Goldman Sachs AI Stocks: Top 5 Stock Picks

In this article, we will be taking a look at Goldman Sachs AI stocks: top 5 stock picks. To read our detailed analysis of the artificial intelligence market, you can go directly to see the Goldman Sachs AI Stocks: Top 10 Stock Picks.

5. Meta Platforms, Inc. (NASDAQ:META)

Goldman Sachs’ Q2 Stake Value: $2.8 billion

Number of Hedge Fund Holders: 225

Meta Platforms, Inc. (NASDAQ:META) is based in Menlo Park, California. It has been actively working with artificial intelligence, including through Meta AI, its AI laboratory, which develops AI and augmented reality technologies.

Wedbush’s Ygal Arounian initiated coverage on Meta Platforms, Inc. (NASDAQ:META) shares with an Outperform rating and a $350 price target on August 22.

In the second quarter, 225 hedge funds were long Meta Platforms, Inc. (NASDAQ:META) with a total stake value of $30.9 billion.

Here’s what Giverny Capital Asset Management, LLC said about Meta Platforms, Inc. (NASDAQ:META) in its second-quarter 2023 investor letter:

“I have believed for a while that we’re better served with a lower weight to the tech giants – we own Alphabet (8.1% of our model portfolio at the end of June) and Meta Platforms, Inc. (NASDAQ:META) (5.2%) for a 13.3% exposure, or about half the Index’s weight in the giants. And while Alphabet’s 36% return for the first half and Meta’s 138% return were gratefully received, I’m pleased to report that if we strip out that contribution to our overall return, the other 23 stocks we own, constituting 85% of our portfolio (with cash making up the balance), were up 10.2% on a weighted basis.

GCAM owns two of the seven tech mega caps in Alphabet and Meta, and they enjoyed similar rises. As mentioned, Alphabet A&C shares rose 36% while Meta rose 138%. Together, they added 2.38 percentage points to the overall Index return, meaning these seven tech giants cumulatively generated 12.4 percentage points of return, or roughly three-quarters of the Index’s return.

Alphabet and Meta combined sport a $2.25 trillion market cap and between them should generate roughly $120 billion of pretax profit this year. That’s a multiple of 19 times pretax profit, a substantial discount to Microsoft and Apple, and an even larger discount to Amazon, Nvidia and Tesla.”

4. Alphabet Inc. (NASDAQ:GOOG)

Goldman Sachs’ Q2 Stake Value: $5.8 billion

Number of Hedge Fund Holders: 152

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

Based in Mountain View, California, Alphabet Inc. (NASDAQ:GOOG) is a big tech company that is actively involved in the AI chatbot space with its experimental Bard chatbot, among more.

Alphabet Inc. (NASDAQ:GOOG) was seen in the portfolios of 152 hedge funds in the second quarter, with a total stake value of $18.9 billion.

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

“I have believed for a while that we’re better served with a lower weight to the tech giants – we own Alphabet Inc. (NASDAQ:GOOG) (8.1% of our model portfolio at the end of June) and Meta (5.2%) for a 13.3% exposure, or about half the Index’s weight in the giants. And while Alphabet’s 36% return for the first half and Meta’s 138% return were gratefully received, I’m pleased to report that if we strip out that contribution to our overall return, the other 23 stocks we own, constituting 85% of our portfolio (with cash making up the balance), were up 10.2% on a weighted basis.

GCAM owns two of the seven tech mega caps in Alphabet and Meta, and they enjoyed similar rises. As mentioned, Alphabet A&C shares rose 36% while Meta rose 138%. Together, they added 2.38 percentage points to the overall Index return, meaning these seven tech giants cumulatively generated 12.4 percentage points of return, or roughly three-quarters of the Index’s return.

Alphabet and Meta combined sport a $2.25 trillion market cap and between them should generate roughly $120 billion of pretax profit this year. That’s a multiple of 19 times pretax profit, a substantial discount to Microsoft and Apple, and an even larger discount to Amazon, Nvidia and Tesla.”

