Artificial intelligence made headlines in 2024, with stocks in the space appreciating tremendously. Amid the growing adoption of technology, many companies are shelling out billions to advance their AI capabilities.
According to a recent report by CompTIA, 22% of companies aim to pursue AI integration across their products. The report also found that 33% of companies are working with some type of AI application to improve their service and product delivery.
By riding this wave, investors can be sure to see gains over the medium term. Artificial intelligence is still in its infancy, which means these stocks hold great potential. Numerous technology applications are still being explored.
For instance, it could have use cases in defense, chatbots and data analysis. Consider these three companies if you want to invest in solid artificial intelligence stocks with great promise in returns. Let’s examine why these three stocks stand out.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) started as a graphics card company. However, its chips quickly became popular in the artificial intelligence sector. Since then, the company has been working to produce faster and more efficient chips for the industry.
CEO Jensen Huang has played an important role in this transformation, making Nvidia the go-to company for the best artificial intelligence chips.
Thus far, Huang’s efforts have paid off and Nvidia has been the top artificial intelligence stock of 2024. Despite sliding by double digits in the past few weeks, NVDA is still up 116.42% year. Over the past 12 months, the stock has gained 129.52%.
Looking at the EPS, Nvidia has continued to maintain phenomenal growth. In the last quarterly results, it reported an EPS of $5.98, a 629% year-over-year increase.
Its current trailing 12-month price-to-earnings ratio of 59.59 is relatively high. However, this high valuation is justifiable if it continues to maintain earnings growth.
Additionally, the company has a robust buyback program and pays out dividends. In its first quarter fiscal 2025 results, it announced it had increased payouts by 150% to 10 cents per share.
Over the past five years, NVDA has been one of the best-performing stocks, rising over 2500%.
The great stock performance, increased dividend payouts and the rising adoption of AI make Nvidia one of the best artificial intelligence stocks to own in August 2024.
Arista Networks (ANET)
Arista Networks (NYSE:ANET) is a leading software provider in the cloud computing and data center industries. The rise of artificial intelligence has been a huge boost for the company.
All artificial intelligence models require massive amounts of data, which is where Arista comes in. It is helping to create networks that can adapt to the changing needs of large language models and other artificial intelligence use cases.
Its stock performance has been quite robust. Year-to-date, it has gained 39.72% to $323.54 per share. In the past 12 months, its stock price has gained over 80%. If you had invested in ANET five years ago, you would have seen returns of almost 500% so far.
Its trailing 12-month price-to-earnings ratio of 42.69 is quite high. However, the stock has also maintained robust earnings growth. Its diluted earnings per share have steadily been on the rise since 2020. As a result, its elevated valuation is justifiable.
Looking at its financial results, Arista saw revenue rise 15.9% in the second quarter of fiscal 2024 to $1.69 billion. It also reported a GAAP net income of $665.4 million compared to $491.9 million the previous year.
Based on its robust financial and stock performance, ANET is one of the main artificial intelligence stocks that should be in your portfolio in August 2024.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is a giant tech company best known for its social media platforms, Instagram and Facebook. The company is also one of the leading investors in artificial intelligence.
One of its well-known products to date is Llama 3.1, an open-source artificial intelligence model. In its second quarter fiscal 2024 results, Meta revealed it plans to spend up to $40 billion on research, with a good chunk of that going to artificial intelligence.
Despite the huge capital expenditure, Meta reported astronomical profits with net income of $13.47 billion compared to $7.79 billion the previous year.
Investors have reacted positively to this increased spending with META up 42.68% this year and its value rising by 56% over the last 12 months.
Based on its robust financial results and rising expenditures on artificial intelligence, Meta could be the go-to investment for artificial intelligence stocks. It shows great promise and has the financial capacity to develop technology to the next level.
On the date of publication, Joel Lim 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
