Machine learning is ushering in an era once imagined only in novels. Machine learning is the reason behind the wondrous technologies like almost flawless Google search results, self-driving cars, AI, robotics and technology-based healthcare systems.
Machine learning is a technological phenomenon that has steadily been gaining headway across the globe. In 2017, the global market for machine learning was worth about $1.58 billion already, and that number is expected to grow to $20.83 billion by 2024, growing at a CAGR of 4.06%, according to Forbes.
A Deloitte report has mentioned that machine learning is an excellent global opportunity for current investments and future growth, citing a survey conducted by MIT Technology Review where out of 375 leading businesses in more than 30 countries, about 60% of the respondents were already well on their way in their implementation of machine learning and AI strategies. Deloitte has also mentioned that investment returns on matching learning projects in the first year are mostly 2-5 times the cost of the project, which is typically between hundreds of thousands of dollars to millions. As such, machine learning stocks like Alphabet Inc. (NASDAQ: GOOG), Amazon.com, Inc. (NASDAQ: AMZN), Microsoft Corporation (NASDAQ: MSFT), and Apple Inc. (NASDAQ: AAPL) can be considered good investment options.
Investing is becoming difficult by the day, even for the smart money. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points. We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Without further ado, let's look at the 10 best machine learning stocks to invest in. The stocks added to our list below were selected on the basis of hedge fund sentiment, analysts' ratings, fundamentals, and growth potential based on core business strengths.
Best Machine Learning Stocks to Invest In
10. International Business Machines Corporation (NYSE: IBM)
Number of Hedge Fund Holders: 41
International Business Machines Corporation (NYSE: IBM) is a provider of integrated solutions and services across the world. The company offers software for vertical and domain-specific solutions, and also researches advanced algorithms and machine learning, alongside providing other related products and services. It ranks 10th on our list of the best machine learning stocks to invest in.
This April, Credit Suisse raised its price target on International Business Machines Corporation (NYSE: IBM) from $160 to $165, keeping an Outperform rating on the shares in light of the company's positive quarterly results.
In the first quarter of 2021, International Business Machines Corporation (NYSE: IBM) had an EPS of $1.77, beating estimates by $0.12. The company's revenue was $17.73 billion, up 0.90% year over year and beating estimates by $431.53 million. International Business Machines Corporation (NYSE: IBM) has gained 10.52% in the past 6 months and 13.18% year to date.
As of the end of the first quarter of 2021, 28 hedge funds out of the 866 tracked by Insider Monkey held stakes in International Business Machines Corporation (NYSE: IBM) worth roughly $1.35 billion. This is compared to 51 hedge funds in the previous quarter with a stake value of about $998 million.
9. QUALCOMM Incorporated (NASDAQ: QCOM)
Number of Hedge Fund Holders: 73
QUALCOMM Incorporated (NASDAQ: QCOM) is a technology company working to develop and commercialize foundational technologies and products for mobile devices and wireless products. The company's QSI segment deals with artificial intelligence, among other technology sectors, and it ranks 9th on our list of the best machine learning stocks to invest in.
This June, QUALCOMM Incorporated (NASDAQ: QCOM) was initiated at KGI Securities with an Outperform rating and a $175 price target.
In the fiscal second quarter of 2021, QUALCOMM Incorporated (NASDAQ: QCOM) had an EPS of $1.90, beating estimates by $0.23. The company's revenue was $7.92 billion, up 52.23% year over year and beating estimates by $304.53 million. QUALCOMM Incorporated (NASDAQ: QCOM) has also gained 55.43% in the past year.
As of the end of the first quarter of 2021, 73 hedge funds out of the 866 tracked by Insider Monkey held stakes in QUALCOMM Incorporated (NASDAQ: QCOM) worth roughly $2.76 billion. This is compared to 85 hedge funds in the previous quarter with a stake value of about $2.72 billion.
ClearBridge Investments, an investment management firm, mentioned QUALCOMM Incorporated (NASDAQ: QCOM) in its first-quarter 2021 investor letter. Here's what they said:
“Within IT, we have also increased exposure to a cyclical semiconductor industry currently working through a severe supply shortage due to several years of capacity reductions, COVID-19 shutdowns and one-off production delays as well as demand resilience in areas like autos and smartphones. The main risk for semiconductors is short-term revenue pressure until capacity catches up with demand, which hurt wireless chipmaker Qualcomm. Looking past current constraints, we expect the industry to see a strong second half and solid growth in 2022.”
8. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM)
Number of Hedge Fund Holders: 76
Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) is a manufacturer of integrated circuits and semiconductors. The company has also added AI, machine learning, expert systems, and advanced algorithms to its intelligent manufacturing environment. It ranks 8th on our list of the best artificial intelligence stocks to invest in.
This June, Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) was initiated with a Buy rating at Argus, which also has a $150 price target on the company's shares. Analyst Jim Kelleher commented that the company is expected to have unprecedented growth in the coming years, in light of the growing demand for IT and related products.
