Best AI stocks of 2024: Companies leading the AI gold rush
The top AI stocks for 2024 comprise companies leading the development and integration of artificial intelligence in various aspects of society and industry.
Artificial intelligence (AI) is expected to play a major role in the evolution of the Fourth Industrial Revolution. Driven by advancements in AI, robotics, the Internet of Things (IoT), biotechnology and quantum computing, among other things, the Fourth Industrial Revolution is characterized by the fusion of technologies that integrates the physical, digital and biological worlds.(1)
Given that the future of technology is widely believed to be heavily influenced by AI, investing in AI stocks is compelling.
AI is a rapidly growing field with significant potential for innovation, efficiency improvements and competitive advantages across various industries.
If you want to invest in companies with a competitive edge, market demand and growth potential, AI is proving itself a favorite among investors so far this year.
So here are some of the top AI stocks to consider for 2024.
20 best AI stocks of 2024
This is an ever-changing space that moves at a rapid pace, and the best AI stocks of today may not be the best AI stocks of tomorrow. But to give you some starting inspiration, here are the top 20 holdings as of August 6, 2024, in one of the largest AI-specific investment funds, the Global X Artificial Intelligence & Technology ETF (AIQ):
*Performance accurate as of market close on August 5, 2024
What are AI stocks?
Artificial intelligence means the ability of machines, such as computers, to perform tasks and activities that would normally require human intelligence. AI stocks, then, represent companies at the forefront of this transformation.
These firms are involved either in the research, development, or application of AI. This could be companies whose entire business model revolves around AI, or those where AI constitutes only a small segment of their operations.
Types of AI stocks
Though the concept of AI is not new, the industry is still in its early stages of development. As time progresses, we’re likely to witness the emergence of more specific segments of this industry. For now, we can break down AI stocks into the following categories:
Pure AI plays. These are companies whose main focus includes developing and providing cutting-edge AI solutions, platforms, and related services. These might be the best stocks if you want complete exposure to the AI industry. Unfortunately, at the moment, there are very few major public companies that fit this bill. One example that didn’t make it onto our best AI stocks list is C3.ai (AI).
Stocks heavily investing in AI. This category includes firms that are integrating AI into their business model to fuel growth or improve efficiency. Essentially, they leverage AI as a strategic tool for gaining a competitive edge or achieving success. The segment also includes companies that are betting big on the future of AI by making speculative investments in early-stage AI companies. Examples of top stocks include the likes of Microsoft (MSFT) (part-owners of OpenAI), Alphabet (GOOGL), Baidu (BIDU), Tesla (TSLA), and Amazon (AMZN).
How to invest in AI stocks
Open a brokerage account. Choose a broker that suits your needs, whether it’s one with robust research tools, low fees or a user-friendly interface. Then, complete an application and sign up.
Fund your account. Deposit funds via a bank transfer, debit card or any other means your broker allows.
Research and choose AI stocks. Research the best AI stocks (or funds) for your portfolio, and then search for them on your chosen platform by company name or ticker symbol.
Buy shares. Select the amount you want to invest and create an order to buy shares. And just like that, you’re now officially an investor in the AI sector.
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Why do people want to invest in AI stocks?
Here’s a glimpse into why many investors are turning their attention toward artificial intelligence.
Huge growth potential. The AI industry is on an explosive trajectory, fundamentally changing how we live, work, and interact. In fact, the global AI market has nearly tripled in size in the last 4 years, surging from $108.42 billion in 2020 to $305.91 billion in 2023.
Investment returns. Some projections are that this futuristic market could hit almost $7.4 billion by 2030. For investors, this translates to a sector ripe with opportunities for significant returns as the application of AI spreads across industries.
Innovation’s front row. Investing in AI stocks is akin to having a backstage pass to the future. It’s a chance to be part of groundbreaking developments that could redefine or completely reshape societal norms and structures.
Diversification. AI’s versatility means it spans numerous sectors, from finance to healthcare to automotive and many others. Investing in the best AI stocks allows for a strategic spread of investments, mitigating risks associated with market volatility in individual sectors.
