Investing in artificial intelligence (AI) has gained significant attention as a potentially lucrative venture. While it’s not an official statement from the surgeon general, the financial health benefits of AI investments are hard to ignore. In the current landscape, seven of the top 10 biggest stocks by market capitalization have strong AI credentials. Four of these stocks have more than doubled in value since January 2020, with Google’s parent company, Alphabet, poised to deliver substantial returns.
The AI boom appears to be in its infancy, setting the stage for exciting investment opportunities in the coming years. This article explores the top contenders for the title of the best AI stock for the decade and why Google may be a frontrunner.
Tesla: A Strong Contender
Tesla, renowned for its electric vehicles (EVs), has seen its stock soar more than eightfold in this decade alone, including a remarkable 180% gain in 2023. AI plays a pivotal role in Tesla’s future, particularly in the autonomous ride-hailing (robotaxi) market. Cathie Wood, the founder of Ark Invest, believes Tesla’s value could surge by nearly 9.5 times its current worth by 2027.
Nvidia’s Dominance
Nvidia is another standout in the AI sector, with its shares having grown over sixfold since early 2020. The company’s graphics processing units (GPUs) are in high demand, powering various generative AI applications. This demand is expected to continue growing, bolstering Nvidia’s position in the market.
Microsoft’s Strategic Moves
Microsoft has strategically partnered with OpenAI, the developer of ChatGPT, to integrate generative AI into its software products. The company’s Azure platform is poised to benefit from AI capabilities, potentially delivering impressive returns in the coming years.
Amazon’s Cloud and AI
Amazon’s Amazon Web Services (AWS) ranks as the leading cloud-services platform. The company is rapidly incorporating generative AI functionality into AWS, positioning itself for significant growth in the AI sector.
Apple’s Quiet Progress
While Apple may not boast about its AI endeavors as loudly as others, it is actively involved in AI development. The company is quietly making strides in the field.
Meta’s Open-Source Approach
Meta Platforms, formerly Facebook, is taking an open-source approach to AI development, a strategy that could yield substantial rewards in the future.
Google: The Potential Leader
Google stands out as a potential leader in the AI sector. It has already made significant strides in the autonomous ride-hailing market through its Waymo self-driving car technology unit. Waymo operates autonomous ride-hailing services in Phoenix and San Francisco, with expansion plans for Los Angeles.
Google’s commitment to AI is further evidenced by its development of AI chips. The company recently unveiled the next generation of its tensor processing unit (TPU) chip, claiming it to be up to 1.7 times faster than Nvidia’s A100 GPU while consuming 1.9 times less power.
In addition to hardware, Google has integrated generative AI into its cloud platform, Google Cloud, which is experiencing rapid sales growth. The company is also on the cusp of releasing its Gemini generative AI tool, reported to be five times more powerful than GPT-4, according to semiconductor research company SemiAnalysis.
Valuation and Challenges
Google’s valuation stands out as a competitive advantage, being cheaper than most other top AI stocks based on forward-earnings multiples and price-to-earnings-to-growth (PEG) ratios, except for Meta.
However, some experts argue that AI could pose an existential threat to Google, as AI personal assistants could potentially replace search engines entirely. Search generates a significant portion of Google’s and Alphabet’s revenue.
While this threat is real, many believe that Google is well-positioned to develop and successfully monetize AI personal assistants, should they become a dominant force in the future.
