Artificial intelligence has been a scorching hot investment trend during this bull market run. And while some AI winners have slowed a bit this summer, investors and analysts remain bullish about the long-term potential of this innovative technology.
AI stocks have been volatile lately, but volatility can also present opportunities to get stocks at a reasonable price. If you’re interested in investing in AI, here are seven stocks to watch this summer.
Quick Look at Best AI Stocks:
Microsoft Corp. (Nasdaq: MSFT)
Microsoft is heavily invested in artificial intelligence, spanning various applications and research. A core focus is Azure AI, providing cloud-based AI services for businesses. Additionally, Microsoft incorporates AI into its products, like Office 365, enhancing features with intelligent assistants and automation. The company is also exploring natural language processing, computer vision, and machine learning.
Beyond innovative technology, Microsoft emphasizes responsible AI, ensuring its developments align with ethical guidelines. Notable projects in this area include AI for Good, which addresses global challenges like climate change and hunger, and Project Alexandria, which creates a knowledge base for businesses using AI.
From a technical standpoint, MSFT shares are trading near all-time highs but still have a reasonable 38.4 P/E ratio and a Relative Strength Index (RSI) reading of 51, well below the overbought level.
NVIDIA Corp. (Nasdaq: NVDA)
NVIDIA is one of the strongest AI stocks in the market, primarily thanks to its constantly in-demand GPUs. These GPUs have the processing power required for the most complex machine and deep learning algorithms, making them necessary tools for AI development. The firm’s focus extends beyond hardware, offering software platforms and development kits to support AI researchers.
NVIDIA’s work spans various AI applications, including self-driving cars, medical imaging, natural language processing, and video games. The company’s research arm also explores the boundaries of AI, pushing the technology forward with projects in areas like computer vision, robotics, and generative AI. For now, NVIDIA is the computational backbone for much of the world's AI advancements.
The company’s stock has seen a transcendent rise over the last two years but has been rangebound since the 10-1 stock split announcement. However, the next earnings call is scheduled for Aug. 28, which could propel shares out of the current range.
Meta Platforms (Nasdaq: META)
META has devoted significant resources to AI development in its social media platforms and the Metaverse. Their AI research focuses on natural language processing, computer vision, and machine learning to enhance user experiences. This includes developing AI models for image recognition, content moderation, and personalized recommendations.
Much of the company’s AI efforts are directed toward building the Metaverse, a virtual reality universe. This involves creating AI systems that understand and respond to human interactions within this digital environment. Additionally, META is exploring AI for augmented reality applications, such as virtual assistants and smart glasses. Other projects include the Llama 2 open-source large language model and Cicero, which claims to be the first AI to play the strategy game Diplomacy at a human level.
ServiceNow Inc. (NYSE: NOW)
ServiceNow is primarily known for its cloud-based platform that helps businesses manage workflows and IT operations. However, the company has also invested significantly in AI to enhance its platform and free up human clients for more complex tasks.
ServiceNow's AI strategy centers around intelligent automation, which involves using AI to streamline and automate various business processes. Some areas where this focus is magnified include Natural Language Processing (NLP) to understand and respond to user queries, machine learning algorithms to analyze data and identify trends, and AI-powered virtual agents to handle routine (and mundane) tasks and inquiries.
Despite not being a household name like Microsoft or Meta, ServiceNow is still a massive company with a $158 billion market cap and over $8 billion in annual revenue. The company also has an upcoming catalyst when it reports earnings on July 24.
Palo Alto Networks Inc. (NYSE: PANW)
Palo Alto Networks is a cybersecurity sector champion that heavily leverages AI to protect organizations from evolving online threats. The company utilizes AI and machine learning algorithms to analyze vast amounts of security data, identifying malicious activity patterns. This enables them to detect and prevent zero-day attacks, ransomware, and other sophisticated threats.
AI automates routine security tasks, such as incident response and threat hunting, freeing security teams to focus on more strategic initiatives. As attackers increasingly use AI themselves, Palo Alto Networks is developing defenses like Precision AI to counter these complex AI threats with other forms of AI and create a more resilient security infrastructure.
PANW shares have receded from the all-time high reached in Q1 2024, but the company remains one of the top cybersecurity innovators, and its research into AI can only enhance its efficiency. The stock’s P/E ratio is 48.2, but the 57 RSI shows that shares have yet to reach overbought territory.
