Best AI Stocks to Buy Now in 2023: Investing in Artificial Intelligence

ASML is a Dutch chip equipment manufacturer and is renowned as the world’s leading supplier by far, for the semiconductor industry. It provides hardware, software, and services to top chip-makers around the world, such as TSMC, Intel, and Samsung.

Moving up the supply chain, ASML (NASDAQ:ASML) is another lucrative name among the many AI stocks out there. Although the Dutch equipment manufacturer doesn’t necessarily use artificial intelligence in its day-to-day operations, it does have indirect exposure to the market. This is because it supplies the machines TSMC uses to create chips for their clients, such as NVIDIA.

But what makes ASML so special is its incredible economic moat. That’s down to the fact that it’s the only company in the world that makes extreme ultraviolet lithography (EUV) machines. These machines are essential to making every single advanced processor chip in circulation today. And with the AI sector requiring an immense amount of computing power, ASML’s equipment will be at the forefront of the AI revolution.

Detractors will point to the fact that ASML stock currently trades at a relatively pricey valuation. Its trailing and forward P/E ratios sit comfortably in the 30’s, which is above the market’s average. That said, the premium can be justified considering the firm’s strong competitive advantage with no competitor close to replicating its offerings. And if NVIDIA’s projected demand for AI applications does come true, ASML’s current share price may look extremely cheap amongst the many top AI stocks out there.

Capital at risk.

Founded by renowned billionaires Bill Gates and Paul Allen in 1975, Microsoft is the world’s largest software company. It’s famous for its software products that include the world’s most used operating system in Windows, Microsoft Office, and the once known Internet Explorer browser which is now known as, Edge.

Arguably the catalyst that started the current rally in artificial intelligence stocks, Microsoft (NASDAQ:MSFT) is certainly another AI name to look out for. It all started when the tech giant bought a $13bn stake in an AI startup called, OpenAI. They’re the ones who pioneered the natural language processing chatbot, ChatGPT which has spearheaded the AI rally today, especially in the field of generative AI.

And with ChatGPT amassing hundreds of millions of users in just two months – faster than TikTok and Instagram – Microsoft opted to integrate its investment into its software applications, such as its Bing search engine. In addition to that, the chatbot’s various capabilities surrounding generative AI and machine learning have also been integrated into Microsoft’s other applications, such as Microsoft Office, Windows, and even Skype.

Considering the fact that Microsoft stock is also trading at a trailing and forward P/E in its 30’s, the shares may be a no-brainer given the tremendous amount of potential AI has. Machine learning could serve as a compounder in growing the enterprise’s offerings, productivity, and earnings. Therefore, Microsoft has to be one of the better AI and machine learning stocks now to invest in with its robust balance sheet and blue-chip status.

Capital at risk.

Alphabet is one of the world’s biggest companies by revenue and market cap. It’s the parent company of the search engine we all know and love, Google. It also earns sizeable revenues from its other services such as YouTube with exciting and new ventures in the pipeline, such as Waymo which plans to build self-driving cars on scale.

Google’s parent company, Alphabet (NASDAQ:GOOGL) is also one of the hottest AI stocks this year. Many had feared that Google would lose its dominant market position to Microsoft in the search and advertising space.

But despite having been on the losing end of the ‘AI battle’ early on, the conglomerate has shown just why it’s the leader in artificial intelligence. Alphabet has released its own set of generative AI products and even its own chatbot in Bard. This has been integrated with Google’s latest natural language processing model, PaLM 2 to have better generative AI and machine learning capabilities.

More importantly, Google plans to synergise AI technology into its applications as well. CEO Sundar Pichai confirmed the board’s intention to integrate Bard with its search engine and even previewed its generative AI capabilities in its other applications, such as Google Workspace. What’s more, there are plans to expand the use of AI in its cloud service, which would provide enterprise scale AI applications.

And with its DeepMind acquisition yet to show its full potential, it’d arguably be foolish to write Alphabet off as one of the top AI stocks without taking a second look – especially when its valuation multiples are much cheaper than its closest competitors.

