This article presents an overview of the 5 Best AI Stocks for 2024. For a detailed overview of more such stocks read our article, 10 Best AI Stocks for 2024.
5. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 180
NVIDIA Corp (NASDAQ:NVDA) is perhaps one of the most obvious names in any AI stock recommendation list on the Wall Street these days. Despite having tripled in 2023, NVIDIA Corp’s (NASDAQ:NVDA) valuation has been attracting many analysts. In December 2023, Stacy Rasgon, Bernstein Research senior semiconductor analyst, said that NVIDIA Corp (NASDAQ:NVDA) was the cheapest of the AI stocks in the market. He was referring to NVIDIA Corp’s (NASDAQ:NVDA) relatively low earnings multiples seen in December when compared to peers. Since the start of 2024 the stock has gained about 6%.
Joseph Moore, Morgan Stanley semiconductor analyst, recently said in a program on CNBC that NVIDIA Corp (NASDAQ:NVDA) will “find ways” to fill the China portfolio of their business. He was referring to the US-China tensions and America’s new policies affecting US chipmakers’ exports to China.
As of the end of the third quarter of 2023, 180 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in NVIDIA Corp (NASDAQ:NVDA).
In its fourth quarter 2023 investor letter, ClearBridge Large Cap Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA):
“Much of that differential can be attributed to the performance of the Magnificent Seven (Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia and Tesla), a basket of mega cap growth stocks that accounted for 47.8% of the benchmark return for the quarter and 65.4% for 2023.
The ClearBridge Large Cap Growth Strategy maintains exposure to six of the seven stocks, with overweights in Amazon.com, Meta and NVIDIA Corporation (NASDAQ:NVDA). Those three stocks, as well as Microsoft, were among the leading contributors to Strategy performance for the quarter. Microsoft and Nvidia continued to be supported by strong execution and leadership positions in the implementation of generative artificial intelligence (AI).
These are high-quality, cash flow generative businesses that we will continue to own, actively adjusting our positioning sizes based on risk/reward and portfolio construction priorities. With Nvidia shares more than tripling in 2023, we opportunistically took profits throughout the year, an approach that continued in the fourth quarter with additional trims that brought the position down to 6% of overall assets.
Active management of our mega cap exposure contributed to the Strategy outperforming the benchmark both in the fourth quarter and through the narrow leadership market of 2023. We also attribute these improved results to solid stock picking, being opportunistic in adding to or initiating new positions in growth companies at or near the bottom of their earnings cycle, and maintaining a commitment to diversification across our three buckets of growth: select, stable and cyclical.”
4. ServiceNow Inc (NYSE:NOW)
Number of Hedge Fund Investors: 199
Macquarie Equity recently picked ServiceNow Inc (NYSE:NOW) as one of its top AI picks for a “disruptive 2024.” The firm set an $800 price target on the stock, which shows significant upside potential from the stock’s $699 trading price as of January 9.
As of the end of the third quarter of 2023, 99 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in ServiceNow Inc (NYSE:NOW).
In its October 2023 investor letter, Lakehouse Capital stated the following regarding ServiceNow, Inc. (NYSE:NOW):
“ServiceNow, Inc. (NYSE:NOW) also delivered a strong quarterly result that surprised on the upside. Subscription revenues grew 27% year-on-year to $2.29 billion and non-GAAP operating income grew 41%, both exceeding analyst expectations and the company’s own guidance. Key performance indicators were healthy, with current remaining performance obligations growing 27% year-on-year to $7.4 billion and renewal rates holding firm at 98%. Despite the challenging macro environment for many software companies, ServiceNow’s multi-product platform continues to resonate with large enterprise customers with the number of clients spending over $1 million in annual contract value (ACV) up 17% year-on-year to 1,789, while the cohort spending over $20 million swelled by 58% year-on-year to 49. Helping drive some of that product adoption was their Creator Workflows module, first launched near the start of 2021, which crossed the $1 billion ACV threshold this quarter.
We remain impressed by the execution from management, who continue to expand the company’s total addressable market with new product launches that generate significant return on investment for their customers. Right before the quarter ended, they launched the Vancouver Platform release, which embedded generative AI across all workflows on the Now Platform and managed to close four large deals in a single day. Their generative AI offering drove the highest number of customer requests ever for a prerelease product in the company’s history, providing an attractive pipeline of new deals. Overall, we have high conviction in their growth trajectory and are happy to remain patient shareholders.”
3. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 234
Meta Platforms Inc (NASDAQ:META) ranks second in our list of the best AI stocks to buy according to hedge funds. Meta Platforms Inc (NASDAQ:META) recently received positive comments from BMO which said Meta Platforms Inc (NASDAQ:META), along with several other major tech companies, will benefit from the blend of AI and content creation in 2024.
As of the end of the third quarter of 2023, 234 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Meta Platforms Inc (NASDAQ:META).
In its fourth quarter 2023 investor letter, ClearBridge Large Cap Growth Strategy stated the following regarding Meta Platforms, Inc. (NASDAQ:META):
“Much of that differential can be attributed to the performance of the Magnificent Seven (Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia and Tesla), a basket of mega cap growth stocks that accounted for 47.8% of the benchmark return for the quarter and 65.4% for 2023.
The ClearBridge Large Cap Growth Strategy maintains exposure to six of the seven stocks, with overweights in Amazon.com, Meta and Nvidia. Amazon benefited from strong margin expansion across segments, most notably its core e-commerce business, while Meta Platforms, Inc. (NASDAQ:META) saw accelerated revenue growth and share gains in online advertising.
Active management of our mega cap exposure contributed to the Strategy outperforming the benchmark both in the fourth quarter and through the narrow leadership market of 2023. We also attribute these improved results to solid stock picking, being opportunistic in adding to or initiating new positions in growth companies at or near the bottom of their earnings cycle, and maintaining a commitment to diversification across our three buckets of growth: select, stable and cyclical.”
2. Amazon.com Inc (NASDAQ:AMZN)
Number of Hedge Fund Investors: 286
Amazon.com Inc (NASDAQ:AMZN) remains one of the top AI stocks thanks to its Cloud business since Amazon.com Inc (NASDAQ:AMZN) is rolling out several AI-related features that would help companies develop and deploy AI applications on the Cloud.
Amazon.com Inc’s (NASDAQ:AMZN) ecommerce business is also set to benefit from the AI boom. BMO Capital’s Brian Pitz recently started covering Amazon.com Inc (NASDAQ:AMZN) with an Outperform rating and explained how AI would help ecommerce companies. The analyst said AI would help ecommerce companies in product recommendations and same-day delivery.
“…AI is helping with product recommendation, while companies with same-day delivery and regionalization of their fulfillment networks have made it easier to get products into the hands of consumers,” Pitz said.
In its fourth quarter 2023 investor letter, ClearBridge Large Cap Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN):
“Much of that differential can be attributed to the performance of the Magnificent Seven (Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia and Tesla), a basket of mega cap growth stocks that accounted for 47.8% of the benchmark return for the quarter and 65.4% for 2023.
The ClearBridge Large Cap Growth Strategy maintains exposure to six of the seven stocks, with overweights in Amazon.com, Inc. (NASDAQ:AMZN), Meta and Nvidia. Amazon benefited from strong margin expansion across segments, most notably its core e-commerce business, while Meta saw accelerated revenue growth and share gains in online advertising.
Active management of our mega cap exposure contributed to the Strategy outperforming the benchmark both in the fourth quarter and through the narrow leadership market of 2023. We also attribute these improved results to solid stock picking, being opportunistic in adding to or initiating new positions in growth companies at or near the bottom of their earnings cycle, and maintaining a commitment to diversification across our three buckets of growth: select, stable and cyclical.”
1. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 306
Microsoft Corp (NASDAQ:MSFT) is a ubiquitous name in the Wall Street these days, popular among both money managers and analysts. It is the most popular stock among the 910 hedge funds tracked by Insider Monkey.
Bank of America analysts led by Alkesh Shah recently added Microsoft Corp (NASDAQ:MSFT) to their top AI picks for 2024 list. While the analyst said now is not the right time to be a “blind bull” on tech stocks given the massive rally already experienced by these companies, he sees a significant upside for some companies in the space. The analyst is bullish on Microsoft Corp (NASDAQ:MSFT) as he sees “incremental” growth in Azure and Office due to AI.
In its fourth quarter 2023 investor letter, ClearBridge Dividend Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT):
“Microsoft Corporation (NASDAQ:MSFT) is the largest holding in our portfolio. Given its partnership with OpenAI and leading position in the cloud, Microsoft is well-positioned to profit from the boom in AI. However, due to Microsoft’s tremendous scale and diversification, the company is not dependent upon AI for its success. Microsoft’s diverse portfolio of software and cloud offerings ensures the company will thrive even if the next hot thing, like AI, fizzles out. In this way, Microsoft is emblematic of our broader investing approach. We seek to benefit from powerful trends, but we do so with an eye toward managing risk and limiting downside in case the future turns out to be less rosy than hoped for.”
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