3. NVIDIA Corporation (NASDAQ:NVDA)

Goldman Sachs’ Q2 Stake Value: $6.3 billion

Number of Hedge Fund Holders: 175

We saw 175 hedge funds long NVIDIA Corporation (NASDAQ:NVDA) in the second quarter. Their total stake value was $25.9 billion.

NVIDIA Corporation (NASDAQ:NVDA) is a semiconductor company that is vital to the development of AI today because of its development and provision of AI chips and GPUs.

A Buy rating and a $668 price target were maintained on NVIDIA Corporation (NASDAQ:NVDA) on August 24 by William Stein at Truist Securities.

Mairs & Power said the following about NVIDIA Corporation (NASDAQ:NVDA) in its second-quarter 2023 investor letter:

“Regarding stock selection in the first half, NVIDIA Corporation (NASDAQ:NVDA) was a massive outperformer, up 189.54%. Amazon and Microsoft were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year. Nvidia is the leading provider of processors used for artificial intelligence (AI) computation for both learning and inferencing, and its stock rallied significantly on a massive earnings report in the first quarter as cloud data center companies invested heavily in AI.”

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

Goldman Sachs’ Q2 Stake Value: $6.7 billion

Number of Hedge Fund Holders: 278

Amazon.com, Inc. (NASDAQ:AMZN) is a broad-line retail and e-commerce company. It is incorporating AI in its Amazon Web Services businesses and has plans to start producing its own AI chips.

In total, 278 hedge funds were long Amazon.com, Inc. (NASDAQ:AMZN) in the second quarter, with a total stake value of $34.9 billion.

On August 23, Rob Sanderson at Loop Capital maintained a Buy rating and a $200 price target on Amazon.com, Inc. (NASDAQ:AMZN).

This is what Mairs & Power said about Amazon.com, Inc. (NASDAQ:AMZN) in its second-quarter 2023 investor letter:

“Regarding stock selection in the first half, Nvidia (NVDA) was a massive outperformer, up 189.54%. Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year.

Amazon had an impressive first half of the year as well with growth out of its retail segment but slightly slower growth in its cloud business. Customers optimized workloads for existing capacity they were already paying for rather than adding incremental capacity in the current environment. We remain very excited about the opportunity for the company to reduce the labor needs of its retail segment through the use of technology and automation in the future.”

1. Microsoft Corporation (NASDAQ:MSFT)

Goldman Sachs’ Q2 Stake Value: $13.2 billion

Number of Hedge Fund Holders: 300

Alex Haissl at Redburn Partners holds a Buy rating and a $440 price target on Microsoft Corporation (NASDAQ:MSFT) as of August 11.

Microsoft Corporation (NASDAQ:MSFT) had 300 hedge funds long its stock in the second quarter. Their total stake value was $69.8 billion.

Another big tech name on our list, Microsoft Corporation (NASDAQ:MSFT) is a company that has been heavily investing in OpenAI, the creator of ChatGPT, alongside developing its own Bing AI chatbot, among more.

Mairs & Power said the following about Microsoft Corporation (NASDAQ:MSFT) in its second-quarter 2023 investor letter:

“Regarding stock selection in the first half, Nvidia (NVDA) was a massive outperformer, up 189.54%. Amazon and Microsoft Corporation (NASDAQ:MSFT) were also positive contributors, up 55.19% and 42.66%, respectively. All three stocks benefited from a renewed interest in growth stocks by investors in the first half of the year.

Microsoft (MSFT) was another positive contributor to performance in the first half. The company continued to take share in cloud computing. Its strong relationships with customers, as well as knowledge of their businesses, differentiates its offering, which is also helped by leading investments in AI. We expect the company will continue to integrate AI tools into most of its productivity suite of software in the not-too-distant future. This should help with employee productivity and the labor constraints of most of its customers.”

See also 20 Best-Funded AI Startups in 2023 and 11 Most Advanced AI Companies.