In the first quarter of 2021, Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) had an EPS of $0.96, beating estimates by $0.03, and the company's revenue was $12.79 billion, up 24.03% year over year and beating estimates by $101.81 million. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) has gained 4.57% in the past 6 months and 11.62% year to date.
As of the end of the first quarter of 2021, 76 hedge funds out of the 866 tracked by Insider Monkey held stakes in Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) worth roughly $10.87 billion. This is compared to 72 hedge funds in the previous quarter with a stake value of about $11.84 billion.
ClearBridge Investments, an investment management firm, mentioned Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) in its first-quarter 2021 investor letter. Here's what they said:
“While we maintain high conviction in many of the emerging and secular growth names in the portfolio,– we continue to hold Taiwan Semiconductor, the world’s largest foundry. Semiconductor shortages, caused by a combination of years of capacity reductions, COVID-19 lockdowns and better than expected rebounds in industries like autos, will cause short-term revenue pressure but are allowing companies to exert pricing power as they race to replenish depleted inventories.”
7. NVIDIA Corporation (NASDAQ: NVDA)
Number of Hedge Fund Holders: 80
NVIDIA Corporation (NASDAQ: NVDA) is a visual computing company operating worldwide. The company also operates and provides machine learning and analytics software libraries, and ranks 7th on our list of the best machine learning stocks to invest in.
This July, Truist raised its price target on NVIDIA Corporation (NASDAQ: NVDA) from $768 to $910, keeping a Buy rating on the company's shares. Analyst William Stein commented that NVIDIA Corporation (NASDAQ: NVDA) is a leader in parallel computing for AI, something that will lead to structural growth in the company.
In the fiscal first quarter of 2022, NVIDIA Corporation (NASDAQ: NVDA) had an EPS of $3.66, beating estimates by $0.38. The company's revenue was $5.66 billion, up 83.80% year over year and beating estimates by $252.24 million. NVIDIA Corporation (NASDAQ: NVDA) has gained 50.69% in the past 6 months and 55.50% year to date.
As of the end of the first quarter of 2021, 80 hedge funds out of the 866 tracked by Insider Monkey held stakes in NVIDIA Corporation (NASDAQ: NVDA) worth roughly $6.204 billion. This is compared to 88 hedge funds in the previous quarter with a stake value of about $8.69 billion.
SaltLight Capital Management, an investment management firm, mentioned NVIDIA Corporation (NASDAQ: NVDA) in its first-quarter 2021 investor letter. Here's what they said:
“In this letter, we highlight one ‘bet’: a follow-up on our December letter where we wrote extensively about our broad thesis about the Artificial Intelligence opportunity. We present a case study of NVIDIA who we believe is delightfully positioned to capture this opportunity.
Unfortunately, for some readers, again this letter tends to overflow in technical IT jargon. Part of our mission is to educate co-investors about our thinking over the long term. We attempt our best to moderate complexity, however, sometimes the technical analysis is the only way to reinforce the thesis.
Encouragingly, we continue to find global opportunities to deploy capital. We remain cautious on South Africa and believe that, overall, distribution of outcomes is skewed to the downside despite the recent mean reversion in share prices. We believe that we own the best of the South African opportunity set. Therefore, the majority of incremental capital in the fund is being deployed into global opportunities.
6. Intel Corporation (NASDAQ: INTC)
Number of Hedge Fund Holders: 83
Intel Corporation (NASDAQ: INTC) is a manufacturer of essential technologies for the cloud and smart and connected devices for consumers across the world. The company also offers an AI developer ecosystem for the provision of end-to-end software resources, and it ranks 6th on our list of the best machine learning stocks to invest in.
This July, Citigroup commented on Intel Corporation (NASDAQ: INTC), saying that the company's outsourcing of chips to Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) may prove to be a positive development as it may help Intel Corporation (NASDAQ: INTC) regain market share. The firm keeps a Neutral rating on the shares with a $60 price target.
In the first quarter of 2021, Intel Corporation (NASDAQ: INTC) had an EPS of $0.82, missing estimates by -$0.25, the company's revenue was $18.57 billion, beating estimates by $620.78 million. Intel Corporation (NASDAQ: INTC) has gained 0.23% in the past 6 months and 14.92% year to date.
As of the end of the first quarter of 2021, 83 hedge funds out of the 866 tracked by Insider Monkey held stakes in Intel Corporation (NASDAQ: INTC) worth roughly $7.61 billion. This is compared to 72 hedge funds in the previous quarter with a stake value of about $5.57 billion.
5. Micron Technology, Inc. (NASDAQ: MU)
Number of Hedge Fund Holders: 100
Micron Technology, Inc. (NASDAQ: MU) is a manufacturer of memory and storage products for sale across the globe. The company has also introduced its Micron Deep Learning Accelerator technology, cementing its presence in the machine learning sector. It ranks 5th on our list of the best machine learning stocks to invest in.
This July, Citigroup analyst Christopher Danely raised his financial year 2021 and 2023 estimates for Micron Technology, Inc. (NASDAQ: MU) in light of the company’s quarterly reports exceeding expectations. Danely also reiterated a Buy rating and the firm’s $135 price target on the company’s shares.
