Top 5 AI Stocks CRUSHING the Market in 2024

these five stocks were up and average 91% in the 2 months around earnings shattering expectations and beating the stock market by more than 84% but it's not just that they beat the market it's what that says about the companies and their path to even higher stock prices hey bowai Nation Joseph hog here and with everything AI hot right now the debate is whether we're in a bubble or not while stocks like Nvidia and arm Holdings have surged 80% and more just since the beginning of the year others like onra and ideanomics have plunged 20 and 30% of course nobody can know if we're really in a bubble or not even those of us working as a professional analyst for decades it's like thinking you know the next word out of a parrot's mouth just because you trained him but I have found one way to find the AI stocks that will win whether it's a bubble or not looking for the company's beating expectations with strong growth and that path to profitability those that are going to survive any bubble bursting and go on for longterm returns so if we are in a bubble you're going to want to know which are the pets.com the Dr coups and the etoys of Our Generation versus the ones that are going to survive to post Amazon like returns I'll reveal those five AI stocks beating expectations along with how to find these stocks stick around and I'll walk you through all 41 AI stocks I follow how they did during the earning season and which to add to your portfolio first up is One-Stop systems ticker OSS with a strong rebound so far this year off a 29% drop last year to a 59% return in the first 2 months One-Stop designs and manufactures transportable computing systems with AI capabilities it's a prime contractor to the US military for its rugged and mobile designs lately it's also emphasized expanding into commercial platforms to keep growing those key drivers defense contracts and new commercial have driven a 21% annualized sales growth over the Last 5 Years OSS sees the military moving quickly into AI to maintain that tactical advantage and has announced some strategic wins lately what's interesting here is that that February pop in their shares has come well after the company's most recent earnings in November implying that maybe the market is more positive on fourth quarter earnings coming out this week in its third quarter earnings the company did report slightly lower revenue on its transition away from a Legacy Media company and to higher margin AI transportables it took a Goodwill impowerment charge of $2.9 million which was most of the net loss reported OSS isn't in a bad cash position though with over $13 million in balance sheet cash against just 1.7 million in debt the company announced its first multi-year multi-million dollar contract with the US government in November with expected Revenue up to $3.5 million over the next 3 years it also signed three major contracts with US military over the last year worth nearly $8 million in Revenue now this one doesn't quite have the revenue growth we'll see in these other AI stocks I think it's more of a rebound from last year's selloff than a major growth play on the theme but at just 1.1 times on a price to sales valuation and a market cap of just $74 million it's a penny stock that could surprise over the next few years we're just getting started on our list of AI stocks but I want to show you what we're looking for here and how to find it we're starting with something as simple as the price performance of these stocks over those first two months during that earnings reports but it doesn't stop there we're using that outperformance as a clue to which stocks to start our research on and I guess we've come to the Debbie Downer part of the video where I tell you there has got to be more to your investing strategy than just a list of stocks you heard on YouTube Nation a gut feeling Intuition or your cat on a keyboard is not an investing strategy researching stock doesn't have to be a full-time job but if you are going to invest in individual stocks please just spend a few hours a month to research your stocks and keep up with that analysis I can show you where to find the information the tools you need but if you aren't going to use those tools you're better off just investing in an index fund and enjoy those stress-free market returns there is nothing wrong with that in fact I'll link to a video in the description that it's going to reveal my favorite Index Fund to buy right now now finding a company's earnings report is easy just type in the company name and an investor relations into a Google search to to find the company's IR page from there you'll find the company's quarterly and annual reports investor presentations and even special information reported to the SEC with that earnings release you can compare the company's sales growth and profits with Market expectations as well as Management's outlook for the future you can also compare the company's pace of growth and profitability against its peers as well as its own history and do this for a few stocks in an industry and you're going to start to get a feel for the big ISS issues in that group you'll be able to notice when management avoids an issue and when others face it head on because a lot of times it's not what management talks about in these earnings reports but what it doesn't want to talk about now it's not surprising that Nvidia Corporation took her nvda made the list of our AI stocks beating those expectations what is surprising that it was only the fourth on the list with a 73% run in the first two months of the year the company continues to win on that demand for Accelerated Computing that need for faster and more efficient performance with ex acceleration software that that only Nvidia can provide while it's easy to think that this Hardware phase of the AI theme has to slow down eventually Nvidia is forecasting waves of demand from the current wave in cloud data centers and Enterprise through autonomous vehicles Robotics and digitalization which means Revenue growth could continue for years Nvidia shocked the market with its February Q4 earnings growing Revenue by 125% in that fiscal 2024 year and sending the shares up 15% in one day even more amazing though is while it more than doubled its Revenue it also got more efficient boosting operational profitability to 61% also nearly double the prior year the company still sees a trillion dollar market opportunity in that long-term demand for Accelerated Computing and AI analysts expect another year of strong growth with Revenue expected up 80% to100 billion and earnings to double to $22.39 a share that would mean the shares are still pretty richly valued at over 40 times price to earnings and 21 times sales but Nvidia has the growth to back that up shares of arm Holdings ticker armm have now more than doubled since I recommended them in the IPO in September and jumped 47% when the company announced its third quarter results last month more than the company's 14% year-over-year Revenue growth and 63% Improvement in free cash flow both way above expectations it was arms $3.2 billion guidance for ful year revenue and a122 per share earnings that blew away the market forecast analysts now the company can grow another 24% to $ 3.96 billion in sales through the next year and posting a154 in per share income against this optimism though arm is one of the most expensive AI stocks on the list at a price of 32 times that expected revenue and 81 times on a PE basis that's nearly double the valuation even on shares of Nvidia and this all comes on fears that