Microsoft, Apple, Alphabet, Amazon and Nvidia could be the best AI stocks to watch next month. These stocks are the largest AI stocks in the US based on market capitalization.
2023 was arguably the year of AI — the NASDAQ Composite rose by 43% in the calendar year, driven by AI-fuelled bubbles in Nvidia alongside the rest of the so-called ‘magnificent seven.’ The year was immediately preceded by the launch of revolutionary — and crucially, free to use — ChatGPT, which was swiftly followed by a response from both Alphabet in the form of Bard, while many other tech companies soon ensued.
In March 2023, the more advanced GPT-4 hit the market, which was swiftly followed by multiple AI-generated imagery tools — in one case, a realistic fake image of Pope Francis wearing a certain clothing brand circulated the internet, highlighting the openness of AI to abuse. That same month, tech leaders from across the US spectrum signed an open letter urging a pause on AI development for six months to assess the risks.
A couple of months later, ChatGPT gained internet connectivity — and was soon incorporated into Bing, Microsoft’s search engine. For context, Microsoft has a significant stake in ChatGPT’s parent, OpenAI.
Add in the constant stories of academic controversies, and the months-long Writers Guild of America strike over concerns that AI had the potential to replace human writers, and it’s easy to see how AI is already embedded throughout the global markets.
AI is already in use across a wide variety of real-world applications, including in entertainment, social media, art, retail, security, sport analytics, manufacturing, self-driving cars, healthcare, and warehousing alongside dozens of other sectors.
Every Netflix recommendation, every supermarket rewards purchase, and every football match is analysed ever more relentlessly in order to provide more and better data. And analysts think the sector will only grow.
Best AI stocks to watch
As a caveat, there is some disagreement on what constitutes an AI stock — and whether it must be the main focus of a company or simply be a significant growth area.
Microsoft is the original global computing power, so it makes sense that the US behemoth tops the list of the best AI stocks to watch. The company already had a strong relationship with OpenAI prior to the ChatGPT launch and has invested $13 billion into the company since 2019.
In Q1 results, revenue rose by 13% to $56.5 billion. CEO Satya Nadella enthused that ‘with copilots, we are making the age of AI real for people and businesses everywhere. We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.’
Most recently, the US titan has agreed a decade-long partnership with Vodafone to bring generative AI, digital, enterprise and cloud services to more than 300 million businesses and consumers.
Vodafone will invest $1.5 billion in customer-focused AI developed with Microsoft's Azure OpenAI and Copilot technologies and will replace its physical data centres with Azure cloud services — meanwhile, Microsoft plans to become an investor in Vodafone's managed IoT platform.
Market Capitalisation: $2.90 trillion
Apple is in the middle of a sea change — it’s now topped Samsung as the largest smartphone maker by volume in the world but has lost its crown to Microsoft as the largest company on the planet.
Investor hopes for continued growth may lie in future innovation, and in particular, the long-awaited Vision pro headset which releases on 2 February in the US with a $3,499 price tag. For context, Meta’s Quest 2 can be reliably found on sale for circa £250.
In Q4 results, Apple saw revenue decline by 1% to $89.5 billion — though CEO Tim Cook noted that the company managed a ‘September quarter revenue record for iPhone and an all-time revenue record in Services’ alongside ‘our strongest lineup of products ever heading into the holiday season, including the iPhone 15 lineup and our first carbon neutral Apple Watch models.’
Market Capitalisation: $2.82 trillion
Google parent Alphabet may control 84% of the global search market share — but Yahoo was once king of search too. In addition to launching Bard, AI is already used across many of Google’s current functions. And it’s got at least two more AI-focused projects; its coding-focused Generative Language API, and DeepMind which it acquired in 2014.
In Q3 results, CEO Sundar Pichai noted the ‘product momentum this quarter, with AI-driven innovations across Search, YouTube, Cloud, our Pixel devices and more.’ Revenue increased by 11% year-over-year to $77 billion.
Perhaps most importantly, Alphabet plans to launch its most advanced chatbot ever this year — Gemini. This is seen as the company’s serious answer to ChatGPT-4, with Pichai arguing that it ‘represents one of the biggest science and engineering efforts we've undertaken as a company.’ Then there’s its new custom-built AI chips to consider — Apple may win its crown back before too long.
Market Capitalisation: $1.79 trillion
Amazon is well-known as the largest e-commerce retailer in the world, but the company is also a growing operator in the AI space. It offers several cutting-edge AI tools within its AWS business, including Code Whisperer and SageMaker — and clients can customise Amazon’s own machine learning model.
Of course, competitors have their owns services, but Amazon is by far the largest cloud computing company, with circa a third of the global market share.
Within its e-commerce offering, Amazon uses AI to identify consumer trends, manage inventory and also make personalised product recommendations — including targeted advertising. Then there’s the smart devices, including Alexa and the Fire tablets. CEO Andy Jassy enthuses that the AI opportunity will be ‘tens of billions of dollars of revenue for AWS over the next several years.’
Market Capitalisation: $1.58 trillion
Nvidia is arguably the prime beneficiary of the AI boom, with Q3 results seeing revenue rise by 206% year-over-year and 34% quarter-on-quarter to $18.12 billion. CEO Jensen Huang now considers that ‘NVIDIA GPUs, CPUs, networking, AI foundry services and NVIDIA AI Enterprise software are all growth engines in full throttle. The era of generative AI is taking off.’
Barclays analysts remain particularly enthusiastic over the AI company, noting that ‘With supply constraints, customers are often using the entire NVDA platform in order to get priority shipments of accelerators.’
Market Capitalisation: $1.39 trillion
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