Taiwan Semiconductor Co. (NYSE: TSM)
If you want to make money during a gold rush, why not sell shovels to prospectors? That’s the idea surrounding an investment thesis in Taiwan Semiconductor Co., which provides many of the other companies on this list with vital components needed for their AI processes.
AI models require immense computational power to train and operate. This magnitude of power is derived from specialized chips, which enable them to process vast amounts of data rapidly. TSM is a key player in manufacturing these chips, and its advanced semiconductor fabrication operations allow for the production of smaller, more powerful, and energy-efficient chips.
In other words, TSM's ability to produce leading-edge chips is a cornerstone of the AI revolution. Without their advanced manufacturing capabilities, AI application development and deployment could be significantly hindered. The firm drives innovation in semiconductor technology, which in turn fuels advancements in AI.
Celestica Inc. (NYSE: CLS)
Not all AI innovation happens in large-cap firms. Shares of mid-cap electronics manufacturer Celestica Inc. have more than doubled in the last year thanks to high demand for its components that underlie AI infrastructure. But despite this rapid stock growth, the company still has a low P/E ratio of 21 and a market cap below $7 billion.
A significant portion of Celestica's AI-related work revolves around manufacturing network switches. These high-performance switches are critical components in data centers, where AI models are trained and deployed. The company's expertise in designing and producing these switches is essential for building the infrastructure required for AI applications.
Furthermore, Celestica is actively involved in developing cutting-edge networking solutions specifically designed for AI and machine learning applications. Their high-speed switches, for example, facilitate rapid data transfer within data centers, which is essential for training and deploying AI models.
What Makes a Good AI Stock?
Picking the best stocks in any particular sector or industry is challenging, especially in volatile and evolving ones like AI. Getting your investments 100% right is a practical impossibility, but you can give yourself the best odds of success by following specific rules and knowing what to look for. Here are four key factors to research when selecting the best AI stocks.
- Catalysts – A catalyst is some kind of news or event that gets a stock moving, like an earnings release, product launch, insider purchase, or upgrade/downgrade from a stock analyst.
- Project Pipeline – What types of AI projects does the company have on its radar? Do they produce components like TSM or CLS, or are they training new models like META or PANW? Make sure your AI investments have a bright pipeline of future projects; otherwise, they could lag behind the ones that continue to expand and innovate.
- Management Team – While researching the company, don’t neglect to research the executives and managers either. Are they attracting top talent? Do they have a history of success in similar industries? Are there any skeletons in the closet that you should be aware of? Faulty leadership can sink even the most innovative companies.
- Technical Signals – Finally, if you’re looking for stocks that are about to make a big upward move, you’ll want to pay attention to technical trading signals and analysis, as well as fundamental data like earnings growth and price ratios. A breakout signal like an RSI oversold reading or a cross over the 50-day moving average could trigger a move before any major news reaches the market.
Choosing the Right Brokerage for AI Stocks
When investing in AI stocks, you’ll want to choose a broker that has access to shares and suits your style and investment goals. Here’s a list of our favorite online brokerages and what type of investor they’re best suited for.
- Best For:Active and Global TradersVIEW PROS & CONS:Securely through Interactive Brokers’ website
- Best For:Commission-Free Mobile TradingVIEW PROS & CONS:securely through Robinhood's website
- Best For:Active Short SellersVIEW PROS & CONS:securely through TradeZero [SPONSORED]'s website
About Dan Schmidt
Dan Schmidt is a finance writer passionate about helping readers understand how assets and markets work. He has over six years of writing experience, focused on stocks. His work has been published by Vanguard, Capital One, PenFed Credit Union, MarketBeat, and Fora Financial. Dan lives in Bucks County, PA with his wife and enjoys summers at Citizens Bank Park cheering on the Phillies.
Facts Only
Microsoft Corp. (MSFT) invests in AI through Azure AI, Office 365 enhancements, and projects like AI for Good and Project Alexandria.
NVIDIA Corp. (NVDA) produces GPUs critical for AI development and offers software platforms for researchers.
Meta Platforms (META) focuses on AI for social media, the Metaverse, and projects like Llama 2 and Cicero.
ServiceNow Inc. (NOW) uses AI for workflow automation and IT operations, with $8 billion in annual revenue.
