The Best AI Stocks of June 2024
| Company (TICKER) | 1-Year Return |
|---|---|
Nvidia Corporation (NVDA) | 194% |
Meta Platforms, Inc. (META) | 83% |
Arista Networks, Inc. (ANET) | 81% |
Amazon.com, Inc. (AMZN) | 52% |
Palo Alto Networks, Inc. (PANW) | 45% |
ServiceNow, Inc. (NOW) | 37% |
Advanced Micro Devices, Inc. (AMD) | 30% |
UiPath, Inc. (PATH) | 19% |
Tesla, Inc. (TSLA) | -9% |
C3.AI, Inc. (AI) | -28% |
Nvidia Corporation (NVDA)
1-Year Return
194%
3-Year Average Annual Historical EPS Growth
77.9%
5-Year Average Annual Expected EPS Growth
46.5%
194%
77.9%
46.5%
Editor's Take
Nvidia is known for its graphics cards, but the company also produces microchips for autonomous driving cars and AI applications. The company’s CEO, Ginseng Huang, is positioning Nvidia to be at the forefront of bringing AI to every industry.
NVDA is the best-performing AI stock over the past year. Earnings per share, or EPS, had a big leap higher in 2023, and analysts project strong EPS growth going forward. It has the highest forecasted 5-year EPS growth on the list.
The company has an “A” financial health rating from Morningstar, and it is expected to grow EPS by 21.9% next year.
The current price-earnings, or P/E, ratio is high at 75.9. However, if earnings growth continues as expected, the high valuation is fair. The increasing EPS figures are being factored in by investors.
As an added bonus, NVDA buys back shares. That helps bolster stock performance over the long run. It has a buyback yield of 0.7%. It is also one of the best-performing stocks over the last decade, with an average yearly return of 68.8%.
Meta Platforms, Inc. (META)
1-Year Return
82.6%
3-Year Average Annual Historical EPS Growth
14.2%
5-Year Average Annual Expected EPS Growth
30.0%
82.6%
14.2%
30.0%
Editor's Take
Meta operates Facebook, Instagram and WhatsApp, as well as many other companies. It utilizes and expands on AI in many capacities, including integrating it with virtual reality and translators for communication.
Meta is the second best-performing AI stock over the last year. Although EPS fell in 2022, it is starting to recover, with analysts projecting strong growth over the next five years, including a 15.4% jump in 2024.
The average P/E for an stock is 28.1, and META has a P/E of 33.7 and forward P/E of 21.7. Given its strong growth prospects over the next couple years, the stock is still priced fairly despite already having had a strong run higher.
The company has also been buying back shares. Current buyback yield is 2.2%. The stock has been an excellent performer, averaging returns of 21.3% per year over the last decade. The S&P 500 has averaged about 12.0%.
Arista Networks, Inc. (ANET)
1-Year Return
80.5%
3-Year Average Annual Historical EPS Growth
49.9%
5-Year Average Annual Expected EPS Growth
19.4%
Editor's Take
Arista Networks provides products and software for data center and cloud computing. It creates networks that can grow and adapt with the evolution of technologies used on those networks.
ANET makes the list because it is strong in historical EPS growth, expected EPS growth and stock performance over the last year.
Analysts project 14.4% growth next year, which is below the 5-year average expected. It has an “A” financial health rating from Morningstar.
The stock is trading at all-time highs and has a P/E ratio of 42.8 and forward P/E of 36.2. That is a common reading for this stock, which has fluctuated around a P/E of 40 for the last couple of years.
Amazon.com, Inc. (AMZN)
1-Year Return
52.4%
3-Year Average Annual Historical EPS Growth
10.7%
5-Year Average Annual Expected EPS Growth
28.1%
52.4%
10.7%
28.1%
Editor's Take
Amazon doesn’t just sell products on its website. It is also heavily involved in cloud computing and data storage. In that way, the company provides a platform for building, training and deploying AI projects. AMZN also offers Alexa and Echo, AI-powered software and products that can answer questions through voice recognition and data retrieval.
Amazon has struggled to keep growing earnings in recent years. But it makes our list because analysts expect that to change. The stock lost half its value in 2022 as earnings went negative, but the share price bounced back in 2023 as earnings recovered into the positive.
Industry analysts project 25.9% EPS growth in 2024. The company has a “B” financial health rating.
It trades at a high P/E of 59.3, but the forward P/E is a more reasonable 40.7. Amazon rarely trades at a cheap valuation as these are common ratios.
