Artificial intelligence (AI) is rapidly changing the world and the stock market is no exception. AI-powered algorithms are now being used to predict stock prices, identify investment opportunities and even manage portfolios. A great example of AI stock predictions yielding good results is the ARK Autonomous Technology & Robotics ETF (BATS:ARKQ), which employs AI as a tool for their research. Meanwhile, a bad example of AI stock predictions would be AI Powered Equity ETF (NYSEARCA:AIEQ), which uses AI as a replacement for human analysts instead of a tool, and it has so far delivered poor and underwhelming results.
With that in mind, I strongly encourage you to not use AI stock predictions as a replacement for traditional screening and analysis of the market. Instead, use it as a tool to bolster or gain more clarification on the stock or its underlying business.
We’ll be doing just that with Google’s Bard AI. While some may call it a letdown, it is trained on a larger and newer dataset than OpenAI’s ChatGPT and Bing AI. Bard also outperformed these two when it came to a performance test.
Let’s look at what it has to say.
Me: Hi, Bard! I am writing an article for InvestorPlace.com about “7 Stocks to Buy Now That Can Make You Rich.” Can you help me with seven stock picks that fit the criteria?
Here’s what I got:
Bard: “Amazon is the world’s largest online retailer and a leader in cloud computing. The company is well-positioned to benefit from the continued growth of e-commerce and the cloud computing market.”
While AI algorithms like Bard do not provide thorough research and specific metrics about the business or the stock, I believe the argument for buying Amazon (NASDAQ:AMZN) is solid. Amazon has a solid foothold in the cloud computing industry, which has slowed down in recent months, but it is still among the fastest-growing sectors in IT. The AWS segment grew 16% year-over-year in Q1, down from 20% in Q4 last year. Overall revenue growth also reached near double-digit figures, and analysts expect ~12% growth here in 2024.
E-commerce may also be returning to a healthy growth trajectory after the post-Covid-19 correction. Amazon posted a 3% increase in online store sales, discounting foreign exchange fluctuations. I believe this segment will continue to accelerate in future years, mainly driven by the newer generations’ preference for online shopping. Morgan Stanley also expects the e-commerce growth to return to healthy levels.
Thus, AMZN is definitely a buy in my book at this price range. Most analysts think so too, with 37 “Buy,” 1 “Hold,” and no sell ratings, with a 34.4% upside potential by Apr. 2024.
Bard: “Tesla is a leading electric vehicle manufacturer. The company is growing rapidly and is poised to become a major player in the automotive industry. Tesla is also a leader in the development of self-driving cars.”
This may be an unpopular opinion with some, if not, many investors, but I would disagree with Bard’s pick. I believe investors should put a hold on buying Tesla (NASDAQ:TSLA) right now as the market is re-evaluating what the company is actually worth. Tesla’s earnings decline, even if it’s temporary, is not a good look for the company. In combination, the company’s price cuts have dragged down its margins, which is among the best factors that set it apart from other electric vehicle (EV) makers. Analysts also anticipate EPS to decline further to $3.44 in 2024, and that’ll inflate the earnings multiple even more.
All things considered, the stock’s valuation looks steep, and it won’t be improving anytime soon. Investors care less about volume and more about profits; thus, I see TSLA stock being much cheaper in the near future. Meanwhile, there are better deals in the market with much more upside potential, where analysts don’t have mixed feelings. This option just proves that not all AI stock predictions are a win.
Bard: “NVIDIA is a leading semiconductor company that is well-positioned for growth in the years to come. The company is a leader in the graphics processing unit (GPU) market, and it is also expanding into new areas such as artificial intelligence and autonomous driving.”
This option is would not make the top of my list for AI stock predictions either. Much like Tesla, NVIDIA’s (NASDAQ:NVDA) valuation seems too inflated, and investors should take a pass. Sure, machine learning algorithms have been remarkable so far in terms of what they can do, and NVIDIA dominates the AI chip industry. But that does not mean that it will remain this way forever.
I believe the AI growth story is only starting, and by the time these AI algorithms do start generating revenue, or even profits for that matter, companies like NVIDIA will likely have lots of competitors. It is a fabless chip maker, and companies like Advanced Micro Devices (NASDAQ:AMD) and Qualcomm (NASDAQ:QCOM) won’t have too much of a hard time catching up. In fact, Qualcomm’s AI chips are already beating NVIDIA’s when it comes to power efficiency.
Regardless, a stock up 102% year-to-date with a $714 billion market capitalization is too hot. The business’ financials are declining, and the speculation baked into NVDA makes it a risky and irrational buy. Avoid.
Bard: “Block is a leading financial technology company that is well-positioned for growth in the years to come. The company offers a variety of products and services, including Square Cash, Square Capital, and Square Terminal.”
Block (NYSE:SQ) seems more or less fairly valued if we consider the tough macroeconomic conditions on the horizon for late 2023. But if we’re looking at a multi-year timeframe, this is a solid pick since the downside risk is relatively low, trading below 2019 levels. Additionally, analysts have very bullish sentiments about the stock, with a $96.6 price target, reflecting 60% upside.
There are concerns about the Hindenburg report, but I believe the fears are overblown as the company’s financials justify its current valuation.
Bard: “PayPal is a leading digital payments company that is well-positioned for growth in the years to come. The company is a leader in the online payments market, and it is also expanding into new areas such as mobile payments and in-store payments.”
PayPal (NASDAQ:PYPL) is a better buy than Block, in my opinion, as it is a profit-generating company and enjoys worldwide recognition, and almost all vendors support it for transactions. In terms of growth though, PayPal lags behind as its revenue growth rate is 6.8% for the year, while Block’s growth for the same period is 14.3%. However, the gap in growth is forecast to shrink in the coming years as the room for growth shrinks for Block.
Analysts agree that PYPL has a similar upside potential to SQ, albeit slightly less. But that is worth it, considering the investigations Block is under.
Bard: “Shopify is a leading e-commerce platform that is well-positioned for growth in the years to come. The company is a leader in the small business e-commerce market, and it is also expanding into new areas such as enterprise e-commerce and international markets.”
Much like Amazon, I believe Shopify (NYSE:SHOP) has is an excellent due to the e-commerce sector’s continuing growth, but only in a multi-year timeframe. I believe it has appreciated enough to compensate for its earlier selloffs and is likely to trade sideways in this macroeconomic environment for at least the next few months.
The company’s sales have increased by 25.7% to $1.74 billion in Q4, showing strong momentum. It is expected to end 2023 with 19% growth before re-accelerating to 21% in 2024.
Still, I would reiterate that the upside potential here might be limited in the near term. Analysts see only a 5% upside in the next 12 months.
Meta Platforms (FB)
Bard: “Meta Platforms is a leading social media company that is well-positioned for growth in the years to come. The company is a leader in the social media market, and it is also expanding into new areas such as virtual reality and augmented reality.”
Meta Platforms (NASDAQ:META) has been a hotly debated stock in the past two years due to the company’s heavy expenditure on the metaverse. It has so far spent billions on the loss-making project, which has shaved hundreds of billions off META’s market cap.
Nowadays, it is more of a debate about whether or not the metaverse will be a successful project. But I think the strong underlying business should call for a buy at this range, making this a win.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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