3 top artificial intelligence stocks to buy in august

Artificial intelligence (AI) is one of the hottest technology trends and is still in its early stages. The world’s largest tech companies are investing billions to develop new products and services, striving to stay ahead in the field.

As with any investment trend, it's crucial to distinguish between companies riding the hype and those truly leading the way. Here are three AI stocks that stand out as genuine leaders in the field and are worth considering for investment right now.

1. Nvidia

Nvidia (NVDA 3.78%) rightfully garners significant attention in the AI sector. The company was a pioneer in AI, initially providing graphics processing units (GPUs) to major tech firms for AI tasks.
Years later, Nvidia remains at the forefront of AI innovation. It commands an estimated 70% to 95% share of the AI chip market and continues to introduce new products, such as the H200 chip, to drive further demand. During the latest earnings call, CEO Jensen Huang revealed that demand for the H200 has already outstripped supply.

As tech companies compete to develop top-tier AI products and services, they are expected to upgrade their data centers in the coming years, which will likely boost sales of Nvidia's chips. Jensen Huang anticipates that global tech firms will invest over $1 trillion in AI over the next five years and double the number of data centers.

2. SentinelOne

SentinelOne, a cybersecurity firm, aims to replace human analysts with AI-driven algorithms through its Singularity extended detection and response (XDR) platform. The company offers its solutions via a combination of on-site appliances and cloud-based services.

SentinelOne's revenue more than doubled in both fiscal 2022 and fiscal 2023 (ending in January 2023), but growth slowed to 47% in fiscal 2024. The company anticipates continued deceleration due to challenging macroeconomic conditions, projecting growth of 29% to 31% for fiscal 2025. This slowdown, coupled with the absence of both generally accepted accounting principles (GAAP) and non-GAAP (adjusted) profits, has led to decreased investor interest, particularly as interest rates have risen. Consequently, its stock is now trading 34% below its IPO price and 70% below its all-time high.

3. Amazon

Amazon’s (NASDAQ) cloud division, AWS, provides software tools for companies to deploy and manage AI. Last quarter, the division's revenue surged 19% compared to the same period last year, surpassing analysts’ average estimate of a 17.6% increase. Additionally, AWS's operating income reached $9.3 billion, up from $5.4 billion in Q2 of 2023. CEO Andy Jassy announced that the conglomerate is experiencing "significant demand" for its AI training chips and noted that "tens of thousands of companies" are utilizing Amazon Bedrock. This software offers a framework that allows companies to develop AI systems quickly and efficiently.

The above AI stocks stand out for their potential: Nvidia continues to lead in AI hardware, with its GPUs and new H200 chip driving substantial demand and commanding a significant market share. Despite recent growth challenges, SentinelOne's AI-driven cybersecurity platform, Singularity XDR, positions it for future success as it innovates in protecting against threats with advanced AI. Meanwhile, Amazon’s AWS excels in providing essential AI tools and frameworks, such as Amazon Bedrock, which enable companies to develop AI systems efficiently.

The strong performance and increasing adoption of these AI solutions highlight the robust growth potential in their respective areas. Investing in these companies offers exposure to diverse facets of the AI revolution, from cutting-edge hardware and cybersecurity advancements to powerful cloud-based solutions.

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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.