10 Best Machine Learning Stocks To Invest In
In this article, we will discuss the 10 best machine learning stocks to invest in. If you want to explore similar stocks, you can also take a look at 5 Best Machine Learning Stocks To Invest In.
The Global Machine Learning Industry
According to an industry analysis report by Fortune Business Insights, the global machine learning industry was valued at $15.4 billion in 2021 and is expected to reach a value of over $21 billion in 2022. The machine learning industry is expected to grow at a compound annual growth rate of 38.8% from 2022 through 2029 and reach a value of $210 billion by the end of 2029. One of the major drivers of this growth is the increasing adoption of machine learning in a variety of industries including technology, healthcare, manufacturing, automotive, retail, advertising, automation, defense, and financial services among others.
While the machine learning industry is a high-growth industry and growth stocks have been getting hammered in 2022 due to high interest rates that are straining their earnings, long-term investors can in fact benefit from the recent weakness. As of September 30, the Nasdaq composite index has declined 33% year to date.
Investors that are in the stock market for the long term can rack up shares of leading companies in the space while they are still at or close to the bottom. Some of the biggest players in the machine learning industry include Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN).
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Our Methodology
To determine the 10 best machine learning stocks to buy now, we reviewed the industry and identified major players that develop software and hardware for machine learning applications. We narrowed down our selection to companies that had positive market sentiment and strong product pipelines. Along with each stock, we have mentioned the hedge fund sentiment, analyst ratings, and their products. We have ranked these stocks according to their popularity among elite hedge funds. The hedge fund sentiment was sourced from Insider Monkey's database, which keeps track of roughly 900 elite hedge funds as of the second quarter of 2022.
10 Best Machine Learning Stocks To Invest In
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 40
International Business Machines Corporation (NYSE:IBM) is a pioneer in developing solutions for the development and deployment of machine learning models. The company's IBM Watson Studio allows support for the development, training, and testing of machine learning models. The IBM Watson Studio is among the most popular data science platforms that is used by machine learning engineers worldwide.
International Business Machines Corporation (NYSE:IBM) is a leader in the artificial intelligence space and is one of the best machine learning stocks to buy now. On September 27, International Business Machines Corporation (NYSE:IBM) announced a strategic collaboration with the Saudi Data and Artificial Intelligence Authority to use artificial intelligence for carbon capture across the Kingdom of Saudi Arabia. The two entities will jointly leverage the technological advancements in AI and machine learning to detect, map, and mitigate carbon emissions across the country.
On August 16, Credit Suisse analyst Shannon Cross raised her price target on International Business Machines Corporation (NYSE:IBM) to $163 from $156 and assumed coverage of the stock with an Outperform rating. Over the past three months, the stock has received 5 Buy and 4 Hold ratings from Wall Street analysts and has an average price target of $145, which represents an upside of 22% from current levels.
At the close of the second quarter of 2022, 40 hedge funds were bullish on International Business Machines Corporation (NYSE:IBM) and held stakes worth $948 million in the company. As of June 30, Arrowstreet Capital owns more than 2.6 million shares of International Business Machines Corporation (NYSE:IBM) and is the largest shareholder in the company.
In addition to International Business Machines Corporation's (NYSE:IBM) Watson Studio, some of the top cloud platforms that machine learning engineers build and train complex AI models on are offered by Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), and Amazon.com, Inc. (NASDAQ:AMZN).
9. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 65
Snowflake Inc. (NYSE:SNOW) is a leading provider of cloud computing services and its cloud platform is optimized for running machine learning algorithms. The company's platform is compatible with machine learning languages and environments such as Spark, R, Qubole, and Python. As of September 30, the company has free cash flows of $292.5 million and is therefore one of the best cash-rich machine learning stocks to buy right now.
On August 24, Snowflake Inc. (NYSE:SNOW) released market-beating earnings for the fiscal second quarter of 2023. The company reported sales of $497.25 million, up 83% year over year, and beat Wall Street estimates by $30 million. The company reported earnings per share of $0.01 and beat expectations by $0.02.
