In 2023, artificial intelligence (AI) emerged as a critical trend across various industries, continuing its significance into 2024. A McKinsey survey highlighted that 40% of executives and managers intend to boost their investments in generative AI, reflecting the industry’s growth prospects. Despite a 12% increase in the Nasdaq CTA Artificial Intelligence & Robotics Index over the past year, it lagged behind the Russell 1000’s 21% gain.
This analysis delves into the top AI stocks for February 2024, selecting those offering the best value, rapid growth, and strong momentum, based on data up to January 25, 2024.
Value investing targets stocks priced below their true worth. Typically, such stocks are identified through fundamental analysis, with the price-to-earnings (P/E) ratio serving as a key indicator. A low P/E ratio suggests a stock is undervalued compared to its intrinsic value.
Top AI Value Stocks
– Alibaba Group Holding Ltd. (BABA): A major player in e-commerce, cloud computing, and digital entertainment in China, Alibaba manages various online and mobile marketplaces. Market Cap: $188.9 billion; P/E Ratio: 10.2.
– Aptiv PLC (APTV): An Irish-American company specializing in automotive parts focusing on connectivity, safety, and environmental sustainability, Aptiv is also involved in vehicle software, incorporating AI and machine learning. Market Cap: $23.5 billion; P/E Ratio: 10.4.
– JD.com Inc. (JD): China’s leading retailer and e-commerce company, JD.com, in June 2023, launched a large language model AI tool, ChatRhino, aimed at enhancing e-commerce, logistics, and marketing. Market Cap: $31.5 billion; P/E Ratio: 11.2.
For growth stocks, investors often look at revenue and earnings per share (EPS) growth. A balanced approach considers both aspects, excluding companies with growth rates of 1,000% or more to avoid outliers.
Rapidly Growing AI Stocks
– Aptiv PLC: Mentioned earlier.
– Dynatrace Inc. (DT): A software development firm offering cloud solutions, including ecosystem integration and business intelligence insights. Market Cap: $17.7 billion; EPS Growth: 592.4%; Revenue Growth: 16.4%.
– ServiceNow Inc. (NOW): Known for its cloud-based Now Platform, ServiceNow collaborates with Visa for payment service transformations. Market Cap: $156.4 billion; EPS Growth: 426.0%; Revenue Growth: 23.8%.
Momentum investing focuses on stocks showing superior performance, likely to continue their growth trend in the short term unless fundamental industry changes occur.
AI Stocks with High Momentum
– Nvidia Corp. (NVDA): A leading chip manufacturer, Nvidia saw significant growth in 2023, tripling its value and topping the S&P 500. 12-Month Return: 223.7%.
– Meta Platforms Inc. (META): Operating platforms like Facebook and Instagram, Meta has seen a sharp rebound in advertising revenue. 12-Month Return: 176.9%.
– Advanced Micro Devices Inc. (AMD): Specializing in chips for various computing needs, AMD has demonstrated remarkable growth. 12-Month Return: 145.3%.
AI technology caters to numerous industries, driving innovations and sustaining interest among investors. However, the sector’s unpredictability, the risk associated with newer companies, and potential AI dangers pose investment challenges. Despite these risks, AI stocks offer access to a potentially transformative technology trend, with companies spanning nearly all industries exploring AI integrations.
This commentary is for informational purposes, reflecting the analyst’s views as of the article’s publication date.
