Wall Street Picked These 5 AI Stocks for 2024

This article summarizes Wall Street picked these 5 AI stocks for 2024. For a detailed look at such stocks, read our article, Wall Street Picked These 13 AI Stocks for 2024.

5. Alphabet Inc (NASDAQ:GOOG)

Number of Hedge Fund Holders: 166
YTD Performance as of March 7, 2024: -3.6%

Alphabet Inc (NASDAQ:GOOG) uses AI to boost its search dominance. The internet giant offers various internet services, such as search, ads, maps, photos, and videos. Alphabet Inc (NASDAQ:GOOG) also has cloud computing.

According to BMO analysts, Alphabet Inc (NASDAQ:GOOG) is best-positioned to benefit from the proliferation of generative AI and large language models.

“While the acquisition of DeepMind in 2014 resulted in a step function increase in AI capabilities, Google has integrated machine learning (“ML”) into its core products since 2000 – this effectively gives Alphabet a 10+ year head start relative to the industry,” the analysts wrote in a note.

Alphabet Inc (NASDAQ:GOOG) rallied by more than 50% last year as it integrated AI into its search and enhancing advertising on YouTube.

As of their fourth quarter of 2023 shareholdings, 166 of the 933 hedge funds covered by Insider Monkey’s research held a stake in Alphabet Inc (NASDAQ:GOOG). The firm’s largest hedge fund investor is Ken Fisher’s Fisher Asset Management, which has invested $6.3 billion.

In its fourth quarter 2023 investor letter, FPA Crescent Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG):

“Alphabet Inc. (NASDAQ:GOOG) continued going from strength to strength during 2023 despite concerns that competition may infringe on the company’s dominant position in Search. Thus far, Alphabet has continued to hold its own, and we look forward to seeing how the company incorporates further AI developments across the Alphabet ecosystem. Lastly, we are hopeful that the impending arrival of a new CFO will bring a renewed focus on efficiency – an area where we believe Alphabet has ample room for improvement.”

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4. NVIDIA Corp (NASDAQ:NVDA)

Number of Hedge Fund Holders: 173
YTD Performance as of March 7, 2024: +78.4%

NVIDIA Corp (NASDAQ:NVDA) was the best-performing stock in the S&P 500 last year after rallying by more than 251% at the back of the AI frenzy. Given its momentum over the past year, it is one of Wall Street’s top AI stock picks.

While NVIDIA Corp (NASDAQ:NVDA) has more than tripled in value amid the AI frenzy, Tigress Financial analyst Ivan Feinseth believed the stock could rise to record highs of $985 a share.

Goldman Sachs analysts’ have already raised their fiscal 2025 and 2026 estimates for Nvidia  insisting earnings should grow by an average of 22%  on robust AI server demand.

“We no longer assume a drop off in Data Center revenue in 2HCY24 and instead model consistent growth through 1HCY25 driven by continued spending on Gen AI infrastructure by the large cloud service providers, a broadening customer profile, and multiple new product cycles,” the analysts wrote.

Insider Monkey scoured through 933 hedge fund portfolios for their Q4 2023 investments and discovered 173 NVIDIA Corp (NASDAQ:NVDA) shareholders. Rajiv Jain’s GQG Partners was the firm’s most significant investor due to its $6.8 billion stake.

Here is what Alger Spectra Fund said about NVIDIA Corporation (NASDAQ:NVDA) in its Q4 2023 letter to investors: 

“NVIDIA Corporation (NASDAQ:NVDA) is a leading supplier of graphics processing units (GPUs) for a variety of end markets, such as gaming, PCs, data centers, virtual reality and high-performance computing. The company is leading in most secular growth categories in computing, and especially artificial intelligence and super- computing parallel processing techniques for solving complex computational problems. Simply put, Nvidia’s computational power is a critical enabler of Al and therefore critical to Al adoption, in our view. During the period, shares contributed to performance as Nvidia reported solid fiscal third quarter results well above analyst expectations, driven by strong demand from data centers. Growing Al data center workloads are driving demand for the increased interconnections and fully accelerated software stacks, thereby enabling leading application performance and fast result times.”

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3. Meta Platforms Inc (NASDAQ:META)

Number of Hedge Fund Holders: 242
YTD Performance as of March 7, 2024: +41.4%

Meta Platforms Inc (NASDAQ:META) runs social media and entertainment platforms with AI, which helps the company improve its ads and boost revenue and profit.

According to Wolfe Research analyst Deepak Mathivanan integration of generative AU into Meta Platforms Inc (NASDAQ:META)’s universe should lead to more people spending on the ecosystem. He wrote in a research note.

“META is one of the handfuls of companies in our coverage universe where the advancements in Gen AI recently can have a significant impact on financials in the medium term. Incremental revenues from new engagement and ad inventory are the most direct benefit,”

As of Q4 2023, 242 out of the 933 hedge funds polled by Insider Monkey had bought and owned the firm’s shares. Meta Platforms (NASADQ:META)’s largest shareholder in the fourth quarter remained Ken Griffins Citadel Investment Group which owned 19.87 million shares worth $7 billion.

