The past year has been a rollercoaster for individual stocks, with 60% of companies in the Russell 3000 index experiencing a drop in share prices.
This is a stark contrast to the Nasdaq Composite and other indices that weigh their constituents by market capitalization, which have seen significant gains. The Nasdaq, for instance, gained as much as 40% this year, while the S&P 500 was 20% higher by July.
These impressive gains were driven by a select group of mega-cap stocks, now referred to as the “Magnificent 7.” These seven stocks represent some of the most promising investments in artificial intelligence, cloud computing, and other technologies.
As we move into 2024, it’s expected that other top-tier stocks will join their ranks, with AI playing a crucial role in reviving the fortunes of well-run businesses.
One such company is Palantir Technologies (NYSE:PLTR), a tech-focused company that has historically shown little concern for its sales team or finances. In 2022, the company spent $702 million on sales and marketing, only to see revenues rise by $364 million.
However, as InvestorPlace.com writer Chris MacDonald notes, the demand for AI solutions is beginning to change the picture. Palantir is now winning key government contracts, which has helped the firm become profitable over the past three quarters.
Additionally, Palantir Technologies secured a $250 million contract with the U. S. Defense Department for AI and machine learning research, strengthening its ties with the U.S. government and its role in AI and defense.
This contributed to a 6% rise in Palantir’s shares in September. The contract builds on their prior work with the Army Research Lab, focusing on AI research and development.
Another company to watch is Salesforce (NYSE:CRM). According to company estimates, Salesforce’s market could be worth $290 billion by 2026. InvestorPlace.com writer Faisal Humayun believes this could turn the company into the next trillion-dollar giant.
Salesforce has been pursuing aggressive international expansion, with 37% of its revenue in FY 2023 coming from international markets. The rise of AI-focused sales tools, like Salesforce’s generative AI – called Einstein – is an essential part of this growth.
PayPal (NASDAQ:PYPL) is another company to keep an eye on. The company’s cheap valuation, wide economic moat, and ability to grow sales with minimal investment make its $50 shares a bargain.
PayPal’s new CEO, Alex Chriss, is a veteran of Intuit (NASDAQ:INTU), another leader in AI-driven tech. PayPal’s selection of Chriss highlights its own AI-driven ambitions.
Finally, Synopsys (NASDAQ:SNPS) and Cadence Design Systems (NASDAQ:CDNS) are leaders in the electronic design automation (EDA) software market, which is a fancy way of saying “chip design.”
They also provide the software integrity tools that help write secure, high-quality code. It’s a business with incredible growth potential thanks to the increasing sophistication of semiconductors… particularly around AI, which requires advanced chips.
Nokia (NYSE:NOK) isn’t exactly a top-tier AI company. The firm has lost market share to Ericsson (NASDAQ:ERIC) in recent years, and even an American blockade of Chinese rival Huawei hasn’t been able to revive the firm’s fortunes. Nokia has now lost 94% of its peak market capitalization and focuses on a narrow segment of network infrastructure.
However, even second-tier companies without an AI strategy can benefit from the rise of artificial intelligence. In Nokia’s case, the Finnish telecom company is sitting at the start of an enormous 5G buildout. Ultrafast networks will be essential for AI applications, because technologies like self-driving cars require near-instantaneous communications to work.
As the AI Revolution continues to unfold, investors can expect these top-tier firms to keep succeeding.
Let us know what you think, please share your thoughts in the comments below.
