This type of list is quite a bit different from our basic investment philosophy which is: attempt to identify the class of the field and get to know it.
In horse racing the class horse is the one all the other contending horses are aware of and wary of. Horses know.
In business and investing, listen to who the competitors hate and fear. A bit of the 'ol oderint dum metuant goes a long way toward finding winners.
From Insider Monkey, September 10:
In this article, we will present the 30 most important AI stocks according to BlackRock.
Artificial intelligence has been the buzzword around Wall Street for many months but a recent selloff in the technology sector has ignited fears of an AI bubble. Investors are looking towards experts to help them make better investment decisions. In a recent commentary on the AI market, as well as the macro conditions surrounding the economy, the investment titan highlighted multiple factors contributing to market volatility, including recession concerns, pre-US election jitters, and profit-taking. Despite these, the investment firm noted, US corporate earnings have been resilient, with the S&P 500 showing 13% growth in the second quarter of 2024, surpassing expectations. The AI sector remained a key theme of this growth, but BlackRock relented that investors were becoming cautious about the scale of AI spending by tech companies. In this environment, the investment firm recommended diversifying investments into energy, utilities, real estate, and resources tied to AI infrastructure.
Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.
Overall, the wealth wizard advocated for broadening investment exposure beyond US tech stocks, particularly into sectors benefiting from ongoing AI buildout, while remaining cautious about Japanese equities and US short-term bonds. In the weekly commentary, the advisory highlighted that the US economy appeared more resilient than anticipated, with broad-based earnings growth suggesting stability. However, inflation remained a concern, and BlackRock expects it to limit how much the Federal Reserve can cut interest rates in the medium term. The investment firm noted that markets were pricing in significant rate cuts, but expectations seemed overblown given persistent inflation pressures, especially from wage growth. The investment titan suggested looking to European markets for income opportunities and remaining underweight on short-dated US Treasuries in favor of medium-term maturities and quality credit.
The investment firm also underlined the broader market backdrop in the weekly commentary, noting that US stocks fell due to recession fears, with the S&P 500 experiencing its largest weekly drop in 18 months. Treasury yields also declined as investors priced in expected Fed rate cuts. The advisory, however, viewed these recession fears as overstated, pointing to US jobs data that showed slowing but steady employment growth. Analysts at the investment firm maintained that wage gains were unlikely to bring inflation back to the Fed’s 2% target in the near term but cautioned that the August Consumer Price Index (CPI) data would be crucial in determining inflation’s trajectory. A surge in immigration had contributed to easing wage inflation, according to the financial firm’s report, but the long-term labor supply trend would influence the Fed’s ability to adjust rates.
Read more about these developments by accessing Billionaire Stan Druckenmiller Is Betting On AI Infrastructure, Tobacco and Industrial Stocks and 10 Tech Stocks to Monitor Amid Market Volatility According to Bernstein Analyst.
Our Methodology
For this article, we selected AI stocks by consulting an investor note from prominent investment firm BlackRock. These stocks are also popular among hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Most Important AI Stocks According to BlackRock
30. Nu Holdings Ltd. (NYSE:NU)Number of Hedge Fund Holders: 59
Nu Holdings Ltd. (NYSE:NU) owns and runs a digital banking platform in Brazil, Mexico, Colombia, Cayman Islands, Germany, Argentina, the United States, and Uruguay. The stock has been performing on several metrics over the past few months. The user base of the firm continues to expand, reaching 100 million customers at the end of the first quarter of 2024. Revenue is also improving, growing a whopping 66% year-over-year in the first three months of the year. The net income during this period was in excess of $440 million, comfortably beating analyst expectations across Wall Street.
The first quarter results of Nu Holdings Ltd. (NYSE:NU) show that it has managed to increase the average monthly revenue per active user by 30% year-on-year, while maintaining the average monthly customer service costs below $1. The company has lots of room to grow as it is still only the fourth largest financial institution in Latin America. The company recently acquired Hyperplane, a Silicon Valley-based data intelligence company, to enhance artificial intelligence capabilities.
29. Robinhood Markets, Inc. (NASDAQ:HOOD)Number of Hedge Fund Holders: 38
Robinhood Markets, Inc. (NASDAQ:HOOD) operates as a financial services platform in the United States. Some of the most interesting AI use cases for the firm are in data analytics for trading insights and optimized trading experiences. In the former, the firm uses AI to process vast amounts of real-time market data to provide users with advanced insights, news updates, and trend analysis. This can include identifying market movements, stock price fluctuations, and opportunities for investors. In the latter, AI is used to enhance performance by improving the speed and accuracy of trade execution. By using machine learning algorithms, Robinhood can predict market liquidity and volatility, helping to optimize buy and sell orders.
Robinhood Markets, Inc. (NASDAQ:HOOD) has grabbed the attention of analysts on Wall Street due to popularity among retail traders. Barclays recently upgraded the stock to Equal Weight from Underweight with a price target of $20, up from $18. In an investor note, the advisory noted that over the past year, the business models at Robinhood had matured and while risks remained, there were also potential sales catalysts from new products and regulation, with valuations also starting to look more sensible.
28. Lemonade, Inc. (NYSE:LMND)Number of Hedge Fund Holders: 17
Lemonade, Inc. (NYSE:LMND) provides various insurance products through various channels in the United States, Europe, and the United Kingdom. The company uses AI to streamline and enhance various aspects of its operations, providing a more efficient and customer-friendly experience. Some of these include automated claims processing through AI bots, customer service and underwriting through AI-powered virtual assistants, and fraud detection via AI algorithms that analyze vast amounts of data to detect anomalies and patterns that might indicate fraudulent claims. The use of AI products helps the insurance firm reduce costs and maintain lower premiums for customers.
Lemonade, Inc. (NYSE:LMND) also makes use of customer data and behavior analytics to provide personalized recommendations and adjust pricing models based on individual risk profiles. The use of AI for this purpose improves speed, accuracy, and overall customer satisfaction while minimizing operational costs.
27. C3.ai, Inc. (NYSE:AI)...
....MUCH MORE
In investment management, much as it pains me to say, Larry Fink's outfit is the one the competitors hate and fear.
