In this article, we will take a look at Jim Cramer’s 5 best AI stocks. To see more such companies, go directly to Jim Cramer’s 10 Best AI Stocks.
5. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 152
Jim Cramer repeatedly talks about big tech names in his programs and Alphabet Inc. (NASDAQ:GOOG) is often his topic of discussion. Earlier this year Cramer said that Alphabet Inc. (NASDAQ:GOOG) could enjoy high single-digit growth from AI. In another program, Cramer said that Alphabet Inc. (NASDAQ:GOOG) could become a “consultant” company in the AI domain given its size and deals with other companies. Cramer also referred to a report from Barclays earlier this year which talked about Alphabet Inc. (NASDAQ:GOOG)’s existing AI ventures like DeepMind.
Oakmark Global Select Fund made the following comment about Alphabet Inc. (NASDAQ:GOOG) in its Q3 2023 investor letter:
“Alphabet Inc. (NASDAQ:GOOG)(U.S.) was the top contributor for the fiscal year. Alphabet reported multiple strong sets of earnings releases over the past year, and its results generally exceeded consensus estimates across key metrics. Most recently, search revenue growth accelerated from 5% to 6.5% sequentially in the second quarter, a notable development given lingering economic uncertainty and broader advertising weakness. Cloud growth remained at 30%, stable versus the previous quarter, despite continued headwinds from customers optimizing cloud usage. Margin progression also continued, and cloud margins reached 5%. CFO Ruth Porat emphasized that the largest impact from the company’s cost[1]saving initiatives will not be felt until 2024. YouTube continues to prioritize its Shorts segment, which is experiencing strong viewership growth. Although this is a near-term revenue headwind, we believe Shorts’ monetization will accelerate over time. Addressing the year’s hottest topic, CEO Sundar Pichai said Alphabet is an “AI-first company” that is “extremely well-positioned as AI reaches an inflection point.” At Alphabet’s annual developer conference in May, it showcased an impressive array of new AI-powered consumer tools to be rolled out over the course of the year. Investors reacted positively to these presentations, which highlighted the company’s impressive innovations in AI technologies. Overall, we believe the company is positioned well to reap the benefits of the scale of its search business and years of its investment into AI capabilities. We also appreciate that the company is undergoing a transformation on how it views cost discipline and efficiency.”
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 175
Earlier in October Jim Cramer said he likes NVIDIA Corporation (NASDAQ:NVDA) even after last year’s huge gains because of the company’s AI chips dominance. Cramer said his charitable trust owns the stock and he recommends investors to “own it” and not trade it.
As of the end of the second quarter of 2023, 175 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in NVIDIA Corporation (NASDAQ:NVDA).
Artisan Developing World Fund made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2023 investor letter:
“Our focus on scalable business models has its roots in our economic framework. As potential output moderated in most emerging countries, it became clear to us affordability was not improving and that low penetration was necessary but not sufficient for value creation. We eliminated companies from the portfolio that were struggling to generate revenue significantly in excess of fixed costs, often replacing them with passport companies such as NVIDIA Corporation (NASDAQ:NVDA) and Airbnb that were economically tied to emerging markets. Over a period of time, we have been successful in redefining the emerging markets opportunity set around real per capita GDP increases, growth in the middle class, revenue velocity and demand fulfilment. Combined with changes in the market backdrop that have resulted in privileged competitive positions for companies with financial strength and access to capital, we find our opportunity set expanding anew to include companies that are both based in emerging markets and conducive to value creation.”
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 225
Earlier this year Jim Cramer said in a program praised Meta Platforms, Inc. (NASDAQ:META)’s “breathtaking” quarterly report and said that stock had more room to run. Cramer said that his charitable trust owns a position in Meta Platforms, Inc. (NASDAQ:META).
Cramer praised Mark Zuckerberg’s use of AI to reinvigorate growth at Instagram and Facebook, which were facing a downward trend in usage, according to Cramer. People were not checking their feeds and they were not posting content on these platforms. Zuckerberg then decided to use AI to improve these platforms’ ranking and recommendation systems, according to Cramer. Cramer said only Microsoft is doing more with AI “although Mark may be doing more, to tell you the truth.”
Cramer referred to Q2 earnings call of Meta Platforms, Inc. (NASDAQ:META) where Mark Zuckerberg highlighted the company’s AI plans. Here’s what Mark Zuckerberg had said:
“Investments that we’ve made over the years in AI, including the billions of dollars we’ve spent on AI infrastructure are clearly paying-off across our ranking and recommendation systems and improving engagement and monetization. AI recommended content from accounts you don’t follow is now the fastest-growing category of content on Facebook’s feed. Now, since introducing these recommendations, they’ve driven a 7% increase in overall time spent on the platform. This improves the experience because you can now discover things that you might not have otherwise followed or come across. Reels is a key part of this discovery engine and Reels plays exceed 200 billion per day across Facebook and Instagram. We’re seeing good progress on Reels monetization as well with the annual revenue run-rate across our apps now exceeding $10 billion, up from $3 billion last fall.
