Machine Learning Megatrends: 3 AI Stocks Set to Dominate

Stocks to buy

There’s no denying the strength and momentum we’ve seen in AI stocks this year. In fact, the top AI stocks have played an enormous role in the stock market’s robust returns so far this year.

While the S&P 500 was searching for direction in the first quarter, Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA) were bombarding higher as catalyst after catalyst continued to pave the way for its AI advances. Together, the duo now accounts for more than $3.6 trillion in combined market capitalizations.

However, they have ignited plenty of other stocks higher along the way, too. Some of these firms are well-known tech companies. Others are smaller, lesser-known entities in the high-growth space. Either way, the trend remains robust.

Earlier this year, Billionaire investor Stanley Druckenmiller said AI could be as “transformative as the internet.” If that’s the case, let’s look at a few of the top AI stocks to buy now.

AI Stocks to Dominate: Nvidia (NVDA)

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There’s no denying that Nvidia is the most dominant name in AI right now. In some measures, it has no competition, so while its stock gains are astronomical (and even somewhat comical), what’s going to stop Nvidia from printing money at this moment?

Nothing!

Shares are currently up more than 215% so far this year and up more than 300% from the 2022 lows. Going into earnings in late May, the stock was up almost 110%, and the bullish bets had been piling up. I distinctly remember most investors assuming it couldn’t go much higher, as it had made up almost all of its bear market losses and run a great deal going into the event.

Then the company blew out expectations, while management guided for current-quarter revenue of roughly $11 billion vs. expectations of just $7 billion, and the stock erupted. Shares closed higher by almost 25% the next day and have now climbed 50% since that report.

My point is, what if Nvidia has another massive revenue guidance this quarter? What company is stepping in to soak up the excess demand for its AI chips?

For now, Nvidia remains at the forefront of AI domination.

Best Machine Learning Stocks: Alphabet (GOOGL, GOOG)

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ChatGPT is owned by OpenAI, a firm that Microsoft had invested in previously but made another big investment in earlier this year. That’s as the company’s ChatGPT platform exploded in popularity, garnering more than 100 million active users in record time.

In the minds of investors, that made Microsoft a top AI play seemingly overnight. To pour salt on the wound for Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), the company had a somewhat embarrassing gaff with its own AI chat platform, Bard.

Now, there are a few things to take note of here.

First, Alphabet hasn’t been the best at building out platforms outside of Google and YouTube — the top two websites in the world. It failed at social media, and its phone will never displace Apple’s (NASDAQ:AAPL) iPhone. It lags in streaming video and streaming music.

So one might wonder just how Alphabet’s Bard is going to displace ChatGPT. Well, it may never. However, if the company integrates the platform with Google, it should become one of the best machine-learning stocks on the planet.

“Google” has become a verb, and Google.com is the most popular website in the world (literally). Assuming Alphabet can successfully incorporate AI into its Chrome browser — which tops the global market share — and its Google search platform, it will become a dominant AI stock.

Top AI Stocks of the Future: Baidu (BIDU)

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If you read the above passage on Alphabet and are receptive to Chinese-listed equities, you might love Baidu (NASDAQ:BIDU).

The firm sits with a market capitalization of about $52 billion. In other words, Alphabet is almost 30 times larger. However, the opportunity here is interesting.

Like Alphabet, Baidu is an internet search platform. However, because Google can’t operate in China, another company has to pick up the slack — that company being Baidu. It’s the No. 6 website in the world and the top website in China.

That makes it incredibly valuable, even if U.S. investors aren’t that familiar with the name. Analysts expect about 13% earnings growth this year and next year while shares trade at about 15 times earnings.

Even if BIDU stock doubled from current levels, it still wouldn’t make new highs. That highlights the lacking love from the market and the stock’s upside potential. However, if it’s the next one to take off due to AI, it could have a lot of runway.

On the date of publication, Bret Kenwell did not hold (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.