7 Best Artificial Intelligence (AI) Stocks of 2023: Navigating the AI Wave

AI companies are revolutionizing the tech scene. They’re transforming everything from businesses to global markets. Bridget Engle from The Bank of New York Mellon Corporation captured the excitement. Speaking at a Morgan Stanley event, she compared today’s AI breakthroughs, like ChatGPT, to the early days of the internet. She said, “Its impact might be as huge as the internet’s, especially for finance and markets.” For investors eyeing AI, there are plenty of options. You could invest in companies leading in AI hardware, those creating AI-driven solutions, or businesses using AI to boost their products, marketing, or operations. Each sector offers unique opportunities in the booming AI market.

PRO TIP:

When selecting best AI stocks consider these crucial factors:

1. 1. Adoption and Integration of AI: Evaluate how well each company has integrated AI into its core business offerings and how widely its AI solutions are being adopted.
   2. Revenue Growth: Assess the year-over-year revenue growth, indicating the company’s market expansion and adoption rate of its AI technologies.
   3. Profit Margins: Look at profit margins, especially the EBIT (Earnings Before Interest and Taxes) margin, to gauge operational efficiency and profitability.
   4. R&D Expenditure: Evaluate the proportion of revenue reinvested in research and development, a crucial indicator of commitment to innovation in AI.
   5. Debt-to-Equity Ratio: Check the debt-to-equity ratio to understand the company’s financial leverage and stability.
   6. Price-to-Earnings Ratio (P/E): The P/E ratio can provide insight into the stock’s valuation compared to its earnings, useful for assessing if the stock is over or undervalued in the market.
   7. Return on Equity (ROE): ROE measures how effectively a company is using its equity to generate profits, a key indicator of financial health and management efficiency.

The Koyfin Screener allows scanning through more than 100K global securities using 5,900+ filter criteria. Set filters as mentioned in our Pro Tip to refine your search.

*Data as of August 11th, 2023.

Monitoring AI stocks involves actively tracking key developments and market movements. Regularly review tech industry trends, as they directly influence AI stock performance. Watch for updates in business strategies, tech advancements, and competitive positioning of your AI investments. This helps assess their growth potential and market position in the fast-evolving AI sector.

Microsoft is going all in on AI, a point CEO Satya Nadella highlighted in their Q3 2023 earnings call. Their Azure OpenAI Service, housing models like ChatGPT and GPT-4, now caters to over 2,500 customers. Nadella stressed that AI is now a fundamental part of every app they develop. He also shared plans on launching unique AI features.

On a call on June 13, 2023, Natasha Crampton spoke about Microsoft’s strong position in AI, saying, “Microsoft is geared to lead in AI, thanks to our investment in building and using AI responsibly.” Amy Hood chimed in with a bullish outlook, hinting their AI segment could be the quickest to reach $10 billion in revenue in Microsoft’s history.

The numbers also tell a promising story. In 2022, Microsoft upped its capital spending by 15.8% to $23.8B, while funds for research and development climbed to $24.5B, up 18.32% from 2021. James Scott echoed this optimism, stating, “there’s a huge opportunity ahead, and we expect a solid return on our investment.”

Key Investment Insights for Microsoft Corp. (MSFT):

Google, a subsidiary of Alphabet Inc., is enhancing its search functionality with a new AI feature, the Search Generative Experience (SGE). Unlike models such as ChatGPT or Bard, SGE provides direct answers from a variety of sources. In Alphabet’s Q1 2023 Earnings Call, CFO Ruth Porat disclosed a substantial investment in another AI initiative, DeepMind.

Alphabet executive Sundar Pichai emphasized in the call, “As we continue to integrate AI into our products, our AI principles and the highest standards of information integrity remain fundamental to our work.” This AI focus has notable financial ramifications.

In 2022, Alphabet’s R&D expenses escalated to $39.5B, a 25.15% increase from 2021, and their capital expenditures (CapEx) grew by 28% to $31.5B. Porat anticipates a modest increase in 2023’s capital spending, highlighting their continued investment in AI.

Key Investment Insights for Alphabet Inc. (GOOGL):

Amazon.com, Inc. stands strong in the AI arena, primarily via its cloud service, Amazon Web Services (AWS). AWS holds a market share nearly equivalent to the joint shares of its nearest rivals, Microsoft’s Azure and Google Cloud. A standout AI initiative from Amazon is CodeWhisperer, which translates natural language into code. During the Q1 2023 Earnings Call, Amazon Executive Andrew Jassy spotlighted its potential to boost developer productivity, hinting at a significant shift in how developers allocate their time, away from rewriting code.

In the hardware domain, Amazon has ventured into AI chip creation, with the Inferentia chip as a notable mention. This chip drives Alexa and reduces reliance on Nvidia.

