Best AI Stocks for October 2024

Demand for AI applications continues to soar, as evidenced by Nvidia Corp’s (NVDA) second-quarter earnings, which showed a remarkable 154% year-over-year increase in data center revenues, fueled by surging AI demand. The AI boom shows no signs of slowing, further highlighted by the White House's Sept. 12 announcement of a new task force to coordinate policies on data center development, considering economic, national security, and environmental objectives. A key concern addressed was the increasing strain on the U.S. electricity grid from AI computing, which could hinder the Biden administration’s decarbonization and climate goals.

On the market front, a risk-on sentiment followed the U.S. Federal Reserve's interest rate cut. While traders debated whether the larger-than-expected cut signaled the Fed's urgency to avoid a recession, stocks like Nvidia saw a 5% rally in the days after the announcement.

Below, we explore the best AI stocks for October 2024, considering those with the best value, fastest growth, and most momentum. Data are current as of Sept. 24, 2024.

Best Value AI Stocks

Value investing is a strategy based on the principle that some stocks trade at prices that are below their intrinsic value. Investors able to identify these stocks, usually through analysis of fundamental metrics, may be primed for a return on their investment when the market corrects the mispricing and the stocks rise. One such metric is the price-to-earnings (P/E) ratio. Lower P/E ratios are generally considered to be signs of a more attractively valued company since it is valued at less than its fundamental value.

• Consensus Cloud Solutions, Inc.: Consensus Cloud Solutions provides a secure, cloud-based fax service that helps businesses, especially in health care, exchange and manage documents digitally. On the AI front, the company’s Clarity platform streamlines clinical documentation by transforming unstructured faxes and digital scans into structured, actionable data using natural language processing—a field of AI focusing on the interaction of computers and human language, along with machine learning. This automated solution ensures that key information reaches the right clinician promptly, speeding up patient care.
• Perion Network Ltd.: Perion Network is a digital advertising company helping brands and publishers improve their online presence through targeted advertising and data-driven technology. Perion leverages AI through its WAVE platform to create dynamic audio ads using generative AI, tailoring messages in real time based on context, behavior, and demographics. The company also uses machine learning by analyzing real-time signals, improving engagement and campaign performance.
• MARA Holdings Inc.: MARA is a cryptocurrency mining company that focuses on mining Bitcoin using sustainable energy sources. On Sept. 18, MARA announced a strategic collaboration with AlphaGeo, an AI-powered geospatial predictive analytics company, to enhance sustainability and operational efficiency in its global energy-focused expansion.
  

Fastest-Growing AI Stocks

Investors often evaluate growth stocks based on revenue and earnings per share (EPS), as these are key measures of a company's performance. Looking at only one of these two factors, however, can leave your search susceptible to temporary phenomena, including tax law changes or one-off gains.

We aim for a more balanced screen of AI growth stocks by looking at the most recent year-over-year percentage growth for both revenue and EPS, giving each equal weighting. We also exclude companies with growth rates in either category of 1,000% or more on the grounds that these are likely outliers.

• Nvidia Corp.: Nvidia is a technology company that designs and manufactures advanced graphics processing units for gaming, professional visualization, data centers, and AI applications. Recently, Nvidia reported record second-quarter revenue of $30 billion, driven by a 154% year-over-year increase in data center revenue fueled by AI advancements.
• InterDigital, Inc.: InterDigital is a global research and development company specializing in wireless, video, and AI technologies. It develops and licenses innovations used in communications and entertainment products, including wireless devices, internet-of-things devices, and cloud services.
• Super Micro Computer Inc.: Super Micro is a global leader in providing application-optimized IT infrastructure solutions for enterprise, cloud, AI, and 5G. The company designs and manufactures servers, storage, and networking systems via energy-efficient solutions. Super Micro reported record revenue of $14.94 billion for fiscal year 2024, driven by strong demand for AI infrastructure, up 110% year-over-year.

AI Stocks With the Most Momentum

Momentum investing is based on the principle that stocks that have increased at a faster rate compared with the market or their peers are likely to continue on that trajectory, at least in the short term, as long as there aren't fundamental changes to those companies' operations or the broader industry.

Below, we look at the AI stocks that have provided the highest total return in the last 12 months.

• Lumen Technologies, Inc.: Lumen Technologies is a telecommunications company that provides integrated network, cloud, security, and communication services to businesses and governments. In July, Lumen highlighted a key partnership with Microsoft to meet AI-driven demand for high-bandwidth infrastructure.
• MicroStrategy Inc.: MicroStrategy is a publicly traded company focused on accumulating Bitcoin as its primary treasury asset and developing Bitcoin-related applications. Aside from being a serial acquirer of Bitcoin, MicroStrategy’s business analytics platform, ONE, leverages AI to streamline workflows, drive insights, and create conversational chatbots.
• Zeta Global Holdings, Corp.: Zeta Global is an AI-powered marketing platform that helps businesses efficiently acquire, grow, and retain customers through its proprietary customer
  identification, and market intelligence database. During its second quarter, Zeta created more than 400 AI agents for customers on its platform and facilitated a 300% increase in AI agent conversations.
  

Advantages of AI Stocks

Broad applications: AI has transformed—or has the potential to transform—a host of different industries and sectors. Companies positioned as leaders within the AI space could be well-positioned to benefit from widespread adoption and a broad, diverse customer base.

Fast-moving innovation: AI is at the forefront of innovation today, with both major tech firms and smaller up-and-coming companies working diligently to advance this technology. This means that the potential for breakthrough success may be huge as the industry continues to evolve.

Popularity: As of mid-2024, AI is still one of the most talked-about trends in technology. Interest in this space is very high, meaning that investors could be poised to benefit from tremendous momentum with the right investments.

Disadvantages of AI Stocks

Industry uncertainty: Although AI has been in existence for decades, it is only in the last several years that technological developments have brought this field into the mainstream. With changes and advancements happening incredibly quickly, it can be difficult for even the most knowledgeable investors to keep pace with what is happening in the industry. For instance, this means it could be easy for investors to get caught up in the hype surrounding a particular company after the ideal time to purchase that company's stock.

Untested companies: While many of the major tech firms are involved in AI, other AI companies have little history and foundation for investors to consider when selecting investments. These companies may pose a greater risk than more stable, time-tested firms.

Dangers of AI: Leaders in computer science and related fields have warned of the potential dangers associated with AI. As the field continues to expand and change, public opinion, regulations, and other factors may change and have the potential to impact AI stocks in unexpected ways.

The Bottom Line

AI stocks present investors with the opportunity to tap into one of the most popular—and potentially most revolutionary—technology trends today. With companies across virtually all industries and sectors exploring ways to integrate AI into their operations, firms that are focused on the hardware and software required to run AI programs stand to benefit. But there are significant risks to investing in AI stocks, including the uncertain future of the industry and the potential dangers of AI technology itself.

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As of the date this article was written, the author does not own any of the above securities.