In this piece, we will take a look at 8 Best AdTech Stocks to Buy Now.
It goes without saying that the advertisement technology industry happens to be an exciting and ever-evolving sector, as digital advertising continues to dominate the market trends and remains at the forefront when it comes to strategic marketing. According to industry data by Allied Market Research, the global AdTech market was pegged at $748.2 billion in 2021 and is expected to reach $2.9 trillion by 2031. This demonstrates a CAGR of ~14.7% from 2022 to 2031.
This growth comes off the back of growing digital and internet penetration, increased usage of advanced technology like AI and machine learning, improved prospects for the gaming industry, and growth in social media apps including Facebook, WhatsApp, and others. Some of the top trends dominating the AdTech industry include higher usage of connected TV (CTV) advertising, in-app advertising, and interactive ads.
Growth prospects of the AdTech industry
The AdTech market has been bifurcated into solution, advertising type, size of an enterprise, platform, etc. The AdTech industry includes a wide range of companies and products, such as demand-side platforms (DSPs), supply-side platforms (SSPs), ad exchanges, data management platforms (DMPs), and more. Experts are of the view that the global supply-side platform (SSP) market size should touch ~$117.32 billion by 2033. This means that the industry should compound at ~13.3% from 2023 to 2033. This growth is expected to stem from technological advancements, higher consumer demand, and supportive government policies.
In the same vein, the demand side platform software market size should touch US$120.1 billion by 2033 on the heels of an improved trend of programmatic advertising and, the need for better targeting along with measurement capabilities for online ads. While the AdTech industry seems promising, inclusion of artificial intelligence (AI) makes it even more appealing.
AI’s Role in AdTech – Opportunities and Challenges
Global AdTech industry continues to prepare for the complete deprecation of third-party cookies by Google, which makes up ~65% of the web browser market share. This transition seems to be a critical step for enabling user privacy and data security. Artificial Intelligence, because of its capability to process vast amounts of data, should play a crucial role.
Research suggests that ~54% of businesses believe that AI offers advertising cost savings and efficiencies and ~30% of marketing professionals decided to earmark more than 40% of their marketing budget to campaigns that are AI-executed. The advent of smart speakers, voice search, and podcasting can help advertisers in creating fresh avenues to connect with target audiences with the help of audio and voice technology.
While advertisers can exploit the opportunities available in the AdTech industry, they need to be wary about challenges such as Ad fraud. These frauds are caused mainly because of bot traffic, domain spoofing, or ad stacking. Some other challenges include inventory quality, ad creativity, and brand safety.
AI and ML are revolutionizing digital advertising by enabling advertisers to assess vast amounts of data in real time. As a result, the advertisers can make data-driven decisions for optimizing ad campaigns. Advertisers now use algorithmic advertising, personalization, and performance metrics to maximize ROI.
AI algorithms help in automating media buying, making sure that ads reach the target audience. Personalized ads can be delivered using AI-powered recommendation engines and these engines enable real-time tracking, which can help make quick adjustments to fuel success.
The global AdTech industry is expected to compound in the mid-teens range over the next decade. Given that it’s still early in its growth story, now is the time to look at some of the best AdTech stocks.
8 Best AdTech Stocks to Buy Now
Our Methodology
For this article, we selected the holdings of SmartETFs Advertising & Marketing Technology ETF and ranked them in ascending order of the number of hedge funds holding stakes in them. For the purposes, we sifted through Insider Monkey’s hedge fund data for 1Q 2024.
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).
8 Best AdTech Stocks to Buy Now
8) Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 48
Baidu, Inc. (NASDAQ:BIDU) is the largest Internet search engine in China, specializing in Internet services and AI (Artificial Intelligence).
At the time of releasing its 1Q 2024 results, the company said that Baidu Core’s online marketing revenue was stable, and its end-to-end optimization of the AI technology stack continued to propel the growth of AI Cloud revenue during the first quarter. The company’s investments in AI are evident after it recently launched its generative AI, Ernie Bot. This focuses on rivaling Open AI’s ChatGPT. With a new era of Gen-AI unfolding in China, foundation models such as ERNIE should be able to serve as the underlying infrastructure. The company focuses on making the ERNIE family of models affordable and efficient, which should result in margin improvement and stable profitability.
