Since the release of ChatGPT in November 2022, organizations have been scrambling to keep pace with the evolving use cases of generative AI. The technology will upend every industry, creating advantages and disrupting those too slow to respond. Below, we will discuss an AI stocks list of companies in the right place to jumpstart this revolution.
Every day, more and more use cases of AI are emerging. Jensen Huang, CEO of Nvidia (NASDAQ:NVDA), thinks that, like the PC and internet revolution, the AI revolution has just begun. It will improve productivity, drive efficiency and bring forth innovations.
Given the hype, it has been hard to distinguish the actual winners and pretenders. After all, companies – even those with limited AI exposure – have hopped on the AI bandwagon. In the second quarter, AI mentions during earnings hit a record of 7,358 for companies in the Standards and Practices (S&P) 500.
Only time will differentiate the true winners and pretenders. Today, select AI beneficiaries are already seeing revenue growth from AI. The following stocks will be key beneficiaries and should be on your AI stocks list to buy.
Meta Platforms (META)
Surprisingly, Meta Platforms (NASDAQ:META), famous for its marquee social media properties like Facebook and Instagram, is an AI beneficiary. Throughout the past decade, the firm has invested heavily in the technology and should be on your AI stocks list.
In February, the company launched its Llama large language model. However, the model was a smaller version restricted to researchers. Besides, in terms of performance, it lagged behind OpenAI’s model, ChatGPT.
Still, the company wants to be a leader in AI. In July, Meta launched Llama 2 and made the model open source. By making the model accessible for all, the company hopes many developers will build applications on it. It expects its transparency and increased customization options will attract more users.
Meta admits that Llama 2 is inferior to GPT-4 in terms of performance. That is why it is reportedly working on a more robust model to rival GPT-4. Again, the company intends to make the model open source to encourage companies to develop AI tools.
According to the Wall Street Journal, the company is buying more Nvidia H100 AI-training chips. Additionally, the company is investing in its infrastructure to reduce its reliance on Microsoft for AI training.
The firm is also working on other generative AI features. These innovations will be integrated into its social media platforms. With Mark Zuckerberg at the helm, Meta will be a leader in AI.
Microsoft (MSFT)
While most companies expect AI revenues in the future, Microsoft (NASDAQ:MSFT) is already seeing a contribution from the segment. These incremental revenues will be an added boost to the company’s cloud revenues.
The company serves customers by providing the infrastructure necessary to develop intelligent solutions. Azure AI is helping developers and data scientists build, train and deploy AI models through its AI models and customizable APIs.
According to AI21 Labs, it costs up to $1.6 million to train a 1.5-billion-parameter model. Microsoft is seeing revenue growth since training is happening on its infrastructure and compute.
Moreover, the company is already introducing its AI-powered products. Earlier this year, it announced Microsoft 365 Copilot, which leverages data and large language models to drive productivity. Copilot is embedded in Microsoft 365, uplevelling skills and helping in tasks such as writing and editing and summarizing emails.
These features will be a source of incremental revenue for the company. At the Inspire conference, management announced that Copilot would cost $30 for Microsoft 365 E3, E5, Business Standard and Business Premium customers. Microsoft 365 Copilot and Fabric could be available to customers by the end of this year.
As the company revealed during the Envision Conference, generative AI is more than a $10 billion revenue opportunity. That’s why Goldman reiterated its “Buy” rating and $400 price target. Microsoft is positioned to capitalize on the generative AI revolution.
Nvidia (NVDA)
When it comes to AI, Nvidia (NASDAQ:NVDA) is at the forefront of the revolution. So far, no company has benefited as much from generative AI. Notably, AI is in its early innings, making Nvidia a must-have on your AI stock lists to buy.
The firm is seeing tremendous demand for its AI training and inference chips. Its HGX systems have become the engine of large language models and generative AI. Every major cloud provider, including AWS, Microsoft Azure, Oracle Cloud, Google Cloud and Meta, is deploying these systems.
As a result, revenues have soared, with forward estimates growing at unprecedented levels. The chip giant delivered record revenue in the second quarter of fiscal year 2024. Total revenue increased 88% quarter-over-quarter to $13.51 billion. Data center, the segment that mainly sells AI chips, achieved an impressive 141% QOQ and 171% YOY growth.
Organizations are applying Nvidia’s technology to real-life applications. For instance, the largest marketing company, WPP (NYSE:WPP), is creating a content engine using Nvidia Omniverse. Another example is the partnership with Snowflake (NYSE:SNOW). Under the partnership, Snowflake customers can use the NVIDIA NeMo platform for chatbot, search and summarization from their proprietary data.
There is a massive opportunity for Nvidia as cloud providers upgrade their data infrastructure for the new era of AI and accelerated computing. That’s why it deserves to be on your AI stocks list. Accelerated computing is more cost-effective and energy-efficient. Besides, it enables a significant productivity boost for many workloads.
After the recent pullback, NVDA stock is a buy and trades at under 40 times forward EPS. Plus, the average price target from TipRanks analysts is $636, presenting over 40% upside.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.