Artificial intelligence is slowly becoming the driving force behind numerous technological advancements in recent years. Hence, investors are seeking opportunities to capitalize on high-risk AI stocks as the sector continues to revolutionize industries and transform how we live and work.
AI stocks have emerged as an enticing investment option, offering the potential for significant returns. However, with great potential comes great risk. In this article, we will explore three high-risk AI stocks that have the potential to make you rich but also carry the possibility of leaving you broke.
Next Move Strategy Consulting, a market research and management consulting firm, expects the value of the AI market to increase twentyfold to nearly two trillion U.S. dollars by 2030. The convergence of advanced algorithms, abundant data, and increased demand has paved the way for the increase in market size. Investors must exercise vigilance by conducting thorough due diligence and staying updated with the latest developments in the AI market.
One of the most significant AI news stories this year centers on the remarkable rise of generative AI. In particular, ChatGPT has garnered attention with its impressive versatility, intelligence, and ability to engage in human-like conversations. This AI model is a prime example of the notable advancements in artificial intelligence, opening doors to greater accessibility for the general public. Undoubtedly, this development marks an exciting breakthrough in the field, captivating widespread attention and generating considerable interest.
Investing in high-risk AI stocks offers a mix of opportunities and risks. The potential for substantial returns in the AI sector attracts investors seeking to capitalize on its promising prospects. With that in mind, let’s explore three high-risk AI stocks that warrant close monitoring.
Arista Networks (ANET)
Arista Networks (NYSE:ANET), a prominent player in the networking industry, deserves attention when exploring high-risk AI stocks.
The company specializes in cloud networking solutions, offering high-throughput data center switches that meet the demands of AI-driven workloads. Arista Networks has a diverse client base, including internet companies, cloud service providers, and enterprise data centers.
Renowned for their high-throughput data center switches, Arista is pivotal in interconnecting the processing power required for resource-intensive AI workloads.
With AI workloads known for their bandwidth demands, the seamless integration of hundreds of connected processors and gigabits of throughput is crucial. This capability is especially critical for GPUs in AI training, where billions of parallel operations can be executed.
Arista Networks concluded a successful year with strong financial results in Q4 2022, reporting nearly $4.4 billion in revenue, a 49% YoY increase. The company’s products were crucial in supporting the growing data-intensive IT infrastructure driven by increased spending from cloud giants.
The cloud titans accounted for almost half of Arista Networks’ revenue, with their spending more than doubling in 2022. Positive reports from Wall Street further bolstered investor confidence, contributing to the stock’s upward trajectory.
Alphabet (GOOG, GOOGL)
Investing in AI stocks can be a rewarding endeavor, and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), with its pioneering advancements, stands out among them. While high-risk AI stocks exist, Alphabet’s track record positions it as an AI stock that can potentially make investors rich.
Alphabet, the parent company of Google, is currently developing Bard, an AI system designed to compete with ChatGPT. Despite initial setbacks, Alphabet is still in the early stages of harnessing this technology, which has the potential to revolutionize its Google search engine.
During Alphabet’s recent developer conference, they unveiled several AI-related initiatives. These include integrating AI into widely used applications like Gmail, Sheets, Slides, and Docs and incorporating AI capabilities into their search engine. This strategic move intensifies competition with Microsoft’s (NASDAQ:MSFT) Bing browser, which is also undergoing AI-related enhancements.
Despite facing challenges in the ad market, Alphabet reported strong first-quarter results, surpassing expectations. With revenue approaching $70 billion, a 3% year-on-year increase, and earnings per share of $1.17, exceeding analyst estimates, Alphabet demonstrates resilience. Moreover, their decision to repurchase $70 billion worth of shares at its current valuation might be a wise move, potentially leading to greater long-term returns.
Although Alphabet encountered a bumpy start in the AI search engine competition, investors should not underestimate the company’s potential. In the years ahead, Alphabet’s strategic advancements in AI could potentially yield substantial returns for investors.
Considering its innovative initiatives and the continuous growth of the AI industry, Alphabet remains a top choice for those seeking AI stocks to buy.
C3.ai (NYSE:AI), a pure-play AI stock, surged over 75% in 2023, making it a popular choice. It provides enterprise solutions benefiting various sectors like manufacturing, oil and gas, and utilities. The applications aim to boost uptime, optimize supply chains, and aid fleet management and customer service.
Investors should know that C3.ai’s growth and profitability may take time to materialize. In fiscal 2023, the company expects annual revenue of $265 million, representing a mere 5% increase from the previous year. However, management forecasts an adjusted operating loss of approximately $71 million for the fiscal year.
C3.ai boasts renowned clients, creating chances for business growth and industry recognition. Apart from a host of other organizations, it collaborates with the U.S. Department of Defense and Raytheon Technologies (NYSE:RTX) and holds a solid partnership with Baker Hughes, an oil and gas company.
This stock holds long-term potential if the company can sustain customer growth and enhance financial performance. Despite ongoing losses and instability, it’s a noteworthy AI stock to monitor and potentially include in your portfolio, as there’s a chance for substantial gains.
Also, I recommend checking out a great piece from Samuel O’Brient on C3.ai and its potential as a short-squeeze candidate. Short-squeeze stocks continue to make investors a lot of money. True, the market is nowhere near what it was in 2020. However, there are still several stocks that are making multimillionaires out of novice investors.
And if you’ve finished with the list, here’s another selection of seven stocks that offer great potential for your portfolio.
On the publication date, Faizan Farooque did not hold (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.