The S&P 500 took a beating last week, shedding more than 3% as investors rotated out of AI stocks. Nvidia (NASDAQ:NVDA), perhaps the biggest AI trailblazer, saw the second biggest daily loss in the market for any U.S. company on Friday, losing more than $200 billion. With these concerning developments, it’s not surprising that investors are looking to curb their exposure to the top AI stocks.
It wasn’t tough to foresee the current contraction in AI stock prices. Bubble calls from some of the biggest names in the investing punditry and the uncertainty in the economic climate was bound to impact AI stocks at some point. Nonetheless, the long-term bull case for the top AI stocks remains firmly intact. Moreover, many consider that we’re still at the genesis of the AI movement, and these temporary shocks shouldn’t deter investors from investing in the industry’s finest. Also, the stocks discussed in the article are not dependent on AI for their success, but the disruptive technology adds a new dynamic to their businesses.
Meta (META)
Meta (NASDAQ:META) is perhaps the best Magnificent Seven stock pick, and it has enjoyed an incredible run in the past couple of years. Following a successful ‘Year of Efficiency,’ META stock gained over 123% last year, fueled by a strategic pivot from the metaverse to AI and effective belt-tightening measures. In each of the quarters last year, Meta blew past analyst estimates across both lines, delivering double-digit revenue growth in the past three consecutive quarters.
It’s exceptional how far Meta has come in just a year, considering the negative growth rates it was posting prior to Q1 2023. It’s due to earnings reporting in a few days, and analysts expect another solid showing in Q1. Revenues are expected to be at $36.2 billion, representing a 26% increase from the prior year. Furthermore, with 31 positive EPS revisions over the past three months, the market remains optimistic about Meta’s profit outlook.
It remains to be seen how Meta’s latest large language model (LLM) in Llama 3 will compare to its competition. However, based on Meta’s claims, it could potentially be a major growth catalyst in the future.
Microsoft (MSFT)
If I had to pick a stock that benefitted the most from the AI revolution, it would be Microsoft (NASDAQ:MSFT). Its massive investments in generative AI, spearheading OpenAI, have catalyzed the AI race. Consequently, Microsoft added billions to its market cap last year, closing out 2023 with a 38% gain.
Moving forward, AI will continue to be an overarching theme for Microsoft as it looks to expand its total addressable market further further. Moreover, with its recent AI supercomputer announcement with OpenAI, you’d expect the partnership to play a critical role in moving the needle for the AI sector.
However, even without AI, Microsoft’s business remains robust, led by its timeless software and cloud solutions, which dominate global markets. Its diversified portfolio and incredible enterprise services underscore its enduring success. Hence, unlike many of the companies leading the AI space, it’s not a one-dimensional business.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is the ‘Everything Store’ behind the world’s largest eCommerce platform. It processes over 4,000 product sales every minute, a testament to its unparalleled brand equity.
However, in recent years, its eCommerce segment has taken a backseat to its hugely successful cloud computing arm in Amazon Web Services (AWS).
AWS boasts the lion’s share of the cloud computing market, which outperforms other company segments each quarter. Numerous analysts view AWS as a stand-alone entity with a potential value exceeding the trillion-dollar mark.
Many would consider it late to the AI party, though, but it’s making up for lost time with a sizeable investment in the emerging AI giant Anthropic. Its total investment in Anthropic stands at a whopping $4 billion, rivaling AI investments from the likes of Microsoft and others. On top of that, AWS has also benefitted from the AI surge, with many of its new and existing clients investing in the combination of AI and cloud.
On the date of publication, Muslim Farooque did not have (either 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