Investing Theory

AI Stocks to Invest in 2023: What You Need to Know

October 12, 2023

In the ever-evolving landscape of the stock market, one sector that continues to stand out and attract investors' attention is Artificial Intelligence (AI). As we step into 2023, AI technology is not just the future; it's the present.

From revolutionizing industries to enhancing everyday experiences, AI is reshaping the way we live and do business. For investors looking to capitalize on this transformative technology, here's what you need to know about AI stocks to invest in 2023.

Big Data and Machine Learning: Magic Behind AI Companies

I think that if a survey was carried out to find out what an average person associates artificial intelligence with, most answers would revolve around such key phrases as machine learning, data centers or natural language processing and self-driving cars.

Meanwhile, AI technology is much more than that - it is the future that is happening before our eyes. It is the improvement of our daily activities and automation possible to implement in almost all aspects of our life - even is we do not realize it yet. What's more, artificial intelligence can be used not only in traditional business - in the realm of multiple AI services, there's a groundbreaking frontier that is captivating artists, tech enthusiasts, and innovators alike - Generative AI.

Often regarded as the driving force behind the future of creativity, generative AI represents a paradigm shift in how we perceive art, music, literature, and even everyday problem-solving.

In simple words, Generative AI is a subset of artificial intelligence that focuses on teaching machines to mimic human creativity. Unlike traditional AI systems that rely on predefined rules, generative AI employs algorithms to generate new, original content. This content can range from visual art and music compositions to realistic human-like text and even entire storylines. Generative AI systems learn patterns from vast datasets and use this knowledge to create something entirely new.

AI Sector: How do Companies use Artificial Intelligence?

Artificial Intelligence (AI) has permeated various sectors, transforming industries, improving efficiency, and enhancing user experiences. AI capabilities seem literally limitless regardless of which part of the global economy they are being implemented in.

AI platforms today can actually do anything - process tons of data in seconds, analyze hundreds of millions of datapoints in real time, be helpful in financial planning, become digital assistants or simply become better than human brain in some aspects.

AI creates a reliable aid, which is used by more and more people. The business based on deep learning, machine learning or large language models and data centers is still developing - and with its development also comes new opportunities to choose the best AI stock.

However, before you decide on any AI investments, it's worth knowing what to look out for in the first place. Here's a glimpse into how AI is being utilized across different sectors:

1. Healthcare

The AI market in terms of healthcare focuses on actions like Diagnostic Assistance (AI algorithms analyze medical images (X-rays, MRIs, CT scans) to assist doctors in diagnosing diseases like cancer more accurately), Drug Discovery (AI accelerates drug discovery by predicting potential old and new drugs compounds and simulating their interactions with biological systems) and creating Personalized Medicine - AI analyzes patient data to tailor treatment plans and predict disease risks based on individual genetic makeup.

2. Finance

In this field, artificial intelligence companies focus on Algorithmic Trading, where AI-driven algorithms analyze market trends, news, and historical data to make trading decisions, optimizing investment strategies; on Fraud Detection, where AI identifies patterns in transactions to detect fraudulent activities and prevent unauthorized access to financial data and on Customer Service using chatbots powered by AI provide instant customer support, answering queries, handling transactions, and resolving issues.

3. Transportation

Most AI portfolios from this sector bet on designing Autonomous Vehicles, in which AI enables self-driving cars and drones by processing real-time data from sensors, cameras, and GPS to navigate and make driving decisions. AI actions include also Traffic Management, where AI algorithms analyze traffic patterns to optimize traffic flow, reduce congestion, and enhance overall transportation efficiency. What's more, AI tech giants work on Predictive Maintenance, a science field in which AI predicts maintenance needs for vehicles and infrastructure, minimizing downtime and ensuring safety.

4. Retail

I think the constant improvement of each online store and the whole e-retail branch is the most popular area of working for AI technology companies. AI products are being created here to improve Customer Behavior Analysis: AI analyzes customer data to predict preferences, enabling personalized product recommendations and improving customer engagement.

Tech companies also take care of Inventory Management issues: AI optimizes inventory levels by predicting demand patterns, reducing excess stock, and minimizing losses due to overstocking or understocking. Furthermore, there's a big growth potential for AI in Supply Chain Optimization, where AI enhances supply chain efficiency by analyzing data to optimize logistics, reduce costs, and improve delivery times.

So you have to admit that there is a lot to choose from: you can bet on companies from Amazon, Palo Alto Networks Inc. and Meta Platforms Inc to Alphabet and Tesla. No matter what you choose, the annual earnings of the vast majority of AI-based companies are well above expectations, and the industry continues to grow, with no indication that AI will stop trending anytime soon.

AI is a Growth Business

From significant breakthroughs in deep learning to the widespread adoption of AI applications across sectors, the development of the AI sector in recent years has been nothing short of revolutionary. Just a few months ago, ChatGPT got integrated with the Bing search engine.

Large language models require a tremendous amount of data - and once they are trained they are still able to process them in fractions of seconds. Every AI and cloud computing industry is growing at an alarmingly fast pace.

In fact, it's not just the technology itself - but also the entire value of the sector. As shown by data collected by Omdia, the global annual revenue of the entire market has already exceeded $50 billion, and further growth is expected to reach around $125 billion by 2025.

Global artificial intelligence software market vale - data provided by Omdia company.

Best AI Stocks To Buy

As you can see for yourself - the AI revolution is underway. Companies that use artificial intelligence are plentiful and can be found in basically every conceivable sector: from improving marketing efficiency and elevating content creation to a brand new level, to fintech solutions and medical innovations.

From the multitude of choices one can really make one's head hurt - so what is worth betting on? Let's dive into the tech giants landscape and take a closer look at the topic of best AI companies, and best AI stocks at the same time.

1. Microsoft (MSFT)

Microsoft Corporation, commonly known as Microsoft, stands as one of the world's largest and most influential technology companies. Founded by Bill Gates and Paul Allen on April 4, 1975, Microsoft has been a driving force behind the evolution of personal computing and software technology.

At its core, Microsoft is renowned for its software innovations. The company's flagship product is the Windows operating system, which has become a fundamental part of millions of computers globally.

What's more, Microsoft has embraced the era of cloud computing through its Azure platform, providing cloud services to businesses and developers. Azure offers a wide array of services, including virtual computing, analytics, storage, and networking, empowering organizations to build, deploy, and manage applications and services with ease.

Microsoft 365, the company's cloud-based productivity suite, integrates familiar Office applications with cloud-based collaboration tools, enhancing productivity and communication for businesses and individuals.

The technology giant is also deeply involved in the research and development of artificial intelligence (AI). The company's AI initiatives include projects related to machine learning, natural language processing, and computer vision.

Microsoft AI technologies are integrated into various products and services, enhancing user experiences and enabling innovative solutions in areas such as healthcare, education, and business intelligence.

What's worth mentioning, Microsoft and OpenAI entered into a strategic partnership aimed at harnessing the potential of AI for the betterment of society. By combining Microsoft's expertise in cloud computing, software development, and AI technologies with OpenAI's cutting-edge research, the partnership seeks to accelerate the development of advanced AI models and applications. The expected results of this multibillion dollar investment are one of the factors why analysts predict a 50% growth of Microsoft's Revenue in the next 2 years. See below:

Best AI Stocks to choose - Microsoft example. Screen from the tool.

2. NVIDIA Corporation (NVDA)

NVIDIA Corporation, often simply referred to as NVIDIA, stands as a global technology powerhouse renowned for its contributions to the world of graphics processing units (GPUs), artificial intelligence and computing power.

Founded in 1993 by Jensen Huang, Chris Malachowsky, and Curtis Priem, NVIDIA has evolved into a key player in the semiconductor industry, shaping the future of computing, gaming, AI, and deep learning.

NVIDIA is synonymous with GPUs, specialized processors designed to accelerate graphics rendering in computers. Over the years, NVIDIA's GPUs have become indispensable in gaming, scientific simulations, and various other applications that demand high-quality graphics and parallel processing power.

Their GeForce series, in particular, is popular among gamers and enthusiasts for its exceptional performance and cutting-edge features.

What's more, NVIDIA is a proud partner of the well-known Google Cloud.

NVIDIA's overall growth and increasing earnings seem to explain the current high valuation very well.

Analysts predict that earnings of NVIDIA Corp will increase over 500% in the next 2 years

3. Snowflake (NYSE: SNOW)

Snowflake Inc. is a cloud-based data storage company that has gained significant traction in the technology industry for its innovative approach to handling and analyzing large volumes of data. Founded in 2012 by Benoit Dageville, Thierry Cruanes, and Marcin Zukowski, Snowflake has quickly become a leading player in the field of cloud data management.

Snowflake offers a fully-managed, cloud-native data warehousing platform designed for the cloud era. Unlike traditional data warehouses, Snowflake operates entirely in the cloud, allowing users to store, process, and analyze data at scale without the constraints of on-premises infrastructure.

All these factors implicate the fact, that Snowflake can be a good AI investment choice with many future prospects.

Snowflake as an example od AI stocks: view from the tool.

What are the Best AI ETFs to Watch?

Artificial Intelligence Stocks Are on the lips of all investors. What's one with those who bet on ETFs?

AI ETFs that are worth observing, certainly are Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ), iShares Robotics and Artificial Intelligence ETF (NYSEMKT:IRBO) and First Trust Nasdaq Artificial Intelligence ETF (NASDAQ:ROBT).

A peculiar curiosity on the market is also ARK Autonomous Technology & Robotics ETF (BATS: ARKQ), which is based on circa 40 companies operating in fields like 3D printing, autonomous transportation, robotics and even... space exploration.

Psst... For some time now you can also already work with your ETFs from!
Investors typically select ETFs based on their expense ratio and whether they offer distributed or accumulated dividends. Scrab enhances your ETF research by providing in-depth insights about all underlying companies.

It not only displays diversification by country and sector and highlights major holdings but also presents fundamental metrics derived from the companies within the ETF.

This feature enables quick comparisons between ETFs covering the same country or industry. You can promptly identify which ETF includes companies with the highest average margins, lowest debt, or fastest revenue growth.

These metrics are automatically calculated at the ETF level, eliminating the need to individually assess tens or hundreds of companies within it.

Other AI Stocks: ETF in view.

Bottom Line: AI Stocks to the Rescue

Investing in AI stocks in 2023 offers an exciting opportunity to be part of a transformative technological revolution. However, like any investment, it's crucial to conduct thorough research, diversify your portfolio, and stay updated on market trends.

By understanding the diverse AI applications, focusing on data-driven solutions powered by cloud computing, and keeping an eye on both established players and innovative startups, you can make informed decisions on buying chosen AI stocks and potentially reap the benefits of the AI boom in the years to come.

Remember, the key to successful investing (no matter if we're about AI stocks or some different ones) lies in staying informed and making well-informed decisions based on your financial goals and risk tolerance.

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