Here's My Choice for the Best Artificial Intelligence (AI) Stock to Buy Now (It's Not NVIDIA)

Here’s My Choice for the Best Artificial Intelligence (AI) Stock to Buy Now (It’s Not NVIDIA)

Tech stocks like Kinaxis (TSX:KXS) are leading the way forward in AI.

Andrew Button

Author Bio

Andrew “A.J.” Button is a financial writer with a longstanding interest in value investing and international markets. He began investing at a young age, building a portfolio of dividend stocks to help pay for university. After stepping away from investing for a time, he rediscovered his passion in 2019 when he began working as a freelance financial writer. Since then, Andrew has built a diversified investment approach spanning Canadian, U.S., and international equities, as well as guaranteed investment certificates (GICs) and money market funds. He is particularly interested in international stocks, drawn to their dividend potential and long-term growth opportunities, while maintaining an interest in Canadian businesses. Before joining The Motley Fool, Andrew worked as a freelance copywriter specializing in financial services. He continues to write for financial publications and share his thoughts on stocks through social media.

Education and Professional Credentials

Canadian Securities Course (CSC)
CFA Program Level I examination completed

Areas of Expertise

Value investing, Canadian equities, U.S. stocks, international equities, dividend investing, long-term investing, GICs, money market funds, and portfolio diversification.

Social Media Profiles

Published June 27, 2024 11:45 am EDT

When you hear artificial intelligence (AI) stocks, it’s hard not to think of NVIDIA (NASDAQ: NVDA). The supplier of chips to generative AI software companies, it has made more money off AI than any other company.

Most people would agree that NVIDIA has been growing by leaps and bounds thanks to generative AI. What’s less commonly mentioned is that the company’s stock has gotten very expensive because of all this growth. Trading at 70 times earnings, much of NVIDIA’s future growth is already being paid for. Investors may be better off looking for their “AI money” elsewhere. Accordingly, In this article, I will share my top pick for best AI technology stock that isn’t NVIDIA.

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence. — Source: Getty Images

Alphabet

Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), better known as “Google,” is my pick for the best AI stock to buy now. This was a tough choice because Taiwan Semiconductor Manufacturing, another portfolio holding of mine, is just as strong as Alphabet while being cheaper. However, TSM faces certain risks stemming from its geographic proximity to China (e.g., possible invasion) that make it just slightly less desirable than Alphabet in my eyes.

What is it that makes Alphabet stock so strong?

First, it is a leader in AI research, having invented the “transformer” method that made ChatGPT such a success.

Second, Alphabet has been using AI in products like YouTube and Google Search for years — albeit in ways that aren’t easily discernible as “AI” to the general public.

Third, its AI applications (e.g., search summaries, generative AI) are proving fairly popular — not as popular as Microsoft/OpenAI’s offerings for the time being, but fairly popular. In February, Alphabet’s Gemini was rated the sixth most popular AI app by Euro News.

Fourth and finally, Alphabet is a high-moat stock, meaning that it is protected from competition. Its “moat sources” include network effects, Android-Google integration and high brand recognition.

What about Canadian AI stocks?

If you’re reading all this talk about NVIDIA and Google, you might wonder if there are Canadian AI stocks worth investing in, too. In fact, there are.

My personal pick would be Kinaxis (TSX: KXS). It’s a supply chain management software company that develops the popular RapidResponse supply chain management app.

In RapidResponse, users can keep track of all vital supply chain variables: raw inputs, inventory, manufacturing tools, customer buying patterns — you name it. Kinaxis has been developing software that lets companies do these kinds of things for decades. Now, thanks to AI, RapidResponse does its thing better and faster than before. For example, RapidResponse’s AI can identify trends in customer buying patterns that allow companies to predict how much inventory they need on a specific date. It’s a pretty unique use case — one that KXS’s competitors can’t match.

Whether you’re investing in chips, software, or cloud services, there are plenty of ways to get a piece of the AI pie. NVIDIA is just one of them. It’s the obvious winner in the AI world at the moment, but the two stocks mentioned in this article merit a mention as well.