Capital at risk.

Tesla is the world’s biggest electric vehicle (EV) company. Aside from manufacturing EVs, Tesla also sells energy products and services, and is known as one of the largest global suppliers of battery energy storage systems through its stationary battery energy storage devices, solar panels, solar roof tiles, and other related products and services.

It may seem odd to feature Tesla (NASDAQ:TSLA) as one of the best AI stocks today given that it operates in the industrial and energy sectors. However, its explosive potential lies in self-driving cars, more specifically RoboTaxis.

Tesla’s cars already have some AI integrated into its cars to enable some form of self driving, but it’s the potential surrounding machine learning and AI that’s exciting. Data gathered from millions of journeys enables the EV maker to compile the world’s largest pool of driving data.

Such data, combined with AI modelling power, can be used to power its goals of launching its RoboTaxi. If successful, such a concept would be able to bring huge quality of life improvements to many, as it would be able to save people hours of commuting.

That being said, Tesla remains one of the pricier artificial intelligence stocks out there. With a trailing and forward P/E ratio that’s close to triple digits, it’s certainly pricey. But it’s also worth noting that Tesla is a growing company with plenty of earnings potential. If that potential ends up being fulfilled, especially on the AI front, the Tesla share price could be in for a ride back to its all-time highs.

Capital at risk.

NVIDIA is a software and semiconductor company from the US. It designs graphics processing units (GPUs), application programming interface (APIs), as well as system on a chip units (SoCs) for the mobile computing and automotive market. Most recently, it’s been dubbed as a dominant supplier of AI hardware and software.

Last but not least, NVIDIA (NASDAQ:NVDA). Having been one of the biggest beneficiaries during the crypto boom, the graphics card maker is now moving into AI platforms, where CEO Jensen Huang has touted where its true potential lies.

NVIDIA stock has more than doubled in value this year and it’s no surprise either. The chip creator makes the world’s highest-performing microchips that are capable of powering AI software and services. And given that a sizeable chunk of NVIDIA’s profits are expected to come from mega clients like Amazon and Oracle who are pushing AI use cases in as many application as possible, NVIDIA will stand to gain massively from this.

Even so, one should be cautious about the stock’s current valuation. Even on a forward basis, NVIDIA’s P/E ratio sits at three to four times higher than the S&P 500‘s long-term average. While this isn’t too dissimilar from Amazon, the difference is that AI remains an industry without a track record of profitability, whilst Amazon’s cloud and e-commerce business does.

For that reason, investors should consider the risks with NVIDIA before buying its stock at its current levels. Nevertheless, a move down could present a lucrative buying opportunity given the incredible upside potential in earnings for decades to come.

Capital at risk.

Amazon is an American multinational tech company with several business functions. Its most famous for its e-commerce business selling a wide variety of product categories, including electronics, apparel, furniture, food, and even groceries. It also has divisions in cloud computing (AWS), digital streaming (Prime Video), and AI. It is often regarded as one of the world’s most valuable brands.

Having seen its stock drop as much as 52% from its pandemic-era highs, Amazon (NASDAQ:AMZN) stock hasn’t gotten new life on the back of the recent AI hype. In the year to date, the shares are up by a handsome 50% and could have room to rally further given its potential in the AI market.

Aside from integrating AI into its everyday operations on the e-commerce front to help with cost and automation, Amazon’s potential lies on the cloud computing front with AWS. This should help to provide its clients with numerous automation applications as well as generative tools which could help to enrich the user proposition.

Critics will point to Amazon stock’s incredibly high P/E ratio of 300, but it’s worth starting that the e-commerce and cloud giant is recovering from its post-pandemic slump when profits tanked. Provided Amazon can achieve its previous levels of profitability, the stock would be trading at a much healthier valuation.

And when considering the incredible economic moat and diverse business Amazon possesses, it could be one of the more stable AI investments one could make in order to diversify their risk tolerance.

Capital at risk.