Artificial intelligence has been one of the top buzzwords in the stock market over the past year. Companies that merely mention AI seem to get a boost of investment support, while those that are fully immersed in the industry have had banner years, far outpacing the 14% year-to-date return of the S&P 500.
But what is driving the gains in these stocks? And do they still have more room to run in 2024 and beyond?
Here’s a look at some of the top performers in 2023, along with a brief analysis of what’s making them run and what their future prospects hold.
Nvidia (NVDA)
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- YTD gain as of Oct. 11: 220%
Nvidia has been the poster child of AI outperformance in 2023, gaining an incredible 220% this year. The producer of chips — known as GPUs — for gaming and other artificial intelligence seems well-positioned for future growth, with the company projecting 170% year-over-year revenue growth in Q3 of its fiscal 2024.
The incredible rise of so-called “generative AI” like ChatGPT and other platforms this year bode well for growth at Nvidia, as does the growth of AI across major sectors like the automotive industry. The only caveat to investing in Nvidia is that it has a tremendous amount of growth and successful execution built into its price already.
Meta Platforms (META)
- YTD gain as of Oct. 11: 172%
Meta Platforms, formerly known as Facebook, has jumped into the deep end when it comes to artificial intelligence. While not a producer of the physical components of AI systems like Nvidia, Meta relies on artificial intelligence to hone and improve its primary business, which is ad generation and monetization.
Over the past year or so, Meta has steadily boosted its digital advertising business, and it is capitalizing on AI and automation to keep it at the head of the pack. Meta’s huge gain in 2023 would normally keep value-based investors away, but after the big 64% loss the stock took in 2022, it hasn’t even returned to its highs of 2021.
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Tesla (TSLA)
- YTD gain as of Oct. 11: 113%
It might seem funny to think of a car company as an AI leader, but Tesla is a car company like no other. In addition to the technology that it took to even get an electric vehicle company off the ground, Tesla is lauded for its self-driving technology, which seems destined to be a mainstay of the future.
While still working out all the kinks, the AI behind Tesla’s automotive software is the best in the business and a sign of what’s to come. The stock is a huge long-term winner but is notoriously volatile, making it not for the faint of heart. In 2020 alone, Tesla stock rocketed up over 1,000%, while on the downside, it lost a whopping 65% in 2022. For those who can tolerate the swings, analysts still have a consensus buy rating on the stock.
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Adobe (ADBE)
- YTD gain as of Oct. 11: 63%
Adobe has been a perpetual winner in the stock market, but recent gains have been driven not as much by subscription revenue as by expansion into the AI market. The company boasts how its engineers and scientists are already hard at work on the next generation of artificial intelligence, machine learning and deep learning to keep the company growing and provide solutions for individuals and businesses.
Analysts have a “strong buy” rating on the stock and a $600.77 price target over the next 12 months. That’s a potential gain of over 9%.
Lam Research (LRCX)
- YTD gain as of Oct. 11: 53%
Lam Research may not be as well known as the other names on this list, but it’s a big player in the world of artificial intelligence. Lam Research doesn’t make semiconductors, but it makes the equipment that other players use to build them. Thus, when the AI chip industry is booming, so too is Lam Research.
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The company is poised to benefit from the industry’s “4.0 transformation,” which will be led by artificial intelligence and machine learning. Companies such as Deloitte believe that semiconductor growth will remain strong at least through 2030, with Lam Research being a direct beneficiary.
Analysts have a consensus “strong buy” on the stock, with an average price target 12 months out of $706.46, about 10% above current levels.