In 1Q 2024, Baidu, Inc. (NASDAQ:BIDU) surpassed top- and bottom-line estimates off the back of healthy online marketing revenue and improved sales from its AI Cloud business.
The company had a dismal year up until now, with the stock falling more than ~20% on a YTD basis. That being said, experts opine that the company’s growth trajectory shall now begin. Baidu, Inc. (NASDAQ:BIDU) saw slower growth in its core advertising revenue over recent years. As a result, it searched for new growth drivers.
This led to increased investments in the fields like self-driving cars, cloud computing, and artificial intelligence (AI). Baidu, Inc. (NASDAQ:BIDU) said that Ernie Bot’s users doubled in recent months to over 200 million.
Notably, 3 investment analysts gave a “Hold” rating on the company’s shares and 14 analysts have given a “Buy” rating. At the time of writing, the stock has an average rating of “Moderate Buy,” with an average price target of $146.60. Baidu, Inc. (NASDAQ:BIDU) was held by 48 hedge funds in the first quarter of 2014, and the stakes amounted to $1.42 billion.
Ariel Investments, an investment management company, released its first-quarter 2024 investor letter and mentioned Baidu, Inc. (NASDAQ:BIDU). Here is what the fund said:
“Alternatively, several positions weighed on performance. China’s internet search and online community leader, Baidu, Inc. traded lower alongside Chinese equities as intensifying problems in China weighed on investor sentiment during the period. The company continues to invest heavily in Artificial Intelligence (AI) and recently launched its generative AI, Ernie Bot, aimed at rivaling Open AI’s ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”
7) Atlassian Corporation (NASDAQ:TEAM)
Number of Hedge Fund Holders: 51
Atlassian Corporation (NASDAQ:TEAM) is engaged in producing software that helps teams work together more efficiently and effectively. It offers project planning and management software, collaboration tools, and IT help desk solutions.
The company’s 4Q 2024 was a difficult one, as its R&D expenses went up by 24% YoY. This increase was because of investments in AI. This growth in expenses was even higher than its revenue growth of 20% YoY in 4Q 2024, and this made investors worry about its future. After all, demand for AI is not slowing anytime soon. Nonetheless, the company is one of the largest players in the enterprise productivity space.
Earlier, it was just like other software companies. It licensed its software which can be used by businesses. Now, the company is focused on getting more customers for subscription services on the cloud. Atlassian Corporation (NASDAQ:TEAM)’s cloud revenues continue to increase, which can act as an actual growth catalyst for the company. In 4Q 2024, the company saw its cloud revenues increase by ~31%. The higher cloud revenues might result in increased margins, higher efficiency, and a predictable income stream (i.e., subscription).
The number of customers spending over $1 million annually saw an increase of 48% YoY, reflecting momentum in serving enterprise customers and maintaining an efficient go-to-market model.
Analysts at The Goldman Sachs Group initiated the coverage on shares of Atlassian Corporation (NASDAQ:TEAM). They raised their rating from “Neutral” to “Buy,” increasing the price target from $200.00 to $230.00 on 2nd August 2024.
A total of 51 hedge funds tracked by the Insider Money database held stakes in the company as of Q1 2024.
Artisan Partners, an investment management company, released a 1Q 2024 investor letter and mentioned Atlassian Corporation (NASDAQ:TEAM). Here is what the fund said:
“Among our top detractors were Atlassian Corporation (NASDAQ:TEAM), ON Semiconductor and Exact Sciences. Atlassian’s earnings results met expectations for cloud revenue growth. However, this was insufficient for investors to support the stock’s momentum after strong recent performance. While parts of its cloud business, such as enterprise, are exceeding expectations, there are signs of weakness among small- and medium-sized companies, where pressures persist in paid seat expansions. We trimmed the position due to valuation concerns; however, we remain bullish in the longer term and are building conviction around its ability to leverage generative AI to drive accelerated cloud revenue growth.”
