Monkey asked the AI technology to make a portfolio of stocks that would make one rich in the next decade. Since the recommendation date until today, the stock price has gained about 14%.
Madison Sustainable Equity Fund stated the following regarding The Procter & Gamble Company (NYSE:PG) in its fourth quarter 2023 investor letter:
“We sold The Procter & Gamble Company (NYSE:PG). After two years of strong pricing growth, the company is facing slower market growth in both the US and Europe. China, the company’s second largest individual market, is facing a protracted downturn with poor visibility on when fundamentals will improve.”
10. Visa Inc (NYSE:V)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +28%
On March 16, 2023, when ChatGPT recommended Visa Inc (NYSE:V) to Insider Monkey, Visa Inc (NYSE:V) shares were trading at around $223, while the stock price sits at $279 today. This shows a 28% gain in stock price.
As of the end of the fourth quarter of 2023, 162 hedge funds tracked by Insider Monkey had stakes in Visa Inc (NYSE:V).
In its October 2023 investor letter, Lakehouse Capital stated the following regarding Visa Inc. (NYSE:V):
“Visa Inc. (NYSE:V) reported a strong result with net revenue increasing 11% year-on-year to $8.6 billion and non-GAAP earnings per share increasing by 21% to $2.33. As has been the case for many years now, the scalable nature of the business allows for revenue growth to outpace its costs, which places the company in a good position to navigate through this inflationary period. The network continues to grow, with credentials and merchant locations up 7% and 17%, respectively. Cross-border travel-related spend also maintained its robust growth, increasing 26% year-on-year while Visa Direct reported 7.5 billion transactions, up 19% yearon-year, progressing on penetrating categories such as cross-border remittances. Altogether, we’re pleased with how the business is tracking and remain positive on Visa’s outlook.”
9. Walmart Inc (NYSE:WMT)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +29%
When finder.com asked ChatGPT to make a market-beating stock portfolio back in March 2023, the LLM included Walmart Inc (NYSE:WMT) in the list of its stock recommendations. Since March 6, 2023, through date Walmart Inc (NYSE:WMT) shares have gained about 29%.
8. Berkshire Hathaway Inc Class B (NYSE:BRK.B)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +42%
Insider Monkey asked ChatGPT in March 2023 to make a stock portfolio that’d make one rich in the next ten years. Berkshire Hathaway Inc Class B (NYSE:BRK.B) was part of the stocks recommended by the large language model. It proved to be one of the best stocks to buy according to AI because since March 16, 2023, the stock has gained about 42%.
7. Adobe Inc (NASDAQ:ADBE)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +53%
Adobe Inc (NASDAQ:ADBE) was one of the stocks recommended by ChatGPT to finder.com when the website asked the chatbot in March 2023 to make a portfolio. Since then through March 27, 2024, Adobe Inc (NASDAQ:ADBE) shares have gained about 53%. Adobe announced a host of new AI-related products at its annual Summit event recently.
Here is what Polen Global Growth has to say about Adobe Inc. (NASDAQ:ADBE) in its Q3 2023 investor letter:
“Both Alphabet and Adobe’s businesses continue to perform well. With respect to Adobe, the most recent quarter delivered more of the same with constant currency revenue growing 13%, margin expansion, and over 2% of shares outstanding repurchased for non-GAAP earnings growth of over 20%. We believe its approach to GenAI through Firefly, which guarantees safe content because it trains on Adobe Stock, will continue to be attractive to enterprises. The counter to GenAI, and something we are keeping an eye on with Alphabet and Adobe, is that it requires heavy investment. While both businesses can leverage their scale and manage costs in other areas, we expect the investment in future growth through GenAI will weigh on company-wide margins over the near term.”
6. Alphabet Inc Class C (NASDAQ:GOOG)
Stock Performance Since ChatGPT Recommended The Stock Last Year: +65%
Alphabet Inc Class C (NASDAQ:GOOG) is one of the best stocks to buy according to AI. Alphabet Inc Class C (NASDAQ:GOOG) was recommended by ChatGPT to Insider Monkey when our researchers asked the chatbot to make a market-beating portfolio back in March 2023. Since then through March 27, 2024, Alphabet Inc Class C (NASDAQ:GOOG) shares have gained about 65% in value.
Wedbush Securities recently added Alphabet Inc Class C (NASDAQ:GOOG) to its Best Ideas list and said the “perceived” risks to Google Search are overblown and Alphabet Inc Class C (NASDAQ:GOOG) remains a “net beneficiary” of generative AI.
Pershing Square Holdings stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its fourth quarter 2023 investor letter:
“In early 2023, we initiated an investment in Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, at a highly attractive valuation during a period when apprehension about the company’s competitive positioning in AI overshadowed the high-quality nature of its business and strong growth prospects.
Since we initiated our position, the company has delivered impressive operating results. With two of the highest ROI and most resilient ad formats in Search and YouTube, Google occupies a dominant position in the secularly fast-growing digital advertising market. As the digital advertising market recovered over the course of the year, revenue growth in Google’s advertising business accelerated from 3% in Q1 2023 to 10% in Q4 2023. Moreover, the company realized significant progress on its substantial margin expansion opportunity and maintained a robust capital return program. In 2023, operating profit margins expanded by approximately 225 basis points (bps), excluding one-time severance and real estate charges, as the Cloud segment reached breakeven profitability. We expect continued cost control, automation efficiencies, and operating leverage in under-earning segments (Cloud & YouTube) to sustain margin expansion as Google invests behind AI initiatives.
The company is using its ample free cash flow to repurchase approximately 4% of its outstanding shares on an annual basis…” (Click here to read the full text)
Click to continue reading and see 5 Best Stocks To Buy According to AI.
Suggested Articles:
- 16 Richest Hedge Fund Managers in the World
- 13 Cash-Rich Dividend Stocks To Buy Now
- 10Stocks ChatGPT Said Will Make Me Rich in 10 Years
Disclosure. None. 14 Best Stocks To Buy According to AI was initially published on Insider Monkey.