The stock has been a great long-term performer, averaging 25.0% returns per year over the last decade.
Palo Alto Networks, Inc. (PANW)
1-Year Return
44.5%
3-Year Average Annual Historical EPS Growth
n/a
5-Year Average Annual Expected EPS Growth
16.9%
44.5%
n/a
16.9%
Editor's Take
As cybersecurity needs increase with advances in technology, Palo Alto is well-positioned. It provides network and cloud security for the same networks and clouds that many AI projects are built on.
The stock was an excellent performer in 2023 and is currently trading near a 52-week and all-time high. It has a “B” financial rating from Morningstar.
Analysts project 11.8% EPS growth next year, slightly below the longer-term forecast for future years.
Since the company is just moving into profitability, the P/E ratio is high at 44. Investors are betting that the company can continue to grow, which may justify the high price valuation.
Over the last decade, the stock has averaged returns of 27.1% per year.
ServiceNow, Inc. (NOW)
1-Year Return
36.8%
3-Year Average Annual Historical EPS Growth
130.8%
5-Year Average Annual Expected EPS Growth
23.0%
36.8%
130.8%
23.0%
Editor's Take
ServiceNow provides software that allows businesses to automate business processes using AI.
NOW has seen exceptional EPS growth over the last three years. Analysts expect that growth to continue with 20.9% growth next year.
The stock is trading near an all-time high and has an “A” financial health rating.
The P/E is high at 94.0, and the forward P/E is 57.1. Stocks with very high growth rarely trade cheaply, and NOW is no exception. This is near the lowest P/E levels the stock has traded at in the last two years.
Over the last decade, the share price has averaged returns of 27.5% per year.
Advanced Micro Devices, Inc. (AMD)
1-Year Return
30.2%
3-Year Average Annual Historical EPS Growth
-33.7%
5-Year Average Annual Expected EPS Growth
30.6%
30.2%
-33.7%
30.6%
Editor's Take
AMD is a semiconductor manufacturer. Semis or microchips are the backbone of computing and AI. The company’s Senior Vice President, Vamsi Boppana, said “AMD is fostering AI everywhere.”
AMD’s earnings dropped significantly in 2022, but analysts are forecasting a bounce back in 2024 and 2025. Next year’s earnings are projected to jump 51.0%.
Despite the recent earnings dip, AMD stock has performed strongly over the last year and the last decade. It has averaged returns of 48.3%. It has a “B” financial health rating and a buyback yield of 0.4%.
The P/E is well into triple digits, while the forward P/E is 36.8. The stock is trading near its 52-week high but is below its 2021 all-time high.
UiPath, Inc. (PATH)
1-Year Return
18.7%
3-Year Average Annual Historical EPS Growth
n/a
5-Year Average Annual Expected EPS Growth
46.2%
18.7%
n/a
46.2%
Editor's Take
UiPath creates software that allows business employees to tackle both complex and simple problems, including completing routine tasks. This saves businesses time and money.
The stock price is up over the last year, but the company hasn’t produced positive earnings yet. It has a financial health rating of “B” from Morningstar.
The stock makes the best AI stocks list because of its strong yearly performance as well as analysts projecting strong EPS growth over the next five years. Analysts predict a move into profitability in 2024, with an EPS estimate of 48 cents per share.
Since it is a newer company, there are very few financial metrics or even a track record for potential investors to base their decision upon. The stock is trading below its 52-week high and its all-time high set in 2021.
Tesla, Inc. (TSLA)
1-Year Return
-8.9%
3-Year Average Annual Historical EPS Growth
126.3%
5-Year Average Annual Expected EPS Growth
15.3%
-8.9%
126.3%
15.3%
Editor's Take
Tesla is expanding its reach into AI, including its self-guided car technology. “The goal is not to be a car company,” controversial Tesla CEO Elon Musk once said, and the company’s choices certainly back that statement up.
EPS has been ramping up in recent years. Tesla’s average yearly EPS growth over the last three years is the highest on the list at 171.9%. Future growth is looking more subdued, but Tesla has surprised investors and analysts in the past.
Analysts project a decline in EPS for the current year followed by a rise next year, leaving EPS nearly unchanged over that time.
The company has a B financial health rating and trades at a P/E of 41.3. The stock is still up over the last year but trades well below its 52-week high. The stock price has averaged returns of 27.5% over the last 10 years.
