3 Stocks to Scoop Up at a Discount While the AI Rally Takes a Breather

Stocks to buy

Interest in generative artificial intelligence (AI) has surged, aligning with broader interest around companies operating in this space. Internet searches, news coverage and discussions on earnings calls all showcase the sort of hype and hysteria following companies in this space. Companies that many may not have considered AI plays have increasingly pushed their businesses toward such models, expanding the number of options for investors.

Following are three stocks I think can benefit from continued earnings outperformance, driven in part by the rise of AI. These companies each have unique catalysts worth considering. Further, they could surpass the average market growth rate over the coming decade.

Without further ado, let’s dive into those three top AI stocks.

Alphabet (GOOG, GOOGL)

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If you’re looking to buy AI stocks that are among the top performing stocks for years, Google’s parent company Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is a no-brainer choice. The company has continuously impressed market analysts, and has done so again this past quarter. Alphabet is up an impressive 13% year-to-date (YTD), with much further to climb.

The company sports a robust and diversified portfolio that can withstand economic fluctuations. Its cloud computing segment experienced a surge during the pandemic. And, innovative AI products like Gemini promise long-term growth.

Further, Alphabet is challenging its competitors with Gemini AI, outperforming benchmark tests like the multitask language understanding test. Its Google Cloud segment continually gains traction with its new tensor processing unit (TPU), offering superior efficiency. With a solid primary business and advancing AI segment, Alphabet’s stock shows promise at a reasonable valuation.

Consider investing in Alphabet stock before April 25, ahead of its first-quarter conference call, which could spark a significant uptrend. Despite concerns over AI and valuation inflation as a result, Alphabet’s strong core digital advertising base should provide the stock with some stability. With revenue climbing at a rapid rate, I think this top search company is a sneaky AI play worth considering right now.

Meta Platforms (META)

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Another tech and AI giant in the sector that investors should be paying attention to is Meta Platforms (NASDAQ:META). Through the company’s smart strategies and cost-efficient solutions in AI, META once again surpassed analyst forecasts this past quarter.

With a robust operating margin and $43 billion in free cash flow, Meta Platforms emerges as another winner in the digital advertising realm. It is firmly anchored by its suite of social media platforms. Regardless of economic fluctuations, the sector promises significant growth potential.

Concurrently, Meta Platforms launched new AI products, reinforcing its commitment to generative AI. This included Llama 3 and real-time image generators integrated into Meta AI across its platforms. META’s stock rose following the announcement. The enhanced Meta AI, driven by the latest version of its large language model Llama 3, will be integrated more prominently across Instagram, Messenger, WhatsApp and Reels, with a dedicated website at Meta.ai.

META aims for substantial returns from its AI investments, leveraging them to boost app engagement and advertising sales. These will put Meta Platforms in a greater position, especially in innovations like Click-to-Message ads. Investors should hoard some META stock before April 24, where the company has scheduled its Q1 2024 earnings report. 

Shopify (SHOP) 

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Running after Amazon in the global e-commerce sector, Shopify (NYSE:SHOP) succeeds in internet infrastructure for small and big businesses. The platform has provided business owners with excellent tools for starting, developing and managing retail operations, making the company quite popular and profitable through the years.

Leading dog brand named BARK Inc. recently expanded their partnership with Shopify to enhance their experience and boost efficiency in their business operations. Leveraging Shopify’s tools, BARK aims to optimize acquisition costs, explore new channels and improve key metrics. The move includes migrating all business units to BARK.co by fiscal 2025 for unified operations and better insights.

In other similar news, Cognizant collaborated with Shopify and Google Cloud to revamp digital platforms for global retailers and brands. By integrating Shopify’s commerce platform with Google Cloud’s infrastructure, Cognizant aims to enhance customer experiences and implement real-time recommendations and personalized offers. This alliance addressed challenges like scaling operations and modernizing commerce platforms, leveraging generative AI and Google Cloud’s suite of tools.

On the date of publication, Chris MacDonald 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.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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