6) HubSpot, Inc. (NYSE:HUBS)
Number of Hedge Fund Holders: 55
HubSpot, Inc. (N5YSE:HUBS) offers a cloud-based marketing, sales, and customer service software platform. The applications provided by the company are available separately or packaged together.
Experts believe that the company’s stock trades at reasonable levels, given the company’s long-term growth and recent earnings. HubSpot, Inc. (NYSE:HUBS) released its 2Q 2024 earnings print, beating the analysts’ top-line and bottom-line estimates. Its revenue came in at $637.2 million in 2Q 2024, exhibiting a rise from $529.1 million reported in the year-ago quarter. The analysts were expecting $619 million. Top-line growth was aided by higher revenues from subscription and professional services.
Non-GAAP net income stood at $103.5 million or $1.94 per share. This compares to $71.8 million or $1.38 per share in the previous-year quarter. Analysts were expecting $1.63. Earnings were supported by innovation, consistent execution, higher average subscription, and an increase in total customers.
While the stock was having a decent run, the recent headlines weighed over the company’s stock price.
For several months, there was buzz on the street that Alphabet Inc. (NASDAQ:600G) is exploring an acquisition of HubSpot, Inc. (NYSE:HUBS). When the news broke in April 2024, the stock traded higher as the talks suggested a genuine interest from both parties. However, in July 2024, reports indicated that both companies were abandoning their efforts. Post this news, shares of HubSpot, Inc. (NYSE:HUBS) fell sharply, pulling the valuation below the levels before the news. Reuters reported that the US regulatory body indicated an increased aversion to large technology conglomerates getting bigger by taking an inorganic route.
However, experts believe that this news was a potential speed breaker and HubSpot, Inc. (NYSE:HUBS) is well-placed to take off. This is evident from the company’s 2Q 2024 results; where it gave strong full-year guidance. For FY24, it expects total revenue of between $2.567 billion – $2.573 billion.
Analysts at Piper Sandler covered the shares of HubSpot, Inc. (NYSE:HUBS), and reaffirmed their “Overweight” rating. The brokerage gave the price objective of $570.00 on 8th August 2024.
As of the end of the first quarter, 55 out of 920 hedge funds tracked by Insider Monkey held stakes in HubSpot, Inc. (NYSE:HUBS).
5) Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 108
Adobe Inc. (NASDAQ:ADBE), together with its subsidiaries, carries out its operations as a diversified software company worldwide. The company works through three segments: Digital Media, Digital Experience, and Publishing and Advertising.
Over the past 5 years, Adobe Inc. (NASDAQ:ADBE)’s stock return crushed the returns delivered by Dow Jones Industrial Average. While the broader index saw an increase of ~50.0%, shares of Adobe Inc. (NASDAQ:ADBE) went up by ~79%.
This growth in the company’s shares was led by its creative products, Photoshop and Illustrator. Strong execution coupled with market-leading products have supported the company’s 2Q 2024 results. During the quarter, the company saw its revenues and EPS increase by ~11% and ~24% YoY, respectively. Growth in earnings surpassed revenue growth by a wide margin, which demonstrates operational efficiencies.
Analysts at Sanford C. Bernstein upped their price objective on shares of Adobe Inc. (NASDAQ:ADBE) from $653.00 to $660.00, giving the stock an “Outperform” rating on 17th June. Wall Street analysts are quite optimistic about its GenAl offering, Firefly. They tagged Adobe Inc. (NASDAQ:ADBE) as a beneficiary with a real opportunity to monetize GenAl over the near term.
The company raised its annual targets, considering its market-leading products and financial discipline. For FY24, Adobe Inc. (NASDAQ:ADBE) expects total revenue in the range of $21.40 billion – $21.50 billion and earnings per share of $11.80 to $12.00 on a GAAP basis. According to the Insider Monkey database, 108 hedge fund portfolios held Adobe Inc. (NASDAQ:ADBE) at the end of the first quarter of 2024, up from 105 in the previous quarter.
Polen Capital, an investment management company, published a second-quarter 2024 investor letter. Here is what the fund said about Adobe Inc. (NASDAQ:ADBE):
“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings. In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
4) Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 154
Salesforce, Inc. (NYSE:CRM) offers enterprise cloud computing solutions. It provides customer relationship management (CRM) technology, bringing companies and customers together.
