Artificial Intelligence has been a very hot investment trend during this bull market. While some AI winners have slowed down a bit this summer, investors and analysts remain optimistic about the long-term potential of this innovative technology.
AI stocks have been volatile lately, but volatility can also provide opportunities to acquire shares at a reasonable price. If you’re interested in investing in artificial intelligence, here are seven stocks to watch this summer.
A quick look at the best AI stocks:
Microsoft Corporation (Nasdaq: MSFT)
Microsoft is investing heavily in artificial intelligence, which includes many applications and research. The primary focus is Azure AI, which provides cloud-based AI services to businesses. Additionally, Microsoft is integrating AI into its products, such as Office 365, enhancing features with intelligent assistants. Automation. The company is also exploring natural language processing, computer vision, and machine learning.
Along with innovative technology, Microsoft emphasizes responsible AI, ensuring its developments comply with ethical guidelines. Notable projects in this area include AI for Good, which addresses global challenges such as climate change and hunger, and the Alexandria Project, which creates a knowledge base for companies using AI.
Technically, MSFT shares are trading near their all-time highs but still have a reasonable P/E ratio of 38.4 and a Relative Strength Index (RSI) reading of 51, well below the overbought level.
Nvidia Corporation (Nasdaq: NVDA)
NVIDIA is one of the strongest AI stocks on the market, thanks primarily to its consistently in-demand GPUs. These GPUs have the processing power required for more complex machines and deep learning algorithms, making them essential tools for AI development. The company’s focus extends beyond hardware, offering software platforms and development kits to support AI researchers.
NVIDIA’s work includes many AI applications, including self-driving cars, medical imaging, natural language processing, and… video games. The company’s research arm also explores the frontiers of artificial intelligence, pushing the technology forward through projects in areas such as computer vision, robotics, and generative artificial intelligence. Right now, NVIDIA is the computational backbone for much of the world’s AI developments.
The company’s stock has seen a tremendous rise over the past two years but has remained in a limited range since the 10-1 stock split was announced. However, the next earnings call is scheduled for August 28, which could push the stock out of the current range.
Meta platforms (NASDAQ: dead)
META has devoted significant resources to developing artificial intelligence in its social media platforms and in… Metaverse. Their AI research focuses on natural language processing, computer vision, and machine learning to enhance user experiences. This includes developing AI models for image recognition, content moderation and personalized recommendations.
Much of the company’s AI efforts are directed toward building the Metaverse, a virtual reality world. This includes creating artificial intelligence systems that understand and respond to human interactions within this digital environment. Additionally, META is exploring artificial intelligence for augmented reality applications, such as virtual assistants and smart glasses. Other projects include the large open source language model Llama 2 and Cicero, which claims to be the first AI to play the diplomatic strategy game at a human level.
Service Now Company (New York Stock Exchange: now)
ServiceNow is primarily known for its cloud platform that helps companies manage workflow and IT operations. However, the company has also invested heavily in artificial intelligence to enhance its platform and free up human agents to undertake more complex tasks.
ServiceNow’s AI strategy is centered around intelligent automation, which involves using AI to simplify and automate various business processes. Some areas where this focus is amplified include natural language processing (NLP) to understand and respond to user queries, machine learning algorithms to analyze data and identify trends, and AI-powered virtual agents to handle routine (and mundane) tasks and queries.
Although it’s not a household name like Microsoft or Meta, ServiceNow is still a massive company with a market cap of $158 billion and annual revenue of over $8 billion. The company also has a catalyst coming when it reports earnings on July 24.
Palo Alto Networks Inc. (New York Stock Exchange: Bano)
Palo Alto Networks is Cybersecurity sector The champion that leverages AI to protect organizations from evolving cyber threats. The company uses artificial intelligence and machine learning algorithms to analyze massive amounts of security data and identify patterns of malicious activity. This enables them to detect and prevent zero-day attacks, ransomware, and other sophisticated threats.
AI automates routine security tasks, such as incident response and threat hunting, allowing security teams to focus on more strategic initiatives. As attackers increasingly use AI themselves, Palo Alto Networks is developing defenses like Precision AI to counter these complex AI threats with other forms of AI and create a more resilient security infrastructure.
PANW shares fell from their all-time high in the first quarter of 2024, but the company remains one of the top cybersecurity innovators, and its AI research can only enhance its efficiency. The stock’s P/E ratio is 48.2, but an RSI of 57 shows that the stock has not yet reached the overbought zone.
Taiwan Semiconductor Corporation (New York Stock Exchange: TSM)
If you want to make money during the gold rush, why not sell shovels to prospectors? That’s the idea surrounding the investment thesis in Taiwan Semiconductor, which supplies many of the other companies on this list with critical components needed for their AI operations.
AI models require enormous computational power to train and run. This amount of power comes from specialized chips, which enable them to process huge amounts of data quickly. TSM is a major player in the manufacture of these chips, and its advanced semiconductor manufacturing processes allow the production of smaller, more powerful and energy-efficient chips.
In other words, TSM’s ability to produce advanced chips is the cornerstone of the AI revolution. Without advanced manufacturing capabilities, the development and deployment of AI applications could be significantly hampered. The company leads innovation in Semiconductor technologywhich in turn fuels advances in artificial intelligence.
Celestica Corporation (New York Stock Exchange: CLS)
Not all AI innovations happen Large capital companies. Shares of mid-sized electronics maker Celestica Inc. have more than doubled. Last year thanks to the high demand for its components that form the basis of artificial intelligence infrastructure. But despite this rapid stock growth, the company still has a low P/E ratio of 21 and a market capitalization of less than $7 billion.
Much of Celestica’s AI business revolves around manufacturing network switches. These high-performance switches are critical components in data centers, where AI models are trained and deployed. The company’s expertise in designing and producing these switches is essential to building the infrastructure required for AI applications.
Furthermore, Celestica is actively involved in developing cutting-edge networking solutions specifically designed for AI and machine learning applications. For example, its high-speed switches facilitate rapid data transfer within data centers, which is essential for training and deploying AI models.
What makes good AI stocks?
Picking the best stocks in any given sector or industry is difficult, especially in volatile and evolving sectors like artificial intelligence. Getting your investments 100% right is practically impossible, but you can give yourself the best chances of success by following specific rules and knowing what to look for. Here are four key factors to look for when choosing the best AI stocks.
- Motivators – A catalyst is a type of news or event that causes a stock to move, such as an earnings release, product launch, insider buying, or an upgrade/downgrade from a stock analyst.
- Project Pipeline – What types of AI projects does the company have on its radar? Do they produce components like TSM or CLS, or train new models like META or PANW? Make sure your AI investments have a bright pipeline of future projects; Otherwise, they may fall behind those that continue to expand and innovate.
- Management Team – While researching the company, don’t neglect to research the executives and directors as well. Do they attract the best talent? Do they have a history of success in similar industries? Are there any skeletons in the closet you should be aware of? Bad leadership can sink even the most innovative companies.
- Technical signals – Finally, if you’re looking for stocks that are about to make a big upward move, you’ll need to pay attention to technical trading signals and analysis, as well as fundamental data like earnings growth and price ratios. A breakout signal such as an oversold RSI reading or a crossover above the 50-day moving average can trigger a move before any major news hits the market.
Choosing the right brokerage for AI stocks
When investing in AI stocks, you will need to choose a broker that has access to the stocks and suits your investment style and goals. Below is a list of our favorite online brokerages and the type of investor they are suitable for.
