Assessing the 3 Best Generative AI Stocks to Compete with Nvidia in 2024

The sheer magnitude of generative AI mania on Wall Street can be difficult to quantify, but for one of the industry’s star stocks, the age of the GenAI boom has been transformative.

Let’s try to make sense of the extent of the generative AI frenzy that had been a leading driver for growth throughout the S&P 500 in 2023.

According to a Market Intelligence review of S&P 500 transcripts, collective earning calls mentioning AI throughout the year grew 10 times that of 2022, spanning almost 2500 mentions in total.

There’s good reason for this. Bloomberg Intelligence recently suggested that the generative AI market could grow into a $1.3 trillion industry by 2032, representing a break-neck CAGR of 42%.

There’s tangible evidence that such pie-in-the-sky figures could be grounded in reality, too. For semiconductor manufacturer Nvidia, the growth the company experienced on Wall Street in 2023 stood at 239%. The stock shattered the $1 trillion market capitalization milestone for the first time last year and now stands comfortably above $1.5 trillion.

When zooming out to Nvidia’s market performance over the past five years the firm’s achievements appear all the more impressive. With over 1,600% growth recorded since 2019, the stock has become one of the major beneficiaries of the hype sweeping across Wall Street for the emerging technology.

Although Nvidia’s exponential growth isn’t exactly an anomaly given the widespread growth driven by the generative AI boom, the semiconductor leader stands as a key example of the magnitude of industry growth that those adopting the technology could achieve.

With this in mind, could another stock replicate Nvidia’s impressive rally in 2024? The answer to this could be determined by which tech giants move most decisively in adapting to the age of GenAI.

Looking to a GenAI M&A Supercycle

One of the key trends in the generative AI boom has been the emergence of innovative studios like OpenAI in the development of cutting-edge technologies.

Notably, the current star of the GenAI landscape is ChatGPT, a large language model (LLM) that’s accumulated around 180.5 million users to date. Owned by OpenAI, ChatGPT has formed the cornerstone of the generative AI gold rush.

While there’s much talk of an OpenAI initial public offering (IPO) at present, the company has received significant backing from Microsoft, with suggestions of the company committing $10 billion to the startup.

Rather than seeing innovative GenAI startups launch IPOs, it seems more likely that leading ventures will be acquired in a widespread gold rush for leading tech companies to add the landscape’s most promising players to their repertoire.

We’re already seeing evidence of the GenAI merger and acquisition supercycle taking place, with Databricks acquiring MosaicML for $1.3 billion and Thomson Reuters acquiring Casetext for $650 million last year.

It’s widely expected that M&A activity will continue to grow, particularly for artificial intelligence firms, into 2024 and this is likely to form a foundation for shaping the performance of leading companies in the industry throughout the year.

However, Maxim Manturov, head of investment research at Freedom Finance Europe, has warned that an acceleration in mergers and acquisitions shouldn’t be taken for granted by speculative investors.

While optimism surrounds the expectation of increased M&A activity in 2024, dealmakers will have to navigate a complex environment of economic, strategic and geopolitical factors,” Manturov notes.

“Success in this environment is likely to depend on prioritising strategic considerations, assessing the impact of global trends on business models and leveraging transactions to drive transformational initiatives.”

These complexities suggest that the generative AI market will be controlled by the most resourceful players in the industry in 2024 as economic headwinds continue to linger. But can stocks compete with Nvidia’s significant growth throughout the last year? Let’s look at three stocks that could be set to outperform the wider market:

1. Amazon (NASDAQ:AMZN)

\Amazon’s market capitalization weighs in at a remarkably similar value to Nvidia at $1.7 trillion, and the tech giant is also focused on building AI infrastructure at an enterprise level. The company is busy creating AI-based services for its Amazon Web Services (AWS) cloud computing platform in a move that’s likely to facilitate far greater growth.

With the announcement of Bedrock in September 2023, Amazon established a strong platform that enables clients to build and scale customizable AI models. While Bedrock is likely to face competition from other major tech firms like Microsoft and Alphabet as it grows, the natural links to AWS are certainly an advantage.

As for the stock itself, AMZN experienced an impressive rebound off late 2022 lows that hadn’t been seen since before the pandemic. With net sales increasing 14% to $170.0 billion in Q4 2023 compared to Q4 2022, the company’s growth is supported by strong fundamentals.

2. Alphabet (NASDAQ: GOOGL)

\Alphabet is one of the most advanced players in the generative AI landscape today. Having made preparations for the emergence of the technology over many years following the acquisition of the artificial intelligence research lab DeepMind in 2014, the technology has the potential to grow the company across numerous verticals, including autonomous vehicles.

Crucially, Alphabet launched its own rival to ChatGPT in Bard back in early 2023 and has been working to refine the technology in the months that followed.

Given how important Google is to Alphabet’s growth, the firm has a keen interest in harnessing the power of LLMs and generative AI tools to aid user queries and pioneer time-saving processes.

With gross revenue climbing 13% to $86.31 billion in Q4 2023, we’re likely to see much of Alphabet’s resources allocated to becoming a pioneer in the generative AI landscape, and the growth of Bard is likely to be at the forefront of this push to become a market leader in the field.

3. Apple (NASDAQ:AAPL)

\Apple has been an excellent performer in 2023 even despite the company avoiding the temptation to dive immediately into the generative AI furore on Wall Street.

Instead, Apple opted to focus on the launch of the Vision Pro headset in early 2024, but more analysts have begun to anticipate the iPhone manufacturer’s long-awaited entrance into the market later in the year with a future upgrade for the iOS operating system on the way.

Reports suggest that Apple is set to commit $1 billion per year to generative AI investments, and this is likely to manifest itself as software programs intent on mimicking the human ability to learn, understand patterns, and make predictions.

These innovations will significantly improve the functionality of the iPhone and ultimately plenty of other Apple products which could transform the company’s fortunes following a recent stock downgrade from Barclays analysts.

The Generative AI Boom May be Hard to Anticipate

At this stage, it’s important to highlight that generative AI is a young technology that’s still emerging, and as such, it can be difficult to anticipate how the boom will shape up.

The path from ideation to implementation will be a tricky one to navigate for many enterprises, particularly with costs remaining high across the semiconductor market.

With this in mind, there’s every chance that innovations could arrive from left field to make the technology more cost-effective or practical for users.

Despite this, it’s reasonable to anticipate that the tech landscape’s biggest players will be front and center as the generative AI revolution continues to dominate the sector.

Whether they ramp up their M&A credentials or work on bringing their own LLM rivals to market, the likes of Amazon, Alphabet, and Apple are likely to have a major say on how the industry grows throughout 2024.