Artificial intelligence took center stage in late 2022 with the release of ChatGPT and similar apps, sparking a surge in AI-related stocks. AI ETFs have outperformed the Standards and Practices (S&P) 500 this year, with RBOT up 24% while SPY was up 18% by mid-year. Investors seek exposure to this growing sector. Assessing an AI stock’s performance and future prospects is crucial beyond its recent momentum.
Companies with AI-enhanced sales software are poised to gain significantly from artificial intelligence. AI promises to revolutionize the sales process by predicting prospects’ likelihood to close deals, forecasting sales, and suggesting optimal actions.
Here are three AI stocks to consider investing in for a five-year hold:
Upstart Holdings (UPST)
Upstart Holdings (NASDAQ:UPST) achieved an impressive 67% contribution margin, a notable improvement from the prior year’s 47%, highlighting cost-efficiency. Additionally, diversification into various lending products broadens its borrower base and revenue sources, reducing risk concentration.
UPST stock is a top tech short squeeze candidate due to its strong financial results during low-interest rate periods. The Federal Reserve is signaling potential rate cuts, and Upstart’s AI capabilities could spark a significant short squeeze. In the last quarter, Upstart generated approximately $5 million EBITDA and reported adjusted EPS of 6 cents.
Moreover, Upstart’s partnership with Farmers Insurance Federal Credit Union demonstrates their commitment to innovation and collaboration. While Q2 2023 revenue dropped by 39%, an outstanding 187.6% earnings beat is noteworthy. Despite negative net income and operating figures, a significant 159% surge in net cash change suggests strategic potential.
Advanced Micro Devices (AMD)
Watch Advanced Micro Devices (NASDAQ:AMD), a Nvidia (NASDAQ:NVDA) rival, as it enters the AI realm with MI300X, challenging Nvidia’s dominance. MI300X, designed for large language models and generative AI, ships by year-end. It boasts 192 gigabits of memory, surpassing Nvidia’s H100 with 120 gigabits. AMD’s ROCm software complements its AI chips.
Although AMD’s MI300x AI chip isn’t in full-scale production yet, it remains a strong contender against Nvidia in AI chips. With AMD stock down 3.9% this quarter compared to Nvidia’s 14.7% gain, keep watching how this competitive landscape evolves in the coming year.
While its chips may not match Nvidia’s power and its outlook isn’t as strong, AMD has provided solid returns in 2023. However, it lags behind Nvidia and faces challenges as it enters the AI chip space. Keep an eye on AMD as it plans to release its competing AI chips later this year. This is easily one of the top AI stocks for you to consider.
C3.ai (AI)
C3.ai’s (NYSE:AI) FY 2023 financial performance showed a 5.6% year-over-year revenue growth at $266.8 million, but reported a GAAP net loss per share of $2.45. The majority of its revenue, 86%, came from subscription growth, which increased by 11.4%. With $812.4 million in cash, C3.ai is well-funded, allowing it a longer runway and potential competitive advantages. This positions C3.ai among the top AI chip companies, supported by major FAANG brands.
C3.ai offers custom solutions for energy management, supply risk, and inventory optimization, mainly for oil and defense. Despite slow growth, its shares surged 266% this year due to AI’s popularity. Challenges remain in its financials, and analysts compare its gains to Nvidia’s potential stock drop in an AI bubble scenario.
C3.ai, despite losses, shows promise with strong 2023 earnings, aiming for profitability by late 2024 amid growing AI demand. The next earnings will be in September.
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.
