Top 3 AI Stocks to Watch in June 2024

Top 3 AI Stocks to Watch in June 2024

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Artificial Intelligence (AI) continues to take Wall Street and the world by storm and shows no signs of slowing anytime soon, with most AI stocks outperforming. Although AI tools have been used for quite some time, they stepped into the mainstream after the release of ChatGPT in late 2022 and have been literally all we talked about since.

The AI space is wide and varied. Some companies concentrate efforts on voice recognition applications; others focus on automation, autonomous vehicles, chatbots, robotics, and apps, for example. Consequently, choosing AI stocks to add to your watchlist can be challenging. To help, here are three AI companies that could be worth pencilling down this month for further research.

Nvidia (NVDA)

Nvidia, a widely known and popular semiconductor stock that was founded in the early 1990s, remains the go-to company in the generative AI technology market.

With a market cap of US$3.2 trillion, the behemoth is on track to become the most valuable company in the world; its performance this year is nothing short of outstanding (+140% year to date). It is also the largest outperformer in the so-called ‘Magnificent Seven’, creating immense wealth for its investors in previous years.

AI is projected to continue growing, meaning increased demand for Graphic Processing Units (GPUs), which is good news for companies like Nvidia. The company controls more than 80% of the GPU market, establishing a sizeable technological moat for itself. In addition to AI just beginning to take hold and coupled with Nvidia’s insatiable drive to innovate, it is no wonder this company is still one of the most widely talked about stocks.  

The recent ten-for-one stock split saw Nvidia’s share price fall from north of $1,200 to approximately $120, thus making it far more affordable for investors and driving the stock higher. Earnings are forecast to grow more than +20% per year (earnings increased by nearly +800% in the past year), and with revenue, adjusted earnings per share (EPS), and free cash flow growing rapidly, together with the forward Price-to-Earnings (P/E) ratio at a reasonable level for such a large company, Nvidia deserves a spot on most watchlists.

From Nvidia's daily chart, this is a textbook definition of an uptrend. With the stock price recently reaching fresh highs of $132.84, investors will look to buy any dips in this market, preferably from support levels; current supports are seen at $115.82 and $125.59.

Nvidia Daily Chart Created Using TradingView

Microsoft (MSFT)

Microsoft, founded in 1975 by Bill Gates and Paul Allen, is currently the most valuable company in the world according to market capitalisation (US$3.29 trillion) and rallied +57% in 2023. Year to date, the stock is up nearly +20% and recently touched a record high of $443. This multinational technology giant’s primary operations involve developing and marketing software worldwide. Revenue is generated through developing their products, licensing, and supporting software products. That said, Microsoft remains a dominant player in the industry, helping fuel its recent price surge.

Microsoft has invested billions of dollars into OpenAI technology, which uses Azure – Microsoft’s cloud platform – as the fundamental setup for training their large language models. This access to high-performance computing power is crucial for creating complex AI models that require massive amounts of data and processing.

The latest developments showcase the launch of the new Copilot+ PCs, which will be available tomorrow, according to the company. The new Copilot+ PCs is said to have some of the most powerful AI processors, allowing for up to 40 million operations per second! It is certainly an exciting time for the company. According to Microsoft: ‘We introduced an all-new system architecture to bring the power of the CPU, GPU, and now a new high-performance Neural Processing Unit (NPU) together. Connected to and enhanced by the large language models (LLMs) running in our Azure Cloud in concert with small language models (SLMs), Copilot+ PCs can now achieve a level of performance never seen before’. 

The company remains strong in terms of growth and revenue, with both expected to grow by circa +13% per year. Its P/E ratio (38.3) is below the software industry average, and its return on equity (ROE) is forecast to be +30% over the next three years.

The daily chart of the stock shows a similar situation to Nvidia: it recently reached all-time highs and depicts a clear uptrend in which investors are likely to target dip-buying opportunities from support levels. Current supports are seen at $396.85 and $430.46.

Microsoft Daily Chart Created Using TradingView

Apple (AAPL)

Founded in 1976, and currently with 160,000+ employees, Apple is the world’s second most valuable technology company in the world, according to market cap (US$3.26 trillion). The company manufactures and designs several products, including smartphones and personal computers.

The recent introduction of Apple Intelligence (Apple AI) has firmly aligned the company alongside AI giants, highlighting its unique approach to device integration. The announcement was cheered by investors last week, fuelling a run to a record high of $220.20 and adding US$300 billion in market capitalisation, which briefly saw the company surpass Microsoft as the most valuable company in the world.

The question is whether this bold move could trigger upgrades to newer iPhone models that possess the needed processing requirements to operate the new Apple AI features. According to the company, ‘Apple Intelligence will be available on iPhone 15 Pro, iPhone 15 Pro Max, and iPad and Mac with M1 and later, with Siri and device language set to US English’.

Like Microsoft, Apple is strong in terms of company growth and revenue growth, with earnings expected to grow by +6.0% and revenue by +5.5% per year.

Technically, the stock also resembles a similar picture to Nvidia and Microsoft. The company’s share price exhibits a clear uptrend and may attract additional buyers into this market if a correction unfolds to support, currently seen at $180.56 and $198.57.

Apple Daily Chart Created Using TradingView

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