In 2024, a smaller club of elite stocks has emerged: The AI 5.
It’s yet another example of Wall Street’s fascination with abbreviations, a trend that stretches as far back as the 1960s. Recall the so-called Nifty Fifty. This group of highly-touted 50 large-cap stocks regularly traded at price-to-earning ratios of over 50.
Decades later, we have FAANG, MAMA ANT and The Magnificent Seven.
But Light Street Capital’s Glen Kacher coining the term “AI 5” is especially prescient considering artificial intelligence (AI) is the leading force behind the bullish market run nowadays.
Here’s a look at the AI 5 members:
Nvidia
Nvidia Corporation (NASDAQ:NVDA) is considered the global leader in high-end graphics processing units (GPUs). Its trajectory has also evolved with the surge in demand for GPU applications in AI and machine learning.
Nvidia witnessed a significant boost in the 2010s when cryptocurrency miners turned to GPU hardware, leading to a skyrocketing demand. However, it was the integration of GPUs in training AI models that propelled the Jensen Huang-led company to new heights, as the market recognized the pivotal role of this technology.
Nvidia’s surge is fueled by its incredible financial performance, owing to the accelerating adoption of AI across various sectors, including cloud providers and governments, which contributes significantly to Nvidia’s growth. A multi-billion order from Meta for 350,000 H100 GPUs is just one of the showcases of the company’s deep entrenchment in the tech industry.
Microsoft
Microsoft Corporation (NASDAQ:MSFT) is known for its Windows operating system, Office suite, LinkedIn, and Xbox gaming platform. The Redmond, Washington-based tech giant’s stock returns exceeded 1,000% over the past decade.
A pivotal moment in Microsoft’s AI journey was its $13 billion investment in OpenAI. This solidified its presence in the sector. The company’s fiscal Q2 results highlighted robust revenues within its cloud computing segment, competing closely with tech giants like Amazon and Alphabet.
As AI continues to transform industries, Microsoft aims not only to create advanced systems but also to develop machines that surpass human capabilities in various tasks.
Under CEO and chair Satya Nadella, the company envisions an AI-infused future where every…
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