Recently, Workday, Inc. (NASDAQ:WDAY) collaborated with Salesforce, Inc. (NYSE:CRM) to roll out a new product that makes use of Al to make workspace tasks efficient. Apart from this, it offers stronger data analytics tools. Wall Street analysts believe that this collaboration should work in favor of both companies.
While, in 1Q 2025, Salesforce, Inc. (NYSE:CRM) missed revenue estimates, the investors need to look at the bigger picture. This was the 2nd instance in 20 years in which the company missed estimates of Wall Street. The company has expanded its margins and profitability. It saw an adjusted operating margin of 32.1%, exhibiting a rise of 450 basis points as compared to the previous quarter. Its operating cash flow went up by ~39% to reach $6.25 billion, with FCF climbing 43% YoY to $6.08 billion.
Earlier, Salesforce, Inc. (NYSE:CRM) announced the launch of the Einstein 1 platform and the Einstein Copilot feature.
BMO Capital Markets believes that most of the customers who have adopted Copilots are doing so in an experimental manner as they are adopting 5% – 10% of the relevant user base. The brokerage views that Copilot’s impact on revenues is expected to be meaningful in fiscal 2026.
Analysts at Wolfe Research gave an “Outperform” rating, giving the price target of $365.00 on shares of Salesforce, Inc. (NYSE:CRM) on 16th April.
A total of 154 hedge funds in Insider Monkey’s database of 920 funds had stakes in Salesforce, Inc. (NYSE:CRM).
Polen Capital, an investment management company, released its second quarter 2024 investor letter and mentioned Salesforce, Inc. (NYSE:CRM). Here is what the fund said:
“Salesforce, Inc. (NYSE:CRM) declined nearly 20% due to a slowdown in revenue and bookings growth, part of a wider trend we’ve observed across enterprise software as companies defer spending on large projects given the uncertain macroeconomic environment. As mentioned, there has been an emerging narrative about prioritized spending on AI, cloud, and security over enterprise software spending that could eventually impair seat-based software over the longer term. Though there may be some near-term shifts in dollars toward GenAI, we believe the market for mission-critical enterprise software will remain robust well into the future. We will monitor the position closely, but we continue to believe that Salesforce is well-placed with its mission-critical software and high customer retention rates to weather these headwinds, lean on pricing power, and effectively monetize generative AI in its product suite.”
3) Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 222
Alphabet Inc. (NASDAQ:GOOGL) owns Google which accounts for 99% of the company’s revenue, out of which over 85% is from online ads.
Investors and experts continue to favour Alphabet Inc. (NASDAQ:GOOGL) primarily because of its strong 2Q 2024 results, which were supported by its Cloud business and AI infrastructure business. The tech giant’s revenues came in at $85 billion in 2Q 2024, reflecting a rise of 14% YoY. This increase came on the heels of Search as well as Cloud, which for the first time crossed $10 billion in quarterly revenues and $1 billion in operating profit. Revenue from Google Cloud business went up by ~29% YoY to $10.35 billion.
Optimism around the Google Cloud business continues to prevail, thanks to Alphabet Inc. (NASDAQ:GOOGL)’s AI infrastructure and large language models, which continue to gain popularity. This should help the company as demand for cloud-based AI infrastructure and services is anticipated to become a $397.81 billion market (as per Fortune Business Insights). This means that the market should compound at over ~30% during 2023-2030.
Google Cloud revenue has been outpacing the overall revenue growth of the company. Therefore, this significant opportunity in the cloud AI market might fuel the company’s overall growth. The stock currently trades at ~21.51x its forward earnings, which is at a discount compared to Nasdaq-100’s NTM earnings multiple of ~24.4x.
Stifel Nicolaus covered the shares of Alphabet Inc. (NASDAQ:GOOGL), and gave a “Buy” rating. The brokerage gave the price target of $196.00 on 15th May 2024. As of the first quarter, the stock is held by 222 hedge funds with stakes worth $32.3 billion.
