Is It Too Late To Buy AI Stocks?

When OpenAI launched its ChatGPT product, the traction it got was faster than any other product in history. The numbers of users flocking to try the large language model (LLM) grew exponentially to over 100 million in short order, faster than even the pace of growth of Facebook in its early days.

As word of mouth spread about its enormous capabilities, OpenAI was quickly overwhelmed by demand and Sam Altman, who led the venture became something of an icon in technology circles for leading the firm. The subsequent drama when he was fired and returned as CEO to OpenAI created uproar and even Microsoft’s CEO Satya Nadella was roped into the fray.

But what do the growth of OpenAI and the Sam Altman escapade have to do with buying AI stocks? They highlight the buzz around artificial intelligence at this time is at fever pitch levels and that bodes well for what the future holds.

So, is it too late to buy AI stocks? It’s not too late to buy AI stocks because the AI market is forecast to grow from $100 billion to $2 trillion by 2030, according to research from Next Move Strategy Consulting.

Yet, there are a bunch of other reasons why AI is just in its first innings. Moreover, what are top AI stocks worth investing in? 

ASML Holding

While other stocks garner more headlines, ASML is a leading supplier for photolithography systems that are crucial to manufacturing the advanced chips that power AI. What makes ASML unique is its only company that produces EUV lithography machines that make smaller, more energy-efficient and powerful chips possible.

The complexity, R&D expertise, and cost of developing lithography technology, particularly EUV machines, mean the barriers to entry are enormous and virtually ensure ASML has a dominant market position.

As the primary provider of these systems now, ASML already has relationships with key semiconductor companies like TSMC, Samsung, and Intel. Having forged successful partnerships over the years, the likelihood of any of these leading firms risking their business on a new entrant’s offerings is low.

Even if another firm did begin to compete, the seasonality of the semiconductor business is something ASML has successfully navigated but which new entrants may struggle with financially. To emphasize that point, advanced lithography systems are in greater demand during boom cycles but bust cycles can be very harmful to semi sector firms.

Looking to the future, the massive forecast growth in AI, 5G and IoT, as well as electric vehicles should benefit ASML for the foreseeable future.

Analysts have a price target of $748.93 per share on ASML, meaning the share price could climb by 9.4% to fair value.

9 Top AI Stocks To Buy

NVIDIA (NASDAQ:NVDA) is by far and away the graphics processing units (GPUs) leader, and has evolved to become a leader in AI hardware, essential for machine learning and data processing tasks.

According to 49 analysts, fair value for Nvidia sits at $651.41 per share, implying as much as 28.3% upside.

Alphabet (NASDAQ:GOOGL/GOOG) has long been at the forefront of AI research and applications following its acquisition of DeepMind back in 2014.

Fast forward to today and AI has seeped into many of its products, including its search engine, AI-driven advertising, cloud computing, and autonomous driving ventures via Waymo.

Microsoft (NASDAQ:MSFT) made its splash in AI when it took a $10 billion stake in OpenAI. Notably, it wasn’t all cash but was largely through credits for using Azure.

With its focus on artificial intelligence, Azure cloud computing and AI integrations have spanned everything from Office 365 to LinkedIn.

It’s no surprise that (NASDAQ:AMZN) also leverages AI in its e-commerce platform and cloud services (AWS).

In addition, it has been expanding into AI fields like autonomous vehicles and healthcare.

IBM (NYSE:IBM) is perhaps the original pioneer in AI, best known for its Watson solution.

Now the former tech titan is focusing on AI solutions for business, including cloud and cybersecurity.

Tesla (NASDAQ:TSLA) is best known as an EV maker but in AI, particularly as it relates to autonomous driving, it is a clear leader, and that doesn’t even factor in the firm’s innovations in energy and solar.

According to analysts, Musk’s firm has an intrinsic value per share of $236.38 per share.

Baidu (NASDAQ:BIDU) is often referred to as the “Google of China,” with good reason for its search capabilities but what’s less well-known is that Baidu has invested enormously in artificial intelligence, particularly in internet search services, cloud computing, and autonomous driving technologies. (NYSE:CRM) CEO Benioff created waves recently when expressing a willingness on social media to hire any AI engineer coming out of OpenAI. That signaled a clear demand for top talent and highlighted how short the supply is of competent artificial intelligence developers.

It’s clear that Benioff wants to further incorporate AI into its services in order to provide enhanced analytics and business intelligence.

Palantir Technologies (NYSE:PLTR) specializes in big data analytics that were first applied to government sectors but increasingly have been serving the corporate sector.

Its software is used extensively for data integration, analysis, and AI applications across a range of sectors now from finance to energy.

What To Consider When Buying AI Stocks

There is an old saying garbage in, garbage out and when it comes to AI this is as important as ever. While having a large dataset is important for AI, the quality of data is often more crucial, so enterprises with well-structured data sets are primed to have a competitive advantage.

So too are companies with extensive patent portfolios likely to be able to build economic moats that can stand the test of time. Firms with AI patents signal their potential to innovate and maintain an enduring competitive edge, not least because they can produce licensing revenue.

As is evident from Marc Benioff’s tweet, the talent pool for AI engineers is limited, so a skilled AI workforce, including renowned researchers and engineers, is a clear sign that a company has an edge that can translate to financial success.

A further item that can make an AI company more valuable is its custom hardware development. If It can build its own AI chips, a company can have greater control over their product performance and efficiency, offering a strategic advantage.

Final Thoughts

All in all, the time to buy AI stocks is likely not just the present but there will be many opportunities in the coming years. Historically, these stocks have shown tremendous volatility and so when dips occur make sure to have these top AI stocks on a nearby watchlist.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.