C3.ai, Inc. (AI)
1-Year Return
-27.7%
3-Year Average Annual Historical EPS Growth
n/a
5-Year Average Annual Expected EPS Growth
50.9%
-27.7%
n/a
50.9%
Editor's Take
C3.ai provides software that allows its users to roll out AI applications on a large scale. In fact, it is one of the few pure-play AI stocks involved in directly creating AI projects.
The stock began trading in 2020, so it doesn’t have a long track record. But it makes the list because it is up handsomely over the last year and analysts project 50.9% yearly EPS growth over the next five years. That is essentially reducing losses since the company isn’t profitable yet.
AI has some good qualities, but this stock is still highly speculative. Its short history means there are few metrics you can use to forecast its future fortunes. Despite the recent rally, it is trading at a fraction of its 2020 high.
AI has a “C” financial health rating from Morningstar.
*All data is sourced from TradeThatSwing, current as of May 29, 2024.
Methodology
This list is curated based on a methodology designed to both identify AI stocks and highlight ones with solid growth as well as future potential. All stocks trade on U.S. exchanges. They also meet the following criteria:
- AI-related. The company is involved in AI by either being a so-called enabler, engager or enhancer. Enablers are companies that create products or technologies that go into AI. Engagers use AI products. Enhancers build on the technology. We used First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) to identify stocks that are associated with AI. We then narrowed down that portfolio to a list of stocks focused just on AI, not on robotics.
- High ranking metric. Each stock on the list excels in at least one area. Since the field is new, and some of the companies are new, not all the stocks share all features.
- High growth and/or high return. Stocks were selected based on expected EPS growth and/or one year return. The stocks selected were the best-performing based on these metrics.
In addition to the above requirements, all stocks have at least a $1 billion market capitalization, a price above $5 and daily average volume of at least 500,000 shares.
These filters were designed to isolate AI stocks and then find ones that rank favorably based on metrics such as price momentum and—for longer-term investors—earnings growth.
What Are AI Stocks?
AI is a burgeoning industry under the technology umbrella. There is no official sector designation that accounts solely for AI yet. Instead, AI stocks are a loose collection of companies with interests in artificial intelligence.
These companies include major tech companies like Microsoft or Apple, which are both developing their own AI technologies. They also include companies instrumental in the production of AI technology, such as microchip manufacturer Nvidia. Finally, there are pure plays on AI like the publicly traded company c3.ai.
How To Invest in AI Stocks
Investing in AI stocks is no different than investing in any other industry or sector. First, investors need to do due diligence to make sure they understand the industry and the companies associated with it.
Once an investor has sufficient knowledge of the industry and companies, they should determine which stocks they believe have the greatest long-term potential. Finally, once a decision has been made, the investor can purchase AI stocks from their stock broker.
It’s always recommended, however, to consult a financial advisor before making any major investment decision.
Where To Buy AI Stocks
Many AI stocks are publicly traded companies listed on the world’s major stock exchanges. For example, NVDA is listed on the Nasdaq exchange. Other companies, such as c3.ai are listed on the New York Stock Exchange (NYSE).
If the AI stock you’re interested in is listed on a major stock exchange, you should be able to purchase it directly through your broker. If the company is not listed on a major exchange, however, but instead is traded over-the-counter (OTC), then due diligence is thoroughly recommended.
OTC stocks—although often inexpensive—can be volatile and illiquid, making them difficult to buy and sell.
How To Pick AI Stocks
As with any sector, there’s no definitive way to choose which AI stocks you should invest in. Rather, there are personal preferences and portfolio needs that every investor should assess for themselves.
If you’re looking for a good methodology for screening AI stocks, we recommend the methodology used above. However, the stocks revealed by these screens may not be right for everybody.
Each investor needs to assess their own individual needs and preferences to determine for themselves which stocks to add to their portfolio.
Should I Invest in AI Stocks?
AI is a burgeoning sector with tremendous promise. However, nobody can tell you definitively whether you should invest in AI stocks.
The decision to invest in AI stocks is one that needs to be made by each individual investor, depending upon that investor’s own portfolio and what they believe the future holds for the industry.
Are AI Stocks Worth It?
AI appears to have a bright future ahead of itself, but nobody can know for sure how technology and business cycles will evolve in the months and years to come. Every investment carries risk, and only you can know for sure if the risks of AI stocks are right for your investment portfolio.
Be sure to do your own research and due diligence, and remember that it’s always recommended to consult a financial advisor before making any major investment decision.
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