AI stocks have become one of the hottest investment trends on Wall Street in 2023. The recognition of the long-term value potential of artificial intelligence has been bolstered by the impressive performance of OpenAI chatbot ChatGPT, which took the world by storm.
The data explosion in 2023 is unprecedented, with more data being generated every hour than in an entire year just two years ago. However, only a small fraction of this data is being captured and analyzed, leaving a massive opportunity for companies working on AI technology to capitalize on this untapped potential. PwC estimates that by 2030, AI technology could contribute a staggering $15.7 trillion to the global economy, making it a highly attractive sector for investors seeking promising opportunities.
While the AI technology field is still in its early stages, numerous public companies are vying for a share of the AI market. Our selection process for identifying the best-performing AI stocks in 2023 involved considering factors such as the highest year-to-date returns among AI stocks, inclusion in a major AI ETF portfolio, coverage by at least one Wall Street analyst, and a market capitalization greater than $300 million. These companies are well-positioned to benefit from the AI boom and offer attractive investment prospects for discerning investors.
Compare the best AI companies
| COMPANY | SECTOR | MARKET CAP | YTD PERFORMANCE |
|---|---|---|---|
| C3.ai (AI) | Technology | $4.3 billion | 238% |
| Symbotic (SYM) | Industrials | $24 billion | 262% |
| Nvidia (NVDA) | Technology | $1 trillion | 196% |
| MicroStrategy (MSTR) | Technology | $4.9 billion | 161% |
| Meta Platforms (META) | Communication services | $732 billion | 129% |
| MicroVision (MVIS) | Technology | $792 billion | 86% |
Methodology
The selection of top AI stocks is based on specific criteria and market performance:
- Analyst Coverage: All of the chosen AI stocks are covered by Wall Street analysts. This ensures that each stock has undergone professional assessment, taking into account business performance, financial statements, and market valuations. Stocks covered by analysts typically enjoy higher trading volume, media attention, and investor awareness.
- Market Capitalization: Each AI stock in the list has a market capitalization of at least $300 million. Stocks with market caps below this threshold, referred to as microcap or nanocap stocks, are considered riskier and more volatile. On the other hand, stocks with higher market caps are more likely to have significant analyst and media coverage, along with better trading liquidity.
- ETF Holdings: The iShares Robotics and Artificial Intelligence Multisector ETF (IRBO) and the Robotics & Artificial Intelligence ETF (BOTZ) play a crucial role in the selection process. These ETFs exclusively invest in stocks with businesses that are poised to benefit from AI and robotics innovation and long-term growth.
- Year-to-Date Performance: The final selection includes the six AI stocks with the highest year-to-date returns among the holdings of IRBO and BOTZ. Each of these stocks has achieved a year-to-date gain of at least 100%.
By considering these factors, investors can make informed decisions about investing in AI stocks with strong growth potential and analyst support.
Why other stocks didn’t make the cut
The following list highlights the top-performing AI stocks in 2023. It is essential to note that this list is based on their performance this year and does not necessarily indicate their potential as long-term investments.
Among the AI stocks mentioned, Microsoft (MSFT), Alphabet (GOOG), and Apple (AAPL) have shown notable growth, with gains of at least 35% year to date as of June 9. However, it’s important to clarify that they are not the top gainers on this particular list, which focuses on the best-performing AI stocks.
The increasing popularity of AI technologies like ChatGPT has sparked significant interest from investors, leading to dramatic increases in the stock prices of companies associated with AI services. It’s crucial for investors to approach such situations with caution and thoroughly analyze the company’s business fundamentals before making any decisions. A stock’s rapid price surge should prompt investors to investigate whether the company’s underlying metrics justify such a substantial move.
When considering AI stocks, investors should be wary of those with excessively high P/E ratios, P/S ratios, or price-to-free cash flow ratios. Such sky-high valuations may not be sustainable in the long term and could indicate an overvalued stock, leading to potential risks for investors.
In conclusion, this list of top-performing AI stocks provides valuable insights into the current market trends. However, careful evaluation and analysis of a company’s fundamentals are crucial before making investment decisions in the AI sector.
Final verdict
The hype surrounding AI technology has undoubtedly brought attention to AI stocks, leading to substantial returns for the companies mentioned in this list. However, to sustain this growth and capitalize on the potential, these companies must focus on enhancing their current offerings and transforming their AI technologies into profitable ventures. DataTrek Research co-founder Jessica Rabe believes that Big Tech companies have benefited the most from the excitement around AI, and this trend is likely to persist due to their ability to leverage global scale and competitive advantages.
As AI technology continues to evolve, investors are keeping a close eye on the potential winners in the market. The companies mentioned in the list have seen significant gains, but there’s a growing emphasis on their capacity to innovate further. Turning AI into sustainable businesses requires continuous improvements in the underlying technologies and finding new ways to create value for customers.
Jessica Rabe’s insight highlights the dominance of Big Tech in the AI space. Their ability to leverage existing resources and infrastructure gives them a competitive edge in the adoption and implementation of disruptive AI technologies. However, it also underscores the need for other companies to find their unique strengths and differentiators to stay competitive and capture their share of the AI market.
In the world of AI stocks, success is not solely based on the technology itself but also on the ability to translate it into practical, revenue-generating applications. Companies must prioritize refining their AI solutions and addressing real-world problems to build sustainable businesses that can weather the evolving market dynamics.
While the buzz around AI has benefited various companies, it’s essential to remember that this is an ongoing journey. As the technology matures, new players could emerge, and existing leaders might need to adapt and innovate continuously to maintain their positions. In conclusion, AI stocks have seen promising returns, but long-term success will depend on each company’s dedication to improvement and value creation.
Is AI a safe investment?
AI technology presents itself as a promising long-term investment. However, it’s essential to recognize that individual AI stocks may experience varying levels of success. Some companies may emerge as major winners, while others might face significant challenges along the way.
When it comes to investing in AI technology, a prudent strategy involves creating a diversified portfolio of high-quality AI stocks. The focus should be on companies that consistently demonstrate profitability and possess reasonable valuations based on fundamental metrics. By doing so, investors can mitigate risks and position themselves for potential growth in the AI sector.
