Stocks in the AI industry have seen huge gains in recent years. A recent report by PWC estimated the sector could contribute up to $15.7 trillion to global gross domestic product. The three stocks below show the most promise based on their accomplishments and expected product launches in the AI industry.
As investors look to benefit from the rising popularity of AI, these three stocks have emerged as potentially the most lucrative AI stocks to buy now. They are at the forefront of the AI revolution, each making meaningful contributions to the sector’s development.
All of these three stocks have solid fundamentals and their foot in many different places, especially AI, which makes them a safer bet than many other companies.
This detailed review should prove insightful if you have held off on taking the plunge into AI. It will provide insight into what each company is doing to advance AI and why it could be worth your attention.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) is best known for battery electric cars, including the Cybertruck and various models of the Tesla EV. Amidst the drop in global EV sales and delays in the production of the Cybertruck, Tesla lagged in 2024, gaining only 1% year-to-date.
Despite these challenges, the EV maker’s recent better-than-expected vehicle delivery numbers slightly boosted its shares. Most of its existing challenges are due to short-term macroeconomic challenges, which it is expected to overcome.
In its Q1 fiscal 2024 results, Tesla reported a 9% dip in revenue, while operating income fell 56% to just below $1.2 billion.
One positive catalyst that could boost TSLA stock this year is the upcoming Robotaxi announcement, which is slated for later this year. The Robotaxi will be an AI-powered service, which investors anticipate will boost the company’s revenue in the coming years. During the May 2024 announcement, Tesla also announced plans for Optimus, an AI-powered robot.
Looking at the analysts’ predictions, they forecast an average price target of $186.71, which is a 22.54% downside from the recent price. At the high end of the forecast, analysts predict $310 per share, a 28.61% upside.
ASML Holding (ASML)
ASML Holding (NASDAQ:ASML) is at the cutting edge of chip manufacturing. Its extreme ultraviolet lithography machines (EUV) are in high demand as they are the best when it comes to making advanced AI chips,
Having effectively cornered the entire market, the rise of AI chips will undoubtedly lead to a boon for shareholders for years to come.
In its Q1 2024 results, ASML reported revenue of $5.79 billion, a gross margin of 51%, and a net income of $1.3 billion. In the upcoming quarter, it forecasts revenue of $6.2 billion to $6.8 billion, with a gross margin of 50% to 51%.
With so much of the future of advanced AI chip manufacturing depending on its advanced equipment, ASML is undoubtedly one of the top AI stocks to buy now. Analysts give it a strong buy rating, forecasting an average price target of $1,115.43 per share, or 4.98% upside. Meanwhile, the most optimistic analysts expect it to hit $1,300, a 22.35% upside.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, GOOGL) is one of the world’s leading tech companies. It recently made a foray into the AI space with its Gemini generative AI technology. It has enjoyed relative success despite initial hiccups.
The company is also working on incorporating AI into its product suite, which spans a broad user base. It is a solid revenue generation machine with over $300 billion a year in revenue. Alphabet has the financial muscle to become one of the leading players in the AI sector.
Looking at the company’s Q1 2024 results, the company is in solid financial standing. It reported revenue of $80.5 billion in the quarter. More impressively, it reported operating income of $25.47 billion for 32% margins.
One impressive aspect of Alphabet’s revenue generation is that it manages to do so with primarily free products. Consequently, its business model is difficult to replicate. That makes it unlikely that a competitor could push it out anytime soon.
What makes Alphabet even more impressive is its valuation. With a forward price-to-earnings ratio of just 24.81, most investors consider it undervalued. It makes it one of the best AI stocks to buy now. Analysts, though, give the stock a hold rating and an average price target of $198.21, a 6.81% upside. At the high end of the forecast, they give GOOG a price target of $225, translated as a 21.25% upside.
On the date of publication, Joel Lim did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
