5 Stocks That Will Benefit From AI

In this article, we will be taking a look at 5 stocks that will benefit from AI. To read our detailed analysis of the artificial intelligence sector, you can go directly to see the 12 Stocks That Will Benefit From AI.

5. Apple Inc. (NASDAQ:AAPL)

Number of Hedge Fund Holders: 131

Apple Inc. (NASDAQ:AAPL) is an information technology company based in Cupertino, California. The company is currently testing a generative AI chatbot and is hinting at a significant AI-related announcement in 2024.

A Buy rating and a $205 price target are held on Apple Inc. (NASDAQ:AAPL) shares by Michael Walkley at Canaccord Genuity as of August 4.

Apple Inc. (NASDAQ:AAPL) had 131 hedge funds long its stock in the first quarter, with a total stake value of $165.2 billion.

Choice Equities Capital Management mentioned Apple Inc. (NASDAQ:AAPL) in its second-quarter 2023 investor letter:

“Dramatic valuation differences across market cap sizes continue. This has been the case for some time now. Perhaps I have spent too much time discussing these dichotomies, as generally, I feel like if we pick the right stocks and manage market exposures thoughtfully, our equities- oriented portfolio will prosper across various market cycles. However, when markets become as lopsided as they have lately, I feel additional discussion on the market environment is worthwhile, if only to help highlight the opportunities that are available and the likely path forward. I expect future discussions to soon be focused again on our moderately concentrated portfolio. But for now, let’s take one last in-depth look at how far reaching these valuation dichotomies have again become.(Please note: charts that accompany the following can be found in the Appendix.)

Take Apple Inc. (NASDAQ:AAPL) for example. It is the largest stock by market cap, and fairly considered one of the best companies in the world. The company has been extraordinarily successful and improved standards of living everywhere in the process with their ubiquitous products. Along the way, shareholders have been richly rewarded, with shares increasing nearly fourteen-fold over the last ten years while generating an annualized total shareholder return of 31%, including dividends.

On the back of another big quarter for large cap tech, it is now the first stock to surpass the $3T market cap threshold. This makes its weighting in the ~$37T market cap of the S&P 500, ~8%. It also means this one stock’s market cap is larger than that of the entire ~$2.98T market cap of the Russell 2000 index, the first time in history a single stock has outweighed the Russell 2000 – aside from two brief days in September 2020 when Apple’s market cap then accomplished the same…” (Click here to read the full text)

4. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 132

NVIDIA Corporation (NASDAQ:NVDA) was seen in the portfolios of 132 hedge funds in the first quarter, with a total stake value of $12.3 billion.

NVIDIA Corporation (NASDAQ:NVDA) is the first semiconductor company that comes to mind when discussing AI because of its GPU AI chips, which are essential in AI development today. It is based in Santa Clara, California.

Mizuho’s Vijay Rakesh maintains a Buy rating and a $530 price target on NVIDIA Corporation (NASDAQ:NVDA) shares as of July 24.

This is what Aristotle Atlantic Partners said about NVIDIA Corporation (NASDAQ:NVDA) in its second-quarter 2023 investor letter:

“Nvidia contributed to outperformance, as the company benefits from increased demand for its Graphic Processing Unit (GPU) semiconductor systems used in accelerated computing that is used to power Artificial Intelligence (AI) and Large Language Models (LLM). The company reported strong first fiscal quarter 2024 results and issued guidance for the second quarter and fiscal year 2024 that was ahead of consensus due to continuing strong demand trends for its data center GPU systems. “

3. Alphabet Inc. (NASDAQ:GOOG)

Number of Hedge Fund Holders: 155

Alphabet Inc. (NASDAQ:GOOG) is a big tech company based in Mountain View, California. It is among the tech companies leading the AI race, having released its own chatbot, Bard, and leading a dedicated AI division for research in the area.

We saw 155 hedge funds long Alphabet Inc. (NASDAQ:GOOG) in the first quarter. Their total stake value was $18.6 billion.

