We recently published a list of 10 AI Stocks That Will Skyrocket. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against other AI stocks that will skyrocket.
Enterprise AI is expected to Drive Earnings in 2025
Some investors are heavily scrutinizing Big Tech’s AI spending. Despite these hefty expenditures, Big Tech has been enjoying solid revenues and earnings growth. Yung-Yu Ma, CIO at BMO Wealth Management, recently joined Yahoo Finance to shed light on the overall AI sector outlook heading into 2024.
Ma believes that companies are increasing their investments in AI in anticipation of higher returns. He said that it makes sense that the market is less likely to be enthusiastic about this situation. Ma argued that while spending on AI is likely to increase, there is a certainty that the results will soon show, maybe by the end of 2025.
He added that the market will probably see healthy earnings growth in 2025. Spending is broadly going to drive these earnings, particularly AI and its different use cases such as data centers, electricity grids, and other infrastructure. He expects an overall growth in valuation and shared that Big Tech is extremely confident and committed to pouring investment into the sector.
A Glance at Some Revolutionary AI Startups
2024 has been quite a year for artificial intelligence. Existing startups like Anthropic and Databricks have been performing exceptionally well and transforming the industry.
Anthropic is an AI safety and research company behind the OpenAI rival, Claude. On November 24, Anthropic extended its partnership with AWS, involving another $4 billion investment, bringing the total to $8 billion. The partnership also positions AWS as Anthropic’s primary cloud and training partner. Keeping up with the partnership, on December 4, Anthropic began optimizing Claude models to be able to run on AWS Trainium 2.
Databricks, the data and AI company, is another AI startup crucial to the AI revolution. Some of the products by Databricks include data management solutions, data warehousing, real-time analytics, data sharing, and data governance. The company is expanding to new heights. On November 6, the company partnered with KT Corporation to boost data and AI innovation in Korea. Following the trend, on November 20, Databricks announced it saw 70% annualized growth in its French business and has launched a new office in central Paris.
Our Methodology
To come up with AI stocks that will skyrocket, we consulted media reports to shortlist stocks that are expected to perform exceptionally well according to analysts and strategists. After consulting 10 similar rankings on the internet we examined the Street-High upside for each stock and picked the ones with the highest upside, as of December 3, 2024. Our list is in ascending order of the street high upside as of December 3, 2024. We have also mentioned the hedge fund sentiment for each stock.
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 user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc. (NASDAQ:GOOGL)
Street High Upside as of December 3, 2024: 40%
Number of Hedge Fund Holders: 202
Alphabet’s (NASDAQ:GOOGL) performance in Q3 2024 was predominantly driven by its growing demand for search and cloud due to artificial intelligence. The company has been dominating the AI space with its full-stack approach based on three components, a robust AI infrastructure, top-notch research teams, and a large network through its differentiated products and platforms. As of Q3 2024, all products and services with more than 2 billion monthly users use Gemini models. Extending beyond its products, Alphabet Inc. (NASDAQ:GOOGL) is also working to offer Gemini more broadly to developers, such as on GitHub Copilot.
In addition to that, the company also improved the performance of AI in search by expanding the type of questions people can ask. Alphabet Inc. (NASDAQ:GOOGL) also revealed that new Chromebooks would now come with built-in artificial intelligence features. On the shopping front, Alphabet Inc. (NASDAQ:GOOGL) launched a new artificial intelligence tool to help consumers pick the right products supported by generous product details. Alphabet Inc. (NASDAQ:GOOGL) is a prominent name in AI and cloud. Analysts are also bullish on the stock and their high price target represents an upside of 40% from current levels.
Overall, GOOGL ranks 7th on our list of AI stocks that will skyrocket. While we acknowledge the potential of GOOGL to grow, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock
Disclosure: None. This article is originally published at Insider Monkey.
