AI Stocks: Growth and Future Prospects

AI stocks have experienced significant growth in the past year, notably with companies like NVIDIA and SoundHound seeing remarkable increases in their market value. As we look ahead to 2025, what developments might the AI sector bring?

There’s been some debate about whether the excitement surrounding AI is overstated, and geopolitical factors might hinder the essential semiconductor advancements required for the industry’s prosperity. Nevertheless, AI companies continue to show solid performance.

Top 3 AI Stocks Performing Well

Below are three of the best-performing stocks listed in the Indxx Global Robotics & Artificial Intelligence Thematic Index, ranked by their one-year returns. This information is updated weekly for the latest data.

Upstart Holdings Inc. (UPST)

Upstart operates an AI lending marketplace that connects users to banks and credit unions for personal, auto, and refinancing loans. The platform also offers home equity lines of credit and small relief loans. With nearly three million customers, Upstart asserts that its AI technology assists lenders in approving more borrowers from underrepresented groups.

FARO Technologies Inc. (FARO)

FARO, a leading 3D imaging enterprise, caters to various sectors, including defense, automotive, energy, law enforcement, and shipbuilding. The company develops both hardware and software tailored for 3D measurement, imaging, and realization.

NVIDIA Corp (NVDA)

NVIDIA has been involved in multimedia and gaming graphics since 1993 and started creating AI applications back in 2012. Today, the company remains a pioneer in AI, focusing on the development of software, chips, and related services.

Understanding AI Stocks

AI stocks represent shares in companies engaged in artificial intelligence. Given the diverse applications of AI, the types of stocks available are varied. Some firms specialize in voice recognition software, while others might focus on developing autonomous vehicles.

Investing Considerations

If you’re new to the stock market and interested in investing in AI stocks, your first step should be to open a brokerage account. Following that, you need to determine how you want to gain exposure to AI stocks. While investing in individual AI firms can offer high returns, it also involves substantial risk and demands thorough research.

Potential AI Bubble?

Opinions differ on whether we might currently be experiencing an AI bubble. Some analysts suggest we are, while others disagree. Signs of overenthusiasm among investors may indicate a bubble, as many companies confuse buzzwords with actual innovation. Nevertheless, broader technology indexes remain well below previous peaks, making it challenging to definitively label the situation as a bubble.

Final Thoughts on AI Investments

Before committing to individual stocks or focused ETFs, investors should evaluate their choices carefully. Targeted investments can entail greater risk compared to more diverse options, such as S&P 500 index funds, which have historically yielded an average annual return of about 10% before inflation. If you’re in a position to explore individual stocks and can manage volatility, considering AI-related companies within a balanced portfolio could prove beneficial.