Patient Capital Management, a value investing firm, released its second quarter 2024 investor letter. Here is what the firm said about Alphabet Inc. (NASDAQ:GOOGL):
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
2) Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 246
Meta Platforms, Inc. (NASDAQ:META) is the world’s largest online social network, having more than 3.6 billion monthly active users. These users engage with each other in a variety of ways, exchanging messages and sharing news events, etc.
The company released its 2Q 2024 financial results, wherein, its revenues jumped 22% YoY to $39 billion, with ads revenue coming at ~$38.3 billion. Ads revenue saw a jump of ~22% YoY, and the management of Meta Platforms, Inc. (NASDAQ:META) is quite optimistic about ads revenue for 3Q 2024.
In May, the company unveiled a slate of new Gen-AI-powered tools and services. These services focus on helping businesses improve their ad performance and visibility on the company’s popular social platforms such as Facebook and Instagram.
Meta Platforms, Inc. (NASDAQ:META)’s management highlighted that spending is expected to significantly increase in 2025 because of its infrastructure costs. Well, this increase is understandable as this is related to the development of a leading large language model. This powers GenAI technologies. The company continues to focus on improving its ad revenues by innovating in a way that can bring more personalization to each user. This should help Meta Platforms, Inc. (NASDAQ:META) increase the price per ad.
Analysts at Piper Sandler upped their price objective on the shares of Meta Platforms, Inc. (NASDAQ:META) from $545.00 to $575.00, giving it an “Overweight” rating on 1st August. As of the first quarter, the stock is held by 246 hedge funds with stakes worth $46.9 billion.
Polen Capital, an investment management company, released its second-quarter 2024 investor letter and mentioned Meta Platforms, Inc. (NASDAQ:META). Here is what the fund said:
“In the second quarter, the top relative contributors to the Portfolio’s performance were all names we do not hold: Home Depot, Meta Platforms, Inc. (NASDAQ:META), and AbbVie. Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”
1) Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 302
Amazon.com, Inc. (NASDAQ:AMZN) is a leading online retailer and one of the highest-grossing e-commerce aggregators. The company’s focus areas include e-commerce, cloud computing, digital streaming, and AI.
The stock of Amazon.com, Inc. (NASDAQ:AMZN) came under pressure after the internet giant missed analysts’ expectations on revenues. The company’s revenues fell short by $760 million. This was mainly because of the subdued growth of North American and international retail segments. This slowness in growth offset the accelerating growth of its Amazon Web Services cloud platform.
However, it seems that the knee-jerk reaction that broader markets saw has impacted the shares of Amazon.com, Inc. (NASDAQ:AMZN). The company has given a healthy outlook, with operating income expected to come in the range of $11.5 billion and $15 billion in 3Q 2024. Even at the mid-point, the company should be able to see an 18% YoY improvement. This compares to the analysts’ expectations of ~6.1% earnings growth in 3Q 2024 for S&P 500 companies.
Secondly, Amazon.com, Inc. (NASDAQ:AMZN) is expected to benefit from the opportunities in cloud computing. The company’s management is of the view that most of its customers have ended their cost management initiatives. These initiatives had earlier led to a slowdown in AWS sales growth. With these initiatives coming to an end, Amazon.com, Inc. (NASDAQ:AMZN)’s cutting-edge AI developments should help AWS grow its lead in cloud computing.
The company’s CEO said that the generative AI boom has been prompting more companies to upgrade their cloud services. AWS tends to have much higher operating margins as compared to the company’s e-commerce marketplaces.
Analysts at TD Securities increased their price objective on shares of Amazon.com, Inc. (NASDAQ:AMZN) from $225.00 to $245.00 on 10th July. A total of 302 hedge funds tracked by the Insider Monkey database held stakes in Amazon.com, Inc. (NASDAQ:AMZN), up from 293 in the preceding quarter.
Diamond Hill Capital, an investment management company, released its second-quarter 2024 investor letter and mentioned Amazon.com, Inc. (NASDAQ:AMZN). Here is what the fund said:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
While we acknowledge the potential for Amazon.com, Inc. (NASDAQ:AMZN), our conviction lies in the belief that AI stocks hold greater promise for delivering strong returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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