Palo Alto Networks Inc. (PANW) applies AI to cybersecurity, including threat detection and automated incident response.
Taiwan Semiconductor Co. (TSM) manufactures advanced chips essential for AI computational power.
Celestica Inc. (CLS) produces network switches and components for AI infrastructure, with a market cap below $7 billion.
Microsoft's stock has a P/E ratio of 38.4 and an RSI of 51.
NVIDIA's next earnings call is scheduled for August 28, 2024.
ServiceNow will report earnings on July 24, 2024.
Palo Alto Networks' stock has a P/E ratio of 48.2 and an RSI of 57.
Celestica's stock has more than doubled in the past year, with a P/E ratio of 21.
Executive Summary
Artificial intelligence remains a dominant investment trend, with major tech companies and specialized firms driving innovation across cloud services, hardware, and applications. Microsoft, NVIDIA, and Meta are leading the charge with AI integration in cloud platforms, GPU development, and social media, respectively, while companies like ServiceNow and Palo Alto Networks apply AI to workflow automation and cybersecurity. Taiwan Semiconductor and Celestica provide critical infrastructure, manufacturing advanced chips and networking components essential for AI deployment. Despite recent volatility, these stocks are seen as long-term opportunities, with upcoming earnings reports and technical indicators suggesting potential catalysts. The article highlights key factors for evaluating AI stocks, including project pipelines, management quality, and technical signals, while also recommending brokerages suited for different investor profiles.
The narrative emphasizes AI's transformative potential but acknowledges market fluctuations and the importance of strategic investment criteria. While large-cap firms dominate the space, mid-cap players like Celestica demonstrate that AI-driven growth isn't exclusive to industry giants. The analysis balances optimism about AI's future with practical considerations for investors, such as valuation metrics and upcoming financial disclosures.
Full Take
The strongest version of this narrative presents AI as a transformative force with tangible investment opportunities, backed by concrete examples of companies driving innovation across hardware, software, and infrastructure. The analysis credibly highlights how AI is embedded in diverse sectors—from cloud computing to cybersecurity—while acknowledging market volatility as a potential entry point for investors. The inclusion of technical metrics (P/E ratios, RSI) and upcoming catalysts (earnings reports) adds rigor, and the emphasis on responsible AI (e.g., Microsoft's ethical guidelines) balances hype with accountability.
However, the narrative leans heavily on the "AI as inevitable progress" paradigm, which assumes continued exponential growth without interrogating structural risks. The focus on stock performance and corporate pipelines obscures broader questions: How sustainable is the computational demand of AI in terms of energy and resource costs? Who controls the ethical frameworks governing AI deployment, and how are potential harms (e.g., job displacement, algorithmic bias) being mitigated? The article also frames AI investment as a binary choice—either capitalize on the trend or miss out—without exploring alternative perspectives, such as regulatory headwinds or the possibility of an AI bubble.
Patterns detected: ARC-0024 Ambiguity (vague claims about "long-term potential" without defining timelines or risks), ARC-0043 Motte-and-Bailey (broad assertions about AI's transformative power paired with narrow, stock-specific advice).
Root cause: The narrative reflects a techno-optimist paradigm where innovation is equated with progress, and market success is the primary metric of value. This echoes historical patterns of speculative bubbles (e.g., dot-com era), where enthusiasm for a disruptive technology outpaces critical assessment of its societal impacts.
Implications: While investors may benefit from AI-driven growth, the costs—environmental, labor, and ethical—are externalized. Second-order consequences include increased concentration of power among a few tech giants and potential systemic risks if AI infrastructure becomes overly centralized.
Bridge questions: What evidence would challenge the assumption that AI adoption will continue unabated? How might regulatory shifts (e.g., antitrust actions, data privacy laws) alter the competitive landscape? What voices are missing from this discussion—e.g., labor advocates, environmental scientists, or critics of surveillance capitalism?
Counterstrike scan: A coordinated influence campaign would amplify the "AI gold rush" narrative while downplaying risks, using selective data (e.g., stock performance) to create FOMO. The actual content aligns with this pattern but stops short of outright manipulation, as it does include caveats about volatility and ethical considerations. Still, the framing prioritizes investor opportunity over systemic critique.
Sentinel — Human
This text appears to be written by a human journalist with a strong understanding of the AI investment market and finance writing.