Artificial intelligence is undeniably an ongoing theme for the stock market. Its potential overshadows most of the market’s sectors due to its potential to revolutionize certain industries. The sector promises efficiency, innovation and cost-effective solutions, opening up opportunities for investors to snag AI stocks with long-term potential.
According to CompTIA’s IT industry outlook for 2024, around 22% of its surveyed U.S. tech professionals highlighted that they are already aggressively pursuing AI integration. Another 33% are already working on implementation with a limited capacity. That shows the ongoing adoption and future growth of artificial intelligence.
The next question now is, which stock should you be betting on? I believe it’s always best to consider the industry leaders and recognize potential opportunities they may present. So, if we pick our top three, we will look at the best-performing AI stocks with long-term potential.
In this article, I selected the three highest-weighted stocks in the Wisdom Tree Artificial Intelligence and Innovation Index and sorted them based on year-to-date (YTD) earnings. Investors who own these stocks gain exposure to AI and can sleep well at night, knowing that, barring any catastrophes, they can hold them for 10+ years.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) owns social media and messaging platforms like Facebook, Messenger, WhatsApp and Instagram. The company is a technological juggernaut that has made considerable efforts to invest in AI tools and applications through its FAIR research team (Fundamental AI Research). The project seeks to advance AI via open research for everyone’s benefit.
Besides its research, the company owns two large language models. The first is LLaMA, which was intended for non-commercial use. The second language model has a most creative name, LLaMA 2.
LLaMA 2 allows individual developers and enterprises to use the second-generation language model to create countless commercial applications that could boost the development of AI in this field.
If we look at its financials, Meta reported revenue growth of 16% year-over-year (YOY) for FY’23. Diluted earnings per share also grew 73%. That excellent display has translated into a strong price performance of over 43% from the start of the year.
With a strong foothold in social media platforms and innovative AI research, Meta is one of the top AI stocks with long-term potential.
ARM Holdings (ARM)
Snapdragon is a popular processor for Android mobile devices. ARM Holdings (NASDAQ:ARM) is the semiconductor intellectual property company that owns and produces Snapdragon CPUs and has IPs for product development on various devices.
ARM offers AI-ready product families with scalable and highly versatile AI-optimized platform architecture. Its products and platforms allow high efficiency and performance on all devices to run machine learning workloads. Those include:
- Cortex CPUs: The leading and best-in-class CPU for energy efficiency today.
- Ethos NPUs: NPUs are optimized for machine learning inference in IoT, automotive, infrastructure and other industry segments in terms of performance, space and power economy.
- Mali GPUs: GPUs that focus on workloads related to graphics-intensive machine learning that demand high performance for applications in the video, gaming and image domains.
The company debuted on Nasdaq last September 14, 2023, with an excellent reception from investors.
With the IPO priced initially at $51.00 a share, ARM Holdings continued to rise as investors bet on its potential during this AI boom. ARM’s stock price has already gained more than 43% since the start of the year.
Astute investors may have noticed that ARM’s net income did shrink by 52% for the quarter, but for good reason. The company saw accelerated expenses as it increased its engineering and sales headcount to ramp up production and research.
ARM’s solid presence in the tech space and its foray into AI products are good growth indicators. So, add ARM to your list of AI stocks with long-term potential.
Nvidia (NVDA)
Is anyone even remotely surprised that Nvidia (NASDAQ:NVDA) is on a list of the best AI stocks with long-term potential?
The company is one of the biggest winners of the AI revolution. Its proprietary GPU technology, including CUDA, and its endless application for generative AI drove its data center sales to new heights. That excellent growth cemented its position as a definite leader in the space, which could last till the technology matures.
Nvidia also has a strong portfolio of products outside the AI market, such as its RTX and legacy GTX gaming GPU lines.
While others argue that there is little room for growth for NVDA, I disagree. CompTIA’s survey indicates that around 22% are only pursuing AI integration, and 45% are still exploring AI’s adoption. This underlines the fact that the AI market has room for growth, and Nvidia, being the de facto leader, will surely grow with it.
Nvidia’s fiscal 2024 results were golden. The company reported a 126% bump in revenue, and gross margins increased by 15.8 pts to 72.7%. All this culminated in a massive 581% and 586% increase in net income and diluted EPS, respectively.
The good news had tangible effects on price, as NVDA stock grew 72% since the start of 2024. Its astonishing results and the ongoing integration of AI in various sectors make Nvidia a must-have stock for anyone who wants to add exposure to AI to their portfolio.
On the date of publication, Rick Orford 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.
