How to play the AI tech rally? Here’s five top stocks in the space

In This Article:

zf L via Getty Images

Investors continue to flock to technology firms investing in artificial intelligence (AI) with the hype further steering market sentiment in the direction of particular stocks which are already making headlines in the sector.

“Whatever your view on Artificial Intelligence, it has certainly captured the media’s attention and more companies with exposure to AI are significantly gaining in anticipation that it will lead to productivity breakthroughs and benefits for society as a whole,” Giles Coghlan, chief market analyst consulting for HYCM, told Yahoo Finance.

Coghlan also noted, however, that the issue with any technology as fundamental as the creation of the computer, the internet, or the mobile phone, it that it is almost inevitable that it will lead to a bubble.

“While all of these innovations changed the world, early-stage speculations led to huge booms and painful bursts to get there – the challenge for investors is distinguishing the companies that will continue to succeed from those that could end up going bust.”

As a result, he said one potential solution for investors is investing in already top performing firms that have AI exposure.

Here are five of the companies currently dominating the AI space.

Nvidia (NVDA)

The US computer chip designer has become one of the biggest winners of the AI boom, with its stock now worth triple what it was eight months ago.

"Investors have been particularly enthusiastic about Nvidia’s prospects of late, with stocks soaring more than 110% to date and earnings revised significantly higher, largely due to the fact that its graphics processing units are suited for running AI app," Coghlan noted.

Nvidia’s graphics processing units, or GPUs, are critical to generative AI platforms like OpenAI’s ChatGPT and Google’s Bard, making the company a key supplier for companies trying to build something with AI.

“We view Nvidia as the most important company on the planet in an era that is rapidly changing towards one that will be emphasised by greater AI capabilities,” CFRA research analyst, Angelo Zino, said.

The last quarterly earnings report from Nvidia noted over $2bn in profit in three months. Significantly, Nvidia forecast $11bn in sales for the second quarter of fiscal 2024 alone.

Read more: Renewable energy stocks: clean energy switch could benefit these companies

Matt Britzman, equity analyst at Hargreaves Lansdown, told Yahoo Finance that Nvidia is arguably the most high-profile benefactor of the recent AI craze, briefly joining the $1trn market cap club after a massive first quarter that shocked markets.