Here is what Baron Fifth Avenue Growth Fund stated regarding Meta Platforms, Inc. (NASDAQ:META) in its fourth quarter 2023 investor letter:

“Improving unit economics: Many of our companies were able to significantly expand margins during 2023 even though revenue growth decelerated for some of them, showcasing the power of their capital-light, recurring revenue business models, and their increased focus on efficiency. One public example that was at least partially responsible for driving other companies (especially in IT) to become more efficient is X (formerly Twitter), which reduced headcount by a whopping 80% after Elon Musk’s acquisition, despite growing user engagement. Another well-known example is Meta Platforms, Inc. (NASDAQ:META), for which cost controls and margin expansion this year have been a key reason behind the stock’s outperformance (Mark Zuckerberg called 2023 the year of efficiency). Other less well-known examples include the commerce platform, Shopify, which is expected to expand its operating margins from breakeven to 10.9% in 2023 thanks to the sale of its money-losing logistics business, and a 23% reduction in its workforce. What is even more impressive is that the company was able to accelerate innovation velocity (with a lower headcount) as well as improve sales and marketing productivity.”

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2. Amazon.com Inc (NASDAQ:AMZN)

Number of Hedge Fund Holders: 293
YTD Performance as of March 7, 2024: +19.3%

Amazon.com Inc (NASDAQ:AMZN) is a consumer and tech company that sells products, ads, and subscriptions. It also offers AI services through Amazon Web Services. AI helps Amazon.com Inc (NASDAQ:AMZN) improve its e-commerce, cloud, and logistics.

RBC Capital analyst Brad Erickson has called Amazon.com Inc (NASDAQ:AMZN) one of his favorite ideas in the internet space in 2024. The analyst reaffirmed a buy rating on AMZN stock with a price target of $180.

“We expect AMZN to gain ‘share’ in the GenAI narrative battle between itself, GOOGL & MSFT as Bedrock builds partnerships and gains more traction,” Erickson said in a research note to investors.

In the fourth quarter, hedge fund sentiment was positive toward Amazon.com, Inc. (NASDAQ:AMZN) as the number of hedge funds with investments in the stock went up to 293, up from 286 in the previous quarter. Fisher Asset Management increased its stake in Amazon.com Inc (NASDAQ:AMZN) by 3% to 42.24 million shares worth $6.42 billion.

This is what Polen Global Growth Strategy said about Amazon.com, Inc. (NASDAQ:AMZN) in its fourth quarter 2023 investor letter:

“Amazon.com, Inc. (NASDAQ:AMZN), which saw significant price appreciation throughout much of 2023, saw its share price increase materially in Q4 following the company’s Q3 2023 earnings report. We have yet to see the long-awaited re-acceleration in AWS (Amazon Web Services) revenue growth. However, in our estimation, the segment’s growth has likely bottomed, and we could see accelerating growth in 2024. Further, Amazon’s e-commerce business has gradually re-accelerated from 2022’s levels and, perhaps most importantly, the company’s margins and free cash flow have rebounded materially from last year. This rebound in margins and free cash flow at Amazon has been a key component of our long-term thesis for the business, and we expect the improvement in these metrics to continue into 2024 and beyond (though perhaps not linearly) as the company continues to optimize costs and capital expenditures. Our position in Amazon reflects our positive long-term expectations of the business, and it is currently our largest absolute weight in the Portfolio.”

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1. Microsoft Corp (NASDAQ:MSFT)

Number of Hedge Fund Holders: 302
YTD Performance as of March 7, 2024: +9.5%

Microsoft Corp (NASDAQ:MSFT) is a software and AI leader. It offers Office, Microsoft 365 Copilot, and Microsoft Viva. It invested $13 billion in OpenAI and plans to invest $2.1 billion more in AI. Microsoft Corp (NASDAQ:MSFT)’s AI investments drove its 64%+ rally in 2023.

Analysts at TD Cowen have already raised the price target for Microsoft Corp (NASDAQ:MSFT) to $390 a share on expectations that AI will fuel further upside action.

“We expect Azure above high-end of guide, with encouraging Cloud data points including third party data and field checks showing stronger new bookings trends and growing AI tailwinds,” analysts said, according to Investing.com.

Of the 933 hedge funds profiled by Insider Monkey during the fourth quarter of 2023, 302 had investments in the robotics company. Microsoft Corporation (NASDAQ:MSFT)’s largest shareholder is the Bill & Melinda Gates Foundation Trust, owning 38.21 million shares worth $14.37 billion.

Here is what RiverPark Large Growth Fund said about Microsoft Corporation (NASDAQ:MSFT) in its fourth quarter 2023 investor letter:

“Microsoft Corporation (NASDAQ:MSFT): MSFT was a top contributor in the quarter following strong FY1Q24 earnings in late October. In that earnings report, MSFT delivered better-than-expected revenue (+13%) and earnings (+27%), with growth in both accelerating from the prior quarter. All three major segments grew revenue faster than expected, highlighted by 28% constant currency growth in Azure, the company’s cloud offering. This marked the first quarter-over-quarter acceleration for Azure in six quarters. Operating margins (48%) were 400 basis points better than expected and earnings came in 13% ahead of expectations.

Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $100 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to both return to shareholders and use for acquisitions.”

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Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily newsletter to get  the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a peek at Dorsal Capital Partners Sees a 13% Boost in 2023: Its Top 15 Stock Picks and Here is How Billionaire Chris Hohn’s Hedge Fund Beat the Market with 33% Gain.