In the fiscal third quarter of 2021, Micron Technology, Inc. (NASDAQ: MU) had an EPS of $1.88, beating estimates by $0.16. The company’s revenue was $7.42 billion, up 36.48% year over year and beating estimates by $153.35 million. Micron Technology, Inc. (NASDAQ: MU) has also gained 59.54% in the past year.
As of the end of the first quarter of 2021, 100 hedge funds out of the 866 tracked by Insider Monkey held stakes in Micron Technology, Inc. (NASDAQ: MU) worth roughly $7.62 billion. This is compared to 100 hedge funds in the previous quarter with a stake value of about $8.14 billion.
Bonsai Partners mentioned Micron Technology, Inc. (NASDAQ: MU) in its first-quarter 2021 investor letter. Here‘s what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
4. Apple Inc. (NASDAQ: AAPL)
Number of Hedge Fund Holders: 127
Apple Inc. (NASDAQ: AAPL) is a technology company famous for its iPhone line. Apple products are fitted with hardware for machine learning tasks to enhance user experience. The company ranks 4th on our list of the best machine learning stocks to invest in.
This July, JP Morgan raised its price target on Apple Inc. (NASDAQ: AAPL) shares from $165 to $170, keeping an Overweight rating on the stock. In June, Wedbush also kept its Outperform rating on Apple Inc. (NASDAQ: AAPL) shares with a price target of $185.
In the fiscal second quarter of 2021, Apple Inc. (NASDAQ: AAPL) had an EPS of $1.40, beating estimates by $0.41, and the company’s revenue was $89.58 billion, up 53.63% year over year, and beating estimates by $12.30 billion. Apple Inc. (NASDAQ: AAPL) has gained 11.56% in the past 6 months and 12.84% year to date.
As of the end of the first quarter of 2021, 127 hedge funds out of the 866 tracked by Insider Monkey held stakes in Apple Inc. (NASDAQ: AAPL) worth roughly $130 billion. This is compared to 146 hedge funds in the previous quarter with a stake value of about $142 billion.
3. Alphabet Inc. (NASDAQ: GOOG)
Number of Hedge Fund Holders: 185
Alphabet Inc. (NASDAQ: GOOG) is a provider of online advertising services in the US, Europe, Middle East, Africa, Asia Pacific, Canada, and Latin America. It is the parent company of Google and uses AI and deep learning in almost all its operations, including in the running of the Google search engine, Google ads, Maps, and other areas. The company ranks 3rd on our list of the best machine learning stocks to invest in.
This July, Roth Capital analyst Darren Aftahi reiterated the firm’s Buy rating on Alphabet Inc. (NASDAQ: GOOG) shares, alongside the $115 price target they set on it.
In the first quarter of 2021, Alphabet Inc. (NASDAQ: GOOG) had an EPS of $26.29, beating estimates by $10.63, and the company’s revenue was $55.31 billion, up 34.39% year over year and beating estimates by $3.62 billion. Alphabet Inc. (NASDAQ: GOOG) has gained 49.56% in the past 6 months and 51.82% year to date.
As of the end of the first quarter of 2021, 185 hedge funds out of the 866 tracked by Insider Monkey held stakes in Alphabet Inc. (NASDAQ: GOOG) worth roughly $24.5 billion. This is compared to 179 hedge funds in the previous quarter with a stake value of about $21.9 billion.
2. Amazon.com, Inc. (NASDAQ: AMZN)
Number of Hedge Fund Holders: 243
Amazon.com, Inc. (NASDAQ: AMZN) is a technology and e-commerce giant operating across the globe. The company makes use of machine learning and AI to aggregate and analyze purchasing data on products to forecast demand, and to accomplish a range of other tasks as well. It ranks 2nd on our list of the best machine learning stocks to invest in.
This June, Piper Sandler analyst Thomas Champion reiterated an Overweight rating on Amazon.com, Inc. (NASDAQ: AMZN) shares, alongside a $4,000 price target. Champion mentioned that Amazon Prime Day sales saw a 13% increase year over year as well.
In the first quarter of 2021, Amazon.com, Inc. (NASDAQ: AMZN) had an EPS of $15.79, beating estimates by $6.15. The company’s revenue was $108.52 billion, up 43.82% year over year and beating estimates by $3.89 billion. Amazon.com, Inc. (NASDAQ: AMZN) has gained 16.43% in the past 6 months and 15.68% year to date.
As of the end of the first quarter of 2021, 243 hedge funds out of the 866 tracked by Insider Monkey held stakes in Amazon.com, Inc. (NASDAQ: AMZN) worth roughly $50.4 billion. This is compared to 273 hedge funds in the previous quarter with a stake value of about $51.3 billion.
1. Microsoft Corporation (NASDAQ: MSFT)
Number of Hedge Fund Holders: 251
Microsoft Corporation (NASDAQ: MSFT) is one of the biggest technology companies operating globally, with machine learning and AI being a vital part of most of its products, include Bing, Microsoft Office, Windows, and even Xbox games. The company ranks 1st on