When most investors think of artificial intelligence stocks, they think of corporate giants like Nvidia Corp. (ticker: NVDA) and Microsoft Corp. (MSFT), who have made tens of billions of dollars on artificial intelligence.
You can’t blame investors for thinking that way. Companies that capture the headlines usually do so for a good reason, as they deliver upside performance for their shareholders. Nvidia shares, for example, have risen by 176.7% over the past year as of July 23.
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Yet, under the surface or hiding in the shadows are some highly effective AI portfolio plays that have already found their way into billionaires’ portfolios and can just as easily find their way into your portfolio.
With the global artificial intelligence market expected to reach $1.3 trillion by 2030, according to research firm MarketsandMarkets, let’s take advantage of some lower-wattage AI-linked stocks that don’t generate many headlines but should outperform for sector investors in 2024 and beyond.
| Stock | YTD performance* | Upside potential** |
| Alphabet Inc. (GOOG, GOOGL) | 30.3% | 12.5% |
| Adobe Inc. (ADBE) | -8.5% | 12.1% |
| Super Micro Computer Inc. (SMCI) | 175.5% | 24.9% |
| Coursera Inc. (COUR) | -61.3% | 130.0% |
| Thomson Reuters Corp. (TRI) | 13.6% | 1.8% |
*As of July 23. **Based on 12-month consensus target price set by Wall Street analysts on TipRanks.com and current share price as of July 23.
Year-to-date performance: 30.3%
Yes, Google may be a household name, but its parent company, Alphabet, is not always the first name investors associate with artificial intelligence. Once a slow starter in the AI realm, Alphabet’s moves lately have caught the attention of billionaire-backed investment firms, such as Chase Coleman’s Tiger Global Management, Soros Fund Management and Ray Dalio’s Bridgewater Associates. All three made GOOGL share purchases in the first quarter of 2024.
Alphabet’s new Gemini generative AI platform has merged AI into Google search results, affecting 8.5 billion users daily, and AI Overviews places select advertisements at the top of Google search pages. Since advertising accounted for $61.7 billion of Alphabet’s $80.5 billion first-quarter 2024 revenue, the company’s shift to AI-driven ads in Google searches and its AI deployment in Google Cloud may be the best reasons to steer cash into GOOGL shares in 2024.
Analysts are largely all-in on Alphabet, with both KeyBanc and Bank of America analysts issuing “buy” calls on its stock in the past week.
Adobe Inc. (ADBE)
YTD performance: -8.5%
Adobe is on the upswing in mid-2024, with its share price up 15.5% over the past three months, and inroads into AI are a big reason for the gains.
Like Alphabet, Adobe has been pouring cash into artificial intelligence over the past decade, and those efforts finally seem to be paying off. Exhibit A is Adobe’s AI Assistant for Acrobat and Reader, which vastly simplifies users’ experience by allowing them to summarize documents, home in on the key passages they need to find and answer specific queries. This helps them get what they need from a document faster and more efficiently.
Adobe’s Experience Platform also provides user efficiencies, allowing faster and more seamless data sharing between company departments. Data science users, for example, can extract data and share it immediately with company marketers, who can use the information for new products and services.
Adobe’s ability to enmesh AI with its Firefly generative AI tool also improves the user experience, making it easier to access and manipulate stock images. That helps turn free users into subscription-paying ones.
In short, the company is using AI to corner the visual content creation market. So far in 2024, Adobe has had some great performance results, and share-price action is heating up fast this summer.
Super Micro Computer Inc. (SMCI)
YTD performance: 175.5%
This San Jose, California-based information technology hardware and services company is one of the early leaders in the artificial intelligence server products and services market.
Super Micro Computer recently launched a liquid-cooled AI data center system using Nvidia semiconductors, which is expected to smooth companies’ data operations and reduce their power consumption by about 40%. It also allows companies to run even the most complex applications at speedier central processing unit (CPU) rates, with more data accuracy and better performance.
The company’s entry into the AI marketplace has been so successful that its stock is up about 4,000% over the past five years, yet it draws significantly less attention than Nvidia and Microsoft, which lead the technology sector. Ironically, SMCI’s shares have skyrocketed due to its piggybacking on Nvidia chips to provide market-ready hardware, computer systems and servers. Net sales were up more than 200% in the most recent quarter compared with last year’s comparable period, suggesting that stock performance isn’t slowing down anytime soon.
If investors move fast on this exploding but less-talked-about AI-powered stock in the second half of 2024, that may leave a decent performance runway.
Coursera Inc. (COUR)
YTD performance: -61.3%
If you’re looking for a classic under-the-radar AI stock at a bargain price, look no further than Coursera, the Mountain View, California-based online learning company.
Operating in a niche industry isn’t easy, but artificial intelligence makes that proposition easier for Coursera. The company is leveraging AI to reinvent the digital education sector by providing personalized learning services to sectors already showing big demand for e-learning services, given the skyrocketing costs of a brick-and-mortar college education.
For the first quarter ended March 31, Coursera revenues were up 15% to $169.1 million. Full-year 2024 revenue numbers are expected to clock in at $695 million to $705 million, an increase from $636 million in 2023, giving investors confidence that Coursera’s shift to AI is already paying off.
Needham analyst Ryan MacDonald recently reiterated a “buy” rating on COUR with a price target of $15 per share, double the current share price.
Thomson Reuters Corp. (TRI)
YTD performance: 13.6%
A legacy news provider and publishing company may not be your first instinct for adding an AI element to your investment portfolio, but it may be a savvy choice.
The stock is up 13.6% year to date in an industry decimated by layoffs, mergers and closings, so durability and reliability are already baked into the cake with TRI. Yet, that’s an incomplete picture. Add an artificial intelligence component that seeks to capitalize on TRI’s easy access to data (it owns Westlaw, UltraTax and Onesource, all data-rich service providers), and it’s easier to understand why company executives consistently refer to Thomson Reuters as a technology company rather than a news company.
TRI’s news and data foundation now offers investors a rich opportunity to buy a growing tech business at a relatively low price compared with the big tech names. Increasingly, AI is a big growth driver for a company with high-level content creation experience in coverage areas like taxes, public policy, science, military and defense, and finance (especially in data-rich compliance). Using AI to break down data faster and more accurately in complex business sectors is a big selling point for TRI and a huge potential driver of revenue growth going forward.
Add in a dividend yield of 1.3%, robust free cash flow and an ever-expanding flow of content and data to the mix, and TRI makes sense as a forward-looking AI tech investment.
[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]
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5 Best Under-the-Radar AI Stocks originally appeared on usnews.com