Wall Street analysts are bullish on Snowflake Inc. (NYSE:SNOW). On September 22, MoffettNathanson analyst Sterling Auty initiated coverage of Snowflake Inc. (NYSE:SNOW) with a $242 price target and a Buy rating. This September Needham analyst Mike Cikos initiated coverage of Snowflake Inc. (NYSE:SNOW) with a $240 price target and a Buy rating.
At the end of the second quarter of 2022, 65 hedge funds were long Snowflake Inc. (NYSE:SNOW) and held stakes worth $5.12 billion in the company. As of June 30, Altimeter Capital Management is the top shareholder in Snowflake Inc. (NYSE:SNOW) and has stakes worth $2.36 billion in the company.
Here is what Baron Funds had to say about Snowflake Inc. (NYSE:SNOW) in its second-quarter 2022 investor letter:
“During the quarter, we added to three of our cloud infrastructure positions – Snowflake Inc., Cloudflare, Inc., and Datadog, Inc.While investors are concerned that a weakening macroeconomic environment will be a near term headwind to growth as customers may slow down their cloud expansions, we remain focused on the long term – duration of growth, competitive advantages, and innovative capabilities and are happy to increase our positions at a more attractive price. For example, Snowflake, the leading data cloud provider, during its recent user conference, announced several new products, which significantly expand its addressable market…” (Click here to see the full text)
8. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
Micron Technology, Inc. (NASDAQ:MU) is a leading manufacturer of semiconductors and memory storage products. The company's products are used widely for machine learning and deep learning applications. Micron Technology, Inc.'s (NASDAQ:MU) deep learning accelerators allow for deep learning algorithms to run in a more energy-efficient and optimized manner. The company's solid pipeline of hardware products for the most data-intensive applications in machine learning and high-performance computing justifies its inclusion among the best machine learning stocks to buy now.
On September 29, Micron Technology, Inc. (NASDAQ:MU) announced earnings for the fourth quarter of fiscal 2022. The company reported earnings per share of $1.45 and outperformed Wall Street estimates by $0.08. The company's revenue for the quarter amounted to $6.64 billion. As of September 30, Micron Technology, Inc. (NASDAQ:MU) is trading at a PE multiple of 6x and has a trailing twelve-month operating margin of 31.70%, making it an undervalued and profitable machine learning stock to buy now.
Shortly after the company's earnings release, JPMorgan analyst Harlan Sur reiterated his $65 price target and buy-side Overweight rating on Micron Technology, Inc. (NASDAQ:MU). On September 30, Needham analyst Rajvindra Gill revised his price target on Micron Technology, Inc. (NASDAQ:MU) to $60 from $64 and maintained a Buy rating on the shares.
At the close of Q2 2022, 69 hedge funds were eager on Micron Technology, Inc. (NASDAQ:MU) and held stakes worth $2.16 billion in the company. As of June 30, Matrix Capital Management owns 4 million shares of Micron Technology, Inc. (NASDAQ:MU) and is largest shareholder in the company. The fund's stakes are valued at $221 million and the investment covers 5% of the fund's 13F portfolio.
Here is what Meridian Funds had to say about Micron Technology, Inc. (NASDAQ:MU) in its second-quarter 2022 investor letter:
“Micron Technology, Inc. (NASDAQ:MU) is a leader in the production of DRAM and NAND memory. We invested in the stock in the third quarter of 2019 during a cyclical downturn in the memory industry. Our rationale was that, while the memory industry is cyclical, we believed there are strong secular drivers in place that will lead to higher peaks and long-term growth. Our secular thesis is based on our conviction that the quest for ever-increasing compute speeds will increasingly rely on memory to solve bottlenecks and that increased memory content in nearly everything from mobile phones to automobiles will drive demand. Micron’s stock traded lower during the quarter due to macroeconomic concerns that led to lower earnings expectations. We increased our stake in the company, as we believe our secular thesis remains intact. We wanted to take advantage of what we view as temporary cyclical concerns that caused the stock to trade at less than 10x reasonable trough earnings per share (EPS) estimates and less than 7x recent peak EPS.”
7. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 77
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a leading American cybersecurity company that leverages the advancements in artificial intelligence and machine learning to provide intelligent endpoint security, threat intelligence, and cyberattack response services. The company is a pioneer in developing cybersecurity solutions backed by machine learning and deep learning algorithms and is therefore ranked high among the best machine learning stocks to buy now.
On September 30, Capital One analyst Connor Murphy started coverage of CrowdStrike Holdings, Inc. (NASDAQ:CRWD) with a buy-side Overweight rating and a $235 price target. Over the past three months, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) has received 22 Buy ratings and 1 Hold rating from Wall Street analysts and has a consensus analyst rating of Strong Buy. The stock's median price target sits at $236 and implies an upside of 43%.
At the end of Q2 2022, 77 hedge funds were bullish on CrowdStrike Holdings, Inc. (NASDAQ:CRWD) and held stakes worth $4.10 billion in the company. As of June 30, Tiger Global Management LLC is the top shareholder in the company and has stakes worth $1.10 billion.
Here is what Carillon Tower Advisers had to say about CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its second-quarter 2022 investor letter:
“CrowdStrike Holdings, Inc. (NASDAQ:CRWD), a security software platform for protecting information technology assets and cloud workloads, delivered strong earnings results, with solid recurring revenue, customer growth, and profitability. Some investors, however, hoped for bigger numbers on the annual recurring revenue metric. Additionally, CrowdStrike has shown a desire to continue to hire to fuel growth, and so the expected increase in future profitability will be held back somewhat in the near term. We remain positive on the company’s prospects, as current geopolitical tensions make cyber security mission-critical.”
6. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 84
NVIDIA Corporation (NASDAQ:NVDA) is the world's biggest manufacturer of high-end graphics processing units and semiconductors. The company's products are vital to computer vision, deep learning, and machine learning applications. Moreover, NVIDIA Corporation (NASDAQ:NVDA) also provides is GPU power over the cloud for machine learning engineers to develop apps on Azure, Google Cloud Platform, and Amazon Web Services. NVIDIA Corporation (NASDAQ:NVDA) is leading the artificial intelligence industry with its next-generation hardware and is one of the best machine learning stocks to invest in.
This September, JPMorgan analyst Harlan Sur reiterated his $220 price target and buy-side Overweight rating on NVIDIA Corporation (NASDAQ:NVDA). The analyst noted that NVIDIA Corporation (NASDAQ:NVDA) "continues to be 1-2 steps ahead of its competitors". On September 21, Barclays analyst Blayne Curtis maintained an Overweight rating and his $190 price target on NVIDIA Corporation (NASDAQ:NVDA).
At the end of the second quarter of 2022, 84 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA) and held stakes worth $3.31 billion in the company. Of those, Fisher Asset Management was the largest shareholder in the company with stakes worth $1.15 billion. The investment covers 0.81% of Ken Fisher's 13F portfolio.
Here is what Baron Funds had to say about NVIDIA Corporation (NASDAQ:NVDA) in its second-quarter 2022 investor letter:
“At the company-specific level, there was a broad correction across the entire portfolio. While four of our holdings contributed to performance, the contribution to absolute returns was less than 100bps combined, as unfortunately none of them were large enough to move the needle. We had 16 investments detracting over 100bps each with NVIDIA (NASDAQ:NVDA), our second largest detractor, costing the Fund 254bps.
NVIDIA’s stock was hit even harder, down 44.4%, impacted by concerns over the health of the consumer, dramatic declines in crypto, and COVID-related lockdowns in China. Despite the sell-off and the increased near-term volatility in its gaming business, NVIDIA’s revenues grew 46% year-over-year with 48% operating margins, driven by continued strength in its data center business as companies across industries adopt AI and ML…” (Click here to see the full text)
Some of the top beneficiaries of secular growth trends in machine learning and artificial intelligence include Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN), and NVIDIA Corporation (NASDAQ:NVDA).
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Disclosure: None. 10 Best Machine Learning Stocks To Invest In is originally published on Insider Monkey.
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