7 Best-Performing AI Stocks for December 2024

AI stocks have seen tremendous growth in 2024. NVIDIA and SoundHound in particular have hogged much of the spotlight for their massive spikes in value.

And while there's been some speculation that the hype around AI may be overblown, or that geopolitical issues could stymie semiconductor development that's critical to AI's success, NVIDIA continues to outpace competitors by no small margin.

7 best-performing AI stocks

Here are the seven best-performing stocks in the Indxx Global Robotics & Artificial Intelligence Thematic Index, ordered by one-year returns. This list is updated weekly.

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SoundHound AI Inc. (SOUN)

SoundHound AI creates voice-based AI products, such as a voice assistant for restaurants that allows customers to place orders, ask about hours and create reservations. In addition to the food service industry, SoundHound creates products for the automotive and hospitality sectors as well. The company boasts an impressive client list, including Hyundai, Pandora, KrispyKreme, White Castle, Toast and Square.

NVIDIA Corp (NVDA)

NVIDIA started working on 3D graphics for multimedia and gaming companies in 1993. NVIDIA began creating AI applications all the way back in 2012. And today, NVIDIA continues to be at the forefront of AI and is developing software, chips and AI-related services.

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Procept BioRobotics Corp

Procept BioRobotics creates medical robotics solutions for urology. The company offers two robotics systems, Aquablation therapy, which offers an alternative to surgery, and AquaBeam, a heat-free robotic therapy to treat symptoms due to benign prostatic hyperplasia.

What are AI stocks?

AI stocks are shares of companies that work in the artificial intelligence space. There are many applications for AI, and thus a large variety of AI stocks: Some AI companies create voice recognition software. Others create pilotless aircraft.

According to Haydar Haba, the founder of Andra Capital, a venture capital firm that invests in AI companies there are several publicly traded companies that have substantial AI interests and are poised to benefit from the growth of the industry.

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AI stocks tend to fall into one of two categories: blue-chip technology companies that have invested in or partnered with AI developers, and small, experimental companies that are completely focused on AI development.

Shares of small AI developers might seem like the most “direct” investments in AI, but Michael Brenner, a research analyst who covers AI for FBB Capital Partners, says they’re not necessarily the best AI investments.

“Large language models require a tremendous amount of data and a huge amount of capital to put together,” Brenner says.

Brenner notes that small companies may develop innovative new models on their own, but eventually they will have to partner with a bigger company that has more infrastructure in order to run those models at a commercial scale.

“So far, we’re sticking with more of the mega-cap tech companies,” Brenner says, referring to FBB Capital Partners’ AI portfolio.

How to invest in AI stocks

If you're very new to stock trading and want to invest in AI stocks, the first step is to open a brokerage account.

From there you'll need to decide what kind of AI stock exposure you want. Individual AI stocks can potentially offer high returns, but require taking on a lot of risk, upfront expense and research work.

Another option is to invest in AI stocks via pooled exchange-traded funds that focus on AI.

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How to find AI ETFs

Haba said investors can also get exposure to AI stocks through exchange-traded funds that invest in a basket of companies involved in AI development and implementation.

There are several AI stock indexes — like the Indxx Global Robotics & Artificial Intelligence Thematic Index and the Nasdaq CTA Artificial Intelligence & Robotics Index — which are tracked by ETFs.

You can also find AI ETFs in an ETF screener by searching for “artificial intelligence,” “machine learning” or “AI,” but make sure to thoroughly research any ETF you find this way.

Some ETFs that have “AI” in their name invest in AI-linked companies. But others are diversified ETFs that use AI-powered trading, and are not necessarily invested in AI stocks.

» Check out the best AI ETFs

Could we be in an AI bubble?

In early 2023, some small companies have seen rapid increases in their stock prices after being mentioned in any kind of AI-related news. In January 2023, for example, BuzzFeed (BZFD) saw its stock price soar more than 85% the day after the publication of a news report about a partnership with OpenAI to develop an AI-powered article writer.

Haba said that there are some signs investors may be overenthusiastic about the potential of AI right now.

“AI has been used as a buzzword to drive share price premiums, but companies have not always demonstrated usage of cutting-edge techniques,” he said.

“In the private markets, we are seeing hundreds of millions of dollars flow into ‘AI’ companies that have no product market fit. While investors are justifying such investments based on growth potential, it remains unclear whether that potential can or will ever be monetized,” Haba said.

Brenner also acknowledges that some individual AI-linked companies have seen their valuations increase sharply without a big change in their business fundamentals.

However, Brenner doesn’t think that the current surge of interest in AI amounts to a bubble, because many indexes of technology stocks are still below their previous highs.

“At macro-level, it’s hard to say we’re in a bubble, because we’re not at an all-time high,” Brenner says.

Should you invest in AI stocks?

Investors should think carefully before buying individual stocks or narrowly focused ETFs. Targeted investments can be riskier than broad investments, such as S&P 500 index funds, which have a long-term average annual return, not accounting for inflation, of about 10%.

One guideline that can help limit that extra risk is to devote no more than 10% of your overall portfolio to individual stocks.

But if you’re financially secure enough to buy individual stocks, Brenner says AI stocks are worth considering.

“I think retail investors should be thinking about how machine learning is going to impact the stocks they own,” he says.

“For individual investors looking at individual stocks in their 401(k)s, if they can weather the volatility of individual stocks, investing in AI-related companies as part of a diversified portfolio could make sense,” Brenner says.

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