Beyond Reels, AI is driving results across our monetization tools, through our automated ads products, which we call Meta Advantage. Almost all our advertisers are using at least one of our AI driven products. We’ve also deployed Meta Lattice, a new model architecture that learns to predict an ads performance across a variety of datasets and optimization goals. And we introduced AI Sandbox, a testing playground for generative AI powered tools like automatic text variation, background generation and image outcropping. Business messaging is another key piece of our monetization strategy and we recently announced that the 200 million users of our WhatsApp Business app will now be able to create Click-to-WhatsApp ads for Facebook and Instagram without needing a Facebook account.”
Read the full earnings call transcript here.
As of the end of the second quarter of 2023, 225 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Meta Platforms, Inc. (NASDAQ:META). The biggest stakeholder of Meta Platforms, Inc. (NASDAQ:META) was Chase Coleman and Feroz Dewan’s Tiger Global Management LLC which owns a $2.5 billion stake in the company.
Artisan Global Value Fund made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its Q2 2023 investor letter:
“Our best performing stocks this quarter were Meta Platforms, Inc. (NASDAQ:META), Alphabet and Heidelberg Materials. Meta was the largest contributor to performance. Its shares have almost fully recovered from last year’s declines, rising 35% during the quarter and 138% YTD. During the quarter, the company reported earnings that showed a return to growth and healthy user engagement metrics. Most importantly, profitability appears to have stabilized and is poised to improve as significant cost reduction actions implemented over the past six months begin to have an impact. Separate from fundamental performance, there is excitement over AI’s potential to help the company’s business. While Meta’s technology prowess and massively scaled media platform certainly position the company to take advantage of AI, we believe it’s far too early to estimate any discrete tangible benefits. Overall, we view AI as one of several drivers that will contribute to Meta’s continued growth.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 278
Jim Cramer in a program earlier this year said that he was wrong about Amazon.com, Inc. (NASDAQ:AMZN) when it comes to AI. Cramer said he’d thought Amazon.com, Inc. (NASDAQ:AMZN) would be left behind in the AI race. Cramer said that Amazon.com, Inc. (NASDAQ:AMZN)’s AWS platform offers strong machine learning, image recognition and other AI-related capabilities which many companies are already using. Cramer also talked about AWS Bedrock platform for generative AI and praised its capabilities to generate, for instance, content marketing copy based on past campaigns.
White Falcon Capital Management made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q3 2023 investor letter:
“There are comparable narratives involving NU Holdings, Amazon.com, Inc. (NASDAQ:AMZN), and Teck Resources, to name a few holdings from the White Falcon portfolio. Amazon constructed its logistics network and cloud computing infrastructure using yesterday’s currency, but it is poised to capitalize on this network with the inflated dollars of tomorrow. In essence, we believe we hold wonderful businesses with growing revenue streams and potential for operating leverage – all at reasonable valuations.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 300
Jim Cramer regularly talks about Microsoft Corporation (NASDAQ:MSFT) and how AI could boost the stock in the long term. Cramer said in a program that we should put Microsoft Corporation (NASDAQ:MSFT) on front, right and center due to AI since the company has got a “real AI product.” Cramer praised Microsoft Corporation (NASDAQ:MSFT)’s copilot application announced in September. Microsoft Copilot is an AI virtual assistant.
Microsoft Corporation (NASDAQ:MSFT) is also heavily invested in OpenAI, the creator of ChatGPT. Analysts believe Microsoft Corporation (NASDAQ:MSFT) could start enjoying fruits of its huge AI investments soon. OpenAI is also reportedly close to a stock sale deal that would value OpenAI at $90 billion.
Microsoft Corporation (NASDAQ:MSFT) is the most popular stock among the 910 elite hedge funds tracked by Insider Monkey. As of the end of the second quarter of 2023, 300 hedge funds reported owning stakes in Microsoft Corporation (NASDAQ:MSFT).
ClearBridge Value Equity Strategy made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q2 2023 investor letter:
“We initiated a small position in Microsoft Corporation (NASDAQ:MSFT) during the quarter, which may seem surprising given our concerns about index concentration. However, we seized the opportunity on a compelling entry point below our business value estimate, due to an anticipated acceleration of demand for Microsoft’s Azure cloud business and incremental revenues from integration of Microsoft’s AI Copilot program into its office platform. We believe this could support double-digit growth, while simultaneously solidifying Microsoft’s competitive position as an AI winner. Even as a small position, we believe Microsoft provides a large portfolio construction benefit given low correlation to the rest of the portfolio.”
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