John Blackledge at TD Cowen holds an Outperform rating and a $140 price target on Alphabet Inc. (NASDAQ:GOOG) shares as of July 13.

Ensemble Capital Management said the following about Alphabet Inc. (NASDAQ:GOOG) in its second-quarter 2023 investor letter:

“Alphabet Inc. (NASDAQ:GOOG) (+15.4%): After persistent worries earlier in the year about the impact of AI, Google rode a tailwind of AI enthusiasm in the quarter as indications emerged that Google Search had not lost any market share despite a revamped Bing search engine powered by ChatGPT.

Anyone who has been paying attention to the news this year has heard about ChatGPT and the seemingly overnight explosion of interest in artificial intelligence. But like many seemingly overnight successes, AI has been decades in the making.

For instance, the so called Turing Test, long thought of as the test of a machine’s ability to exhibit human level intelligence, was introduced nearly 75 years ago in 1950. It has been 25 years, a quarter of a century, since IBM’s Deep Blue computer beat the human world chess champion Garry Kasparov. And it has been over seven years since Sundar Pichai became the CEO of Google and announced in his first speech that Google was now an A.I.-first company…” (Click here to read the full text)

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

Number of Hedge Fund Holders: 243

Barclays’ Ross Sandler holds an Overweight rating and a $180 price target on Amazon.com, Inc. (NASDAQ:AMZN) as of August 7.

A total of 243 hedge funds were long Amazon.com, Inc. (NASDAQ:AMZN) in the first quarter, with a total stake value of $25.8 billion.

Amazon.com, Inc. (NASDAQ:AMZN) is another big tech company with a lot at stake in the AI space. It offers AI services and products through its Amazon Web Services business, and it is also working on its own AI chips.

This is what The Ithaka Group said about Amazon.com, Inc. (NASDAQ:AMZN) in its second-quarter 2023 investor letter:

“Founded in 1994, Amazon.com, Inc. (NASDAQ:AMZN) has evolved from its early roots as an online bookstore to become one of the world’s largest eCommerce retailers. At the end of 2022 Amazon stood poised to capture ~40% of all US e-commerce sales, representing five times more share than the next closest competitor. In addition to eCommerce, Amazon Web Services (“AWS”) has become the market leader in outsourced cloud infrastructure. Further, Amazon Advertising is garnering significant share in digital advertising, particularly product placement ads, thanks to consumers beginning their product searches on Amazon’s site. Despite providing tepid forward guidance on its 1Q23 earnings call, Amazon’s stock appreciated on the back of increased confidence the company would be able to contain expenses and push operating margins above prior peaks in the near-to medium term.”

1. Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 289

Our hedge fund data shows 289 funds long Microsoft Corporation (NASDAQ:MSFT) in the first quarter. Their total stake value was $57.9 billion.

A Buy rating and a $433 price target were held on Microsoft Corporation (NASDAQ:MSFT) shares on August 2 by Ivan Feinseth at Tigress Financial.

Microsoft Corporation (NASDAQ:MSFT) is also set to benefit from AI’s popularity because of its efforts to bring Bing AI to its users alongside other AI products and services.

Here’s what L1 Capital said about Microsoft Corporation (NASDAQ:MSFT) in its second-quarter 2023 investor letter:

“Microsoft Corporation (NASDAQ:MSFT) is a clear and substantial beneficiary of AI – not only through its investment in OpenAI/ChatGPT but through the incorporation of AI into core Microsoft products and services, and increasingly through Azure (Microsoft’s cloud computing business) providing ‘AI-as-a-service’. At this stage we don’t know what the long-term financial benefits of AI will be to Microsoft, but we have confidence that it will be meaningful, that barriers to competition are increasing and that Microsoft is worth more today than it was 12 months ago. That said, Microsoft’s share price has increased 33% (in U.S. dollars) over the past year, and we no longer consider the company to be undervalued in our central base case. We have started to trim our investment in Microsoft, although it remains one of the Fund’s largest positions.”

See also 20 Best AI Chrome Extensions for 2023 and 10 Best Semiconductor Stocks To Buy For The AI Boom.