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Four Must-Own AI Stocks as We Move Toward 2024
With 2023 drawing to a close, savvy investors are shifting their focus on how to shape their investment strategies for 2024. A dominant conversation this past year has revolved around artificial intelligence (AI), a sector where many stocks have excelled. As we look to the future, certain AI companies stand out for their potential in the coming year
Here are four AI stocks that are poised to be smart additions to any investment portfolio in 2024:
Topping the list is Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), a tech giant that consistently emphasizes its AI-first approach. Overcoming earlier setbacks, Alphabet has firmly established itself as a leader in AI innovation.
With the launch of its advanced Gemini generative AI model, Alphabet has showcased technology that surpasses the capabilities of many rival platforms, including OpenAI’s GPT-4. Alongside this, the company’s Google Cloud service is well-positioned for growth as it attracts customers needing to leverage its formidable computing infrastructure for their own AI initiatives.
Alphabet has also made strides in blending AI into its advertising business model, a strategic move that promises to unlock new revenue streams.
Impressively, with all these advantages, Alphabet’s stock is currently priced at just 21 times its forecasted 2024 earnings, presenting a potentially undervalued opportunity in comparison to its peers in the tech industry.
CrowdStrike Holdings (NASDAQ: CRWD), a heavyweight in the cybersecurity domain, leverages AI to enhance its portfolio of security products. Through the application of machine learning, the company’s software is progressively updated to tackle evolving digital threats.
The rapid ascendancy of CrowdStrike as a premier cybersecurity provider is underscored by its annual recurring revenue hitting $3.15 billion, which indicates a 35% spike in the third quarter of fiscal 2024, concluding on October 31. Moreover, the firm’s profitability is on an upward trajectory, with forecasts indicating continued margin improvement into 2024.
Despite its strong market position, CrowdStrike’s stock carries a steep valuation, trading at over 21 times sales. This price point may give investors pause, as it represents a significant premium for any enterprise.
However, considering CrowdStrike’s presence in a market expected to be valued at $100 billion in 2024—a market that could potentially swell to $225 billion by 2028—the company’s expansive growth potential justifies the investment, even at a premium. Embracing this long-term vision, I see value in owning shares of one of the preeminent names in the cybersecurity landscape.
You might be surprised to see Airbnb (NASDAQ: ABNB) in this list, considering its reputation as a platform for booking short-term accommodations and unique travel experiences, rather than a pure AI enterprise. Yet, AI technology plays a pivotal role in Airbnb’s operations.
For instance, Airbnb has tackled the issue of unauthorized parties in rentals — which previously tarnished its reputation — by developing an AI-based system. This model assesses the risk of a potential renter holding a party at a listing and intervenes to prevent the reservation if deemed necessary.
Further highlighting its commitment to AI, Airbnb has acquired GamePlanner, a company that’s yet to unveil the specifics of its AI capabilities. The acquisition sparks curiosity about how Airbnb plans to integrate GamePlanner’s technology to innovate or improve its service offerings.
Presently, Airbnb continues to exhibit robust financial health with an 18% revenue increase in the most recent quarter and an impressive 44% operating margin in the third quarter. Despite not always being recognized for its AI prowess, Airbnb stands as a compelling AI-centric investment as we enter 2024.
Adobe (NASDAQ: ADBE) is renowned for being a trailblazer in the realm of digital media, and it has adeptly embraced AI within its suite of products. The introduction of Firefly, Adobe’s generative AI technology, enables users to easily alter or generate images through simple text commands.
With the recent cancellation of its costly bid to acquire Figma, Adobe’s proven track record of consistently increasing revenues at a steady, double-digit rate and achieving even higher earnings growth remains unblemished. This consistency offers an attractive potential for long-term market outperformance, making Adobe an alluring investment prospect.
Take the fourth quarter of fiscal 2023, concluding on December 1, as an illustrative benchmark: Adobe reported a year-over-year revenue growth of 12%, alongside an earnings surge of 29%. Management’s forecast for 2024 echoes this momentum, anticipating a revenue uptick of around 10% and a 15% increase in earnings.
For those looking to the year ahead, Adobe shapes up as an excellent investment in the AI sector. The firm’s reliable growth strategy and business model are poised to propel Adobe to outpace market performance.