On the financial front, Brian Olsavsky, another executive at Amazon, highlighted continued investment in infrastructure to cater to AWS customer needs during the same call. This includes financial commitments towards Language Models (LLMs) and generative AI. In 2022, Amazon’s capital expenditures (CapEx) rose by 5.3% to $58.3B, while R&D spending surged by 30.62% to $73.2B, demonstrating a robust financial backing for its AI endeavors.

Key Investment Insights for Amazon.com, Inc. (AMZN):

NVIDIA, known for its advanced GPUs, is now developing more technologies for AI platforms. As per NVIDIA’s Ian Buck, they’re not just making GPUs, but also CPUs, DPUs, and are working on data transfer tech like InfiniBand and Ethernet.

One project to note is InfiniBand, which helps move data quickly, a key for large-scale AI projects. Gilad Shainer mentioned in a webinar that InfiniBand is a top choice for big AI projects, also noting that its revenue has tripled.

On the money side, CEO Jensen Huang shared that the company’s spending increased by 88.8% to $1.8 billion in 2022, with a bigger focus on creating new AI tech and improving computing infrastructure. They also spent $5.3 billion on research and development, up by 34.25% from 2021, showing strong financial support for expanding their AI and computing tech.

Key Investment Insights for NVIDIA Corp. (NVDA):

Meta Platforms, Inc. (META) is not just using AI, but leading in creating new AI technologies. CEO Mark Zuckerberg talked about two big trends in the Q1 2023 Earnings Call: a big move towards AI now, and a growing interest in the Metaverse for the future.

Right now, Meta is working on two main things. First, they’re improving systems that help suggest what users see on platforms like Facebook and Instagram, such as Reels and ads. Zuckerberg mentioned that AI now suggests over 20% of the content on these platforms, which helps make more money. Second, they’re exploring Generative AI, which could change the way their apps and services work.

In terms of finances, Meta spent $31B on big projects in 2022, which is 68% more than in 2021. They also spent $35B on research and development, up by 43%. This shows that Meta is investing heavily in AI.

Key Investment Insights for Meta Platforms, Inc. (META):

Adobe, known for digital creativity, is making unique digital tools like Adobe Express, Firefly, Photoshop, and Illustrator.

During the Q2 Earnings Call, Adobe’s boss, Shantanu Narayen, talked about how excited they are about AI, saying it’s opening up new doors for them, especially in online computing, mobile tech, and AI. Their AI project called “Firefly” is growing fast, hitting 0.5 billion generations. Also, features in Photoshop and Acrobat, powered by Adobe Sensei, show how Adobe is leading in mixing AI with their tech.

Financially, Adobe put $3B into AI research in 2022, which is 17.6% more than last year, to speed up “Firefly” and make their products better. They also increased their big spending in 2022 to $442M, up by 27%, showing strong financial support for their AI projects.

Key Investment Insights for Adobe (ADBE):

Issuer Direct is making strides in modern communication tools, aiming to better the way businesses, stakeholders, and the public connect.

They recently introduced AImee, an AI tool designed to assist in writing and recommendations. CEO Brian Balbirnie revealed that nearly 20% of customers jumped on using AImee in its early weeks. AImee isn’t just about refining the tone of content, it’s on track to blend with other services, kicking off with a pitching platform. This move highlights AImee’s potential in updating old-school PR approaches.

On the financial front, Issuer Direct is upping its game in AI, as seen with their $1.3M investment in R&D for 2022, up from $1.1M the previous year. Coupled with a 6.45% rise in 2022 CapEx, the company, guided by Balbirnie, is on a fast track to develop and promote their AI solutions.

Key Investment Insights for Issuer Direct (ISDR):

How to Create a Watchlist for Top AI Stocks

Step 1: Sign Up to Koyfin for Free. Register an account and get started; no credit card required.  

Step 2: Create a Watchlist. Head to ‘My Watchlists’, create a new watchlist and give it a name.

Step 3: Add Tickers. Click ‘Add Ticker’, then ‘Import Securities’, then copy and paste the below list of tickers. 

MSFT, GOOGL, AMZN, NVDA, META, ADBE, ISDR

Step 4: Customize Columns. Hit the ‘Columns’ icon to add and remove columns from your watchlist table. 

We have thousands of data points you can add to a watchlist, including fundamental data, price and returns data, analyst estimates, percentile ranks, security information, portfolio tools, and the ability to create your own formulas and labels. 

Now your watchlist is ready, and you can use the rest of the Koyfin terminal to track and analyze these stocks.

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Our insights are derived solely from historical information and analyst predictions, employing an impartial approach. Please note that our articles do not serve as financial guidance.