Artificial intelligence (AI) has been the buzzword for the stock market. Corporations that can capitalize on this new technology can generate meaningful long-term returns for investors. People got to see those returns manifest in 2023 and in the first half of 2024. However, some AI stocks can keep charging higher.
Investors can make a living by outsmarting the stock market. These are some of the top AI stocks that have a chance at delivering impressive long-term returns.
Microsoft (MSFT)
The tech giant is currently the world’s most valuable publicly traded corporation. Microsoft (NASDAQ:MSFT) has a $3.1 trillion market cap that goes alongside a 36 P/E ratio and a 0.725 yield. Shares are up by 12% year-to-date (YTD) and have more than tripled over the past five years.
The corporation closed out the third quarter of fiscal 2024 with a 35.5% net profit margin. Revenue increased by 17% year-over-year (YOY) in the quarter while net income was up by 20% YOY. Microsoft Cloud, a top beneficiary of AI, grew by 23% YOY and represented more than half of the firm’s total revenue.
Additionally, Microsoft operates in many business verticals, and Copilot offers an opportunity to cover more ground. Copilot is the company’s AI tool, and its recent Copilot for Security feature should help Microsoft gain market share in the cybersecurity industry.
Therefore, analysts have been rushing to give the stock buy ratings. The average price target suggests an 18% upside from current levels.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) uses AI to display relevant ads to its users. The company has delivered robust returns with its advertising channels, and the first quarter was no exception. Revenue increased by 27% YOY while net income was up by 117% YOY. The social media giant grew its revenue while trimming its headcount by 10% YOY.
While advertising is the company’s primary revenue driver, it’s investing in artificial reality through its Reality Labs segment. It’s going to take several years before artificial reality makes a meaningful impact on Meta Platforms’ revenue growth. However, the company’s financials are looking just fine, and future reinforcements can bring the stock higher in the long run.
Furthermore, Meta Platforms stock is up by 35% YTD and has gained 170% over the past five years. The stock trades at a 27 P/E ratio and offers a 0.43% yield. Meta Platforms is currently rated as a strong buy with a projected 12% upside.
AeroVironment (AVAV)
AeroVironment (NASDAQ:AVAV) is an American defense contractor that produces unmanned aerial vehicles. These drones rely on AI to carry out missions. The contractor has been seeing more demand for its business in recent quarters. Revenue for Q3 of 2024 revenue increased by 39% YOY while net income swung from a slight loss to $13.9 million in profits.
Also, AeroVironment Chief Environment Officer (CEO) Wahid Nawabi mentioned a strong backlog and growing pipeline in the press release. Based on those catalysts, the company raised its guidance for fiscal 2024 revenue. It now expects to generate between $700 and $710 million in fiscal 2024 sales. Additionally, AeroVironment anticipates a double-digit revenue growth rate in fiscal 2025.
Moreover, the stock has hit its stride in recent years. It’s more than tripled over the past five years and is off to a strong start. AeroVironment has gained 64% YTD. The defense contractor recently became profitable, and rising margins should result in a more attractive valuation in the future.
On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