Risks of AI stocks
While the visions of human-like robots taking over the world remain the object of science fiction movies and stories rather than reality for now, there are still some very real risks to investing in this industry you should be aware of:
No guarantee of profitability. As mentioned, AI is still a relatively new industry. While it holds immense potential, there’s still no guarantee that all segments of the industry will be profitable. However, it’s also true that investing never comes with any guarantees of positive returns, regardless of the industry.
Technological obsolescence. AI is advancing at a blistering pace. Unfortunately, that means today’s leading AI tech can quickly become outdated tomorrow. Companies that fail to continuously innovate or keep up with rapid advancements risk losing their competitive edge or becoming obsolete, which is bad news for investors.
Regulatory risks. As AI technologies become increasingly woven into the fabric of society, they are attracting more regulatory scrutiny. Changes in regulations or concerns over privacy, data security, and the ethical use of AI can have unforeseen impacts on companies and their stock prices.
Expert comment - Will the AI industry continue to be profitable?
It's looking that way, but there's no guarantees. If AI becomes commonplace, and the technology is open-source, this could make it much cheaper, devaluing companies. At the moment, AI stocks can generate high profit margins because the technology is advanced and hard to compete with.
If AI becomes a normal part of everyday life, this might actually be a negative for the profitability of AI stocks. This happened with the airline industry. Airline travel was a new technology that many were betting on. It did become a hugely important industry, but not necessarily a profitable one, running on extremely slim margins.
Beyond directly buying individual stock in AI companies, there are several other ways to gain exposure to this dynamic industry.
Exchange-traded funds (ETFs): These funds invest in a basket of different AI stocks, spreading out the risk associated with individual stocks. They offer flexibility and accessibility, as you can easily trade them on a regular stock exchange. Popular examples include the Global X Artificial Intelligence & Technology ETF (AIX) and the Global X Robotics & Artificial Intelligence ETF (BOTZ).
Investment funds and trusts. Funds and investment trusts pool money from investors and then invest it in a diversified portfolio of assets. Some funds and assets may focus exclusively on AI assets but others include other types of investments like tech stocks.
Index funds. Investors can also engage with the AI sector through index funds that track AI-specific indices or broader market benchmarks like the S&P 500 (with AI exposure). Index funds offer instant diversification. They also tend to have lower expenses and fees compared to actively managed funds.
Pros and cons of investing in AI stocks
Pros
High growth potential and fast-growing sector
Chance to participate in a revolutionary industry
Spans multiple sectors, allowing some diversification
Cons
No guarantee of profitability in the long-term for AI investments
Regulatory changes could disrupt the operations and profitability of AI stocks
Some AI tech can become obsolete relatively quickly
Bottom line
The robots haven’t taken over, but it appears artificial intelligence is here to stay. Finding the best AI stocks to invest in presents a challenge because no one knows just yet how much of a role AI will play in the future of human civilization. Sorry for sounding philosophical.
There’s no need to worry about AI being a threat to human existence, not just yet anyway. If you want to make money with AI stocks, make sure you understand the risks and aim for companies you think will still be around in 10 or more years. This is challenging with AI technology that’s still in its infancy, but try your best.
Frequently asked questions
Who is the leader in AI technology?
There’s no definitive leader because there are different branches and segments within the AI industry. There are leading companies across various AI sectors, but there isn’t a single AI stock that dominates across the board. The AI stock best-known at the moment is probably Nvidia, but it may not remain on top.
What is the best AI penny stock to buy?
According to Nasdaq, these are the 5 best AI penny stocks for 2024:
BigBear.ai (BBAI)
Remark Holdings (MARK)
Inuvo (INUV)
Veritone (VERI)
IZEA Worldwide (INDEX)
Is AI a good investment?
It can be, but it depends on the specific AI investment or stock you’re looking at. Also, it’s important to remember that past performance doesn’t dictate future results. It’s impossible to predict exactly what will work out to be a good investment in the future. Otherwise, we’d all be rich already.
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Finder is not an advisor or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.
Sean LaPointe is a seasoned freelance writer who specialises in finance, tech, and business. He excels at finding practical solutions to everyday financial problems and has written for a wide range of top sites including The Motley Fool, Angi/HomeAdvisor, Best Money, CapLinked, and Valutico.
When he’s not writing or researching new ways to help people manage their money, he can be found playing basketball with friends or spending time with his family. See full bio
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