Are These AI Stocks Ready to Rip or Take a Back Seat?

As artificial intelligence (AI) use cases continue to expand, investor interest is intensifying. As AI transforms business processes and automates tasks across various industries, a pivotal question emerges: Are AI stocks set for further explosive growth, or are they headed for a slowdown?

The AI revolution’s transformative potential is clear. Its ability to analyze extensive data sets and automate tasks is creating a significant demand for AI technology.

AI Stocks: Rip or Dip?

This demand is exciting for investors. Catherine Brock noted in a recent Forbes report:

“AI’s sweeping applicability has the potential to transform business processes across many industries.”

This isn’t just about enhancing efficiency; it’s about revolutionizing customer experiences and entire business models. At the forefront of this AI wave are chipmakers and software developers like Nvidia and Microsoft.

Microsoft, a titan in software development and cloud computing services, has delivered a 22.3% total annualized return over the past 15 years. CFO Amy Hood has voiced confidence in their AI products and OpenAI partnership, foreseeing a rapid increase in revenue.

MSFT has been on a tear since the beginning of 2023 when it reached a long-term low near $220. It recently hit a new all-time high weekly close of just under $400 and still looks poised to climb higher this week.

Microsoft (MSFT) stock price chart 1W. Source: TradingView

Read more: 9 Best Artificial Intelligence Stocks To Buy in 2024

Nvidia, a leader in graphics processing units (GPUs) for machine learning applications, has similarly seen a 279% quarter-over-quarter growth in its data center business due to robust AI GPU sales. This company has consistently won over investors, with average annual returns exceeding 43% over 15 years.

NVDA has followed a trajectory similar to MSFT’s. It reached its local bottom in October 2022 at $113 and has surged over 400% since then without much of a downturn. Some analysts are predicting that Nvidia could soon split its stock for the sixth time in company history.

Nvidia (NVDA) stock price chart 1W. Source: TradingView

Read more: AI Stocks: Best Artificial Intelligence Companies To Know in 2024

Meta Flips the Script from Metaverse to AI

Another key player is Meta Platforms, formerly known as Facebook. Meta is harnessing AI to enhance user engagement across its social platforms, which include Facebook, Instagram, Messenger, and WhatsApp.

AI analytics play a pivotal role in improving user experience, leading to longer session times and more relevant advertising. Moreover, Meta’s investment in virtual reality and the integration of AI showcases the company’s commitment to innovation at the forefront of technology.

After suffering a massive 75% drop between September 2021 and October 2022, META has completely recouped its losses to reach a new all-time high of $387 this week. Is this a double-top, or will META blast through resistance to explore new heights?

Meta Platforms (META) stock price chart 1W. Source: TradingView

Regulatory Risks and Adoption Roadblocks

The AI industry’s impact extends to consumer behavior, with potential shifts from offline to online spending. Morgan Stanley researchers highlight that AI-driven improvements in digital experiences could significantly alter consumer spending patterns.

However, the AI market, while promising, is not without its risks. Regulatory challenges, especially in areas like cybersecurity and privacy, could impede AI adoption. Investors are thus advised to adopt a balanced and informed approach when considering AI stocks.

The debate on AI stocks continues, with perspectives varying from bubble concerns to predictions of sustained growth. Peter Oppenheimer of Goldman Sachs believes,

“We are still in the relatively early stages of a new technology cycle that is likely to lead to further outperformance.”

Disclaimer

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