With applications for AI now moving from one industry to the next, Wall Street traders are doing more than buying up tech mainstays like Microsoft and Nvidia, they’re on the hunt for the next big thing while trying to hedge risky underperformers.
In an interview with FOX Business, David Keller, chief market strategist at StockCharts.com, pinpointed some of the AI leaders as well as those trailing behind.
Keller said the computer software giant is at the top of the list and represents the best in large technology companies.
"They have the greatest amount of available capital to invest in AI and will likely be a key part of the next phase," he said. "The stock is testing all-time highs around $340, and the uptrend may just be getting started."
Microsoft has applied AI solutions to a series of its platforms, including Microsoft Cloud, Security and Dynamics 365. The company announced in January that it would invest as much as $10 billion into OpenAI’s ChatGPT.
Shares are hovering at all-time highs.
"Like Microsoft, Alphabet is already up 40% year-to-date, but a key difference is Google remains roughly 22% below its 2021 high," Keller said.
"Google is also pulling back in June, which may provide an ideal entry point for long-term investors looking to benefit from Alphabet’s potential to exploit AI across its business units," he added.
Including its workspace applications like Gmail and Docs, Google has also applied AI solutions to its new search generative experience for AI responses.
Keller said Nvidia is a leading stock in the semiconductor space, which has been one of the top performing industries in 2023.
"Semiconductors are the backbone of the modern technology-based economy, and as companies incorporate AI into their business plans, it will be stocks like this that stand to benefit most," he said. "Nvidia recently hit a new 52-week high above $400 with further upside potential."
Nvidia controls the AI computing market with 80% to 95% of the market share, according to analysts. Last month, Nvidia predicted a spike in revenue after receiving new chip supplies that sent the company’s market capitalization to $1 trillion.
Rounding out the top five, Keller said Caterpillar has invested in using AI for the autonomous operation of heavy equipment, and CrowdStrike Holdings is leveraging the power of AI to protect consumers and minimize security and cyberthreats.
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"PayPal just hit another 52-week low in May and remains well below its 200-day moving average," Keller said.
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"Payment processors have struggled on a relative basis and represent some of the weaker returns in this space this year," he added. "While the long-term potential for PayPal and its use of AI may indeed play out, for now, investors are likely to find better opportunities elsewhere."
As another payment processor that underperformed in the technology sector in 2023 and remains well below its February 2023 high, Block takes the second position in bottom five AI stock opportunities for traders.
While the S&P 500 and Nasdaq have pushed well above their February highs, Keller said, "Block remains in an established downtrend."
Block is run by Jack Dorsey, co-founder of Twitter.
"Traders need to see a break above the 200-day moving average to consider Block as a good AI play later this year," he added.
"The Atlassian Corp. represents a more direct artificial intelligence as it uses OpenAI in their cloud-based products for collaboration," Keller said.
"While the stock is up about 50% year-to-date, it remains well below its 2021 peak of around $480," he said. "The company needs further upside confirmation to assume any momentum above current levels."
Rounding out the bottom five, Keller said EPAM Systems is a $13 billion market cap stock and represents another more direct play on the AI theme, and IBM is an example of a large, well-established company that has struggled to generate a buzz in its own investments into artificial intelligence.
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