3 AI Stocks to Buy in the ‘Green Zone’

Stocks to buy

With the generative artificial intelligence megatrend still gaining momentum, investors remain interested about which AI stocks to buy.

Yet while there are plenty of names with high exposure to this megatrend, which ones are currently in the “Green Zone?”

TradeSmith offers investors valuable tools for determining which stocks to buy. A good example is its Health Indicator feature. This comprehensive indicator provides an overall picture of a stock’s current health.

Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.

As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.

A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.

Stocks entering the “Red Zone” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to your positions. View any move into the “Red Zone” as a warning sign to exit your position for now.

These three AI stocks to buy are currently in the “Green Zone.”

Nvidia (NVDA)

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Nvidia (NASDAQ:NVDA) has been in the “Green Zone” for over seven months. Shares in the AI chip designer have moved lower since August, but this top AI stock remains up more than threefold year-to-date.

Concerns about the impact of the U.S. federal government’s tightening of restrictions on AI chip exports to China have weighed on NVDA stock. So too have worries about high interest rates, and their impact on both economic growth and the valuation of growth stocks.

However, as global demand for AI chips remains sky-high, and Nvidia continues to be the predominant provider of such chips, the company remains poised to keep growing at a rapid clip. Sell-side forecasts call for earnings to grow 58.7% next fiscal year (ending January 2025), and by another 19.7% in the fiscal year after that. TradeSmith’s volatility quotient for NVDA is 42.64%, making it a high-risk stock.

Alphabet (GOOG, GOOGL)

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Shares in Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) have been in the “Green Zone” for over six months. At first investors were skeptical about the Google parent’s AI bona fides, but as the tech giant has made progress with its generative AI efforts, such as its Bard platform, GOOG has become one of the AI stocks to buy.

That said, GOOG stock did experience a modest slide in price recently, after the release of the company’s latest quarterly results. Despite strong overall growth, investors reacted negatively to news about disappointing growth for Alphabet’s cloud computing unit.

However, as Alphabet continues to capitalize on the generative AI trend, and as its core digital advertising business keeps rebounding, there may be enough in play to avoid a permanent change in this stock’s price trend. TradeSmith’s volatility quotient for GOOG is 24.17%, which makes it a medium-risk stock.

Palantir Technologies (PLTR)

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Palantir Technologies (NYSE:PLTR) has been in the “Green Zone” for over five months. Renewed confidence in the AI and machine learning software company’s ability to achieve high growth has resulted in shares more than doubling in price year to date.

More recently, PLTR stock has wavered, delivering a sideways price performance. Chalk this up to the same sorts of concerns affecting the other AI stocks to watch, like NVDA. However, in the case of Palantir, the company’s latest quarterly results appear to be helping to assuage these worries.

For the quarter ending Sept. 30, 2023, Palantir reported revenue and earnings that came in ahead of sell-side expectations. It also raised its full-year outlook for 2023. Investors have reacted positively to this “beat and raise” earnings release, with PLTR rising by double-digits on the news. TradeSmith’s volatility quotient for PLTR is 57.52%, which makes it a sky-high risk stock.

The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

TradeSmith’s mission is to put easy-to-use, technology-based tools into the hands of individual, self-directed investors. TradeSmith began as a simple way to track portfolios using trailing stops and has evolved to become a powerful suite of risk-management and portfolio analysis tools.

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