the six-month post IPO lockup exploration is going to weigh on this stock most IPOs require insiders to hold their shares for at least 6 months to limit early investors from jumping out and and booking their profits on a stock that six-month lockup window expired last week and the big question mark now is how much is soft Bank going to sell the Japanese investing vehicle of masay Yoshi Sun holds more than 900 million shares 90% of arm and is all but certain to trim its stake a little after that massive run soft bank is a venture capital firm so even though it says arm is an important long-term investment it's after those big pre-ipo Investments so it's going to be taking some of those profits to reinvest it in startups so while arm is up 84% in just the first two months of the year and an undeniable leader in the AI race I'd probably wait for the shares to come down a little here the expensive valuation and any selling by SoftBank no matter how gradual is it's going to act as a weight on those shares and I think you can get the shares at a better price maybe around 100 to 110 per share over the next few months watching the stocks that can beat expectations is just one way to find these long-term wealth creators but check out this video to see my favorite and how I use the rule of 40 as a venture capital analyst and now with AI stocks to find the very best we could be seeing that sell-off opportunity already in the next two stocks first with big bear. a ticker bbai shares were up 88% in the first two months of the year after tripling last year but have crashed hard on disappointing earnings results Big Bear is in one of my favorite themes within AI helping companies make sense of their overload and data they help companies organize and visualize raw data to turn it into actionable insights this is key and really the first step in AI just managing all that data collected and then being able to make some sense of it that's helped Big Bear grow its customer base and a $26 million backlog for Revenue it's also produced some major wins recently including exclusivity with L3 Harris and a $32 million award across three contracts with the US Army a relationship that has grown 235% in the last 3 years now it does look like big bear has some work to do to impress investors though the company reported just half a percent Revenue growth in the fourth quarter to $4.6 million though it was able to boost its gross profitability to 32% over the quarter the company was able to report a positive Eid do of 3.7 million on a non-gaap basis versus a loss of 2.5 million last year so it is definitely moving in the right direction management did say it expects ful year Revenue as high as $215 million which while it would be 38% growth over the last year was slightly below analyst forecast and that's why the stock price paid for it falling 32% on the day still this could be an opportunity to get one of these AI stocks at a discount Shares are trading for about 2.2 times sales which is well under where the stock has traded in the past and a big discount to the valuation on other AI software companies I'm going to show you that complete list of 41 AI stocks next but the one I'm most excited about here SoundHound AI ticker s so n another one that gave investors a second chance after its earnings SoundHound is a leader in conversational AI to businesses that can be used to build AI assistance in more than 25 languages of course the market for AI assistant could be ginormous even larger than the $60 billion Enterprise Market SoundHound estimates here sound Hound's competitive Advantage could be in its ability to reach a deeper meaning faster in its programs its AI combines the automatic speech recognition ASR and the natural language understanding nlu steps in a typical voice AI software into just one step to understand context with conversation ations in real time that's backed up with a patent library of over 260 patents through speech recognition natural language processing and machine learning I took advantage of the 30% post earning slump to load up on more shares increasing my position to 3,000 shares now at 14% on the investment shares were up 17% last year and surged 150% in the first two months when Nvidia reported a $3.7 million investment in the company sending the stock up 67% in a single day that was followed quickly by the dis pointing earnings report where while SoundHound reported 47% growth in revenue and net loss that almost haved it did Miss earnings forecast by 8% and the outlook for 39% Revenue growth going forward was also below estimates but rather than fundamental issues with the company I think this is just one of those readjustments that that those fast growth stocks go through from time to time Wall Street and investors get ahead of themselves and get disappointed sending those shares crashing but creating a buying opportunity for braver long-term investors and here we've seen that with the shares regaining nearly all their post earnings crash Rising 39% in just the last 2 weeks here's that full list of 41 AI stocks and how they performed during the first two months of the year I also added the global X Robotics and AI ETF the botz and the S&P 500 returns for reference here we see that 17 of the AI stocks beat that 11.3% return on the AI fund and nearly half the list outperformed the overall Market beyond the top five here we've got some very strong candidates especially putting these together with our prior video on those AI stocks beating the rule of 40 I highlighted both meta platforms and crowd strike in that video both of which beat their expectations for growth in recent quarterly reports now I know all of you in the nation are getting tired of me to say this but I really like the cyber security stocks on this AI theme so both crowd strike and Cloud flare here IBM is another one I've been following very closely here and I think it's still largely undiscovered by AI investors after a decade as dead money invest are still hesitant and the shares are trading for just 2.9 times sales versus a valuation of two or three times that for its peers IBM is set to benefit using its Watson coding assistant to clean up the trillions of dollars worth of technical debt I highlighted recently in a Monday market update Salesforce ticker CRM is a longtime favorite of mine and up over 105% since adding it to my forever portfolio a few years ago I'll leave a link to that in the description if you want to see the full list also I wouldn't completely write off some of these companies underperforming over the last last few months though we saw in that rule of 40 video that while Adobe disappointed on its recent earnings it's still posting 10% growth and 39% profitability enough to create that long-term value that we want from this theme we also see another cyber security stock here Palo Alto networks which plunged 29% even after beating its revenue and earnings expectations but but on its conservative outlook for this year I think it's an opportunity to pick up shares at a discount here and take advantage of that long-term theme in digital security check out my list of forever stocks with the free report all link to in the description below or click on the video to the right to see the AI stocks beating that rule of 40 a must-watch measure for Success don't forget to join the let's talk money Community by tapping that subscribe button and clicking the Bell notification

Channel: Let's Talk Money! with Joseph Hogue, CFA

Views: 13,754

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Length: 13min 46sec (826 seconds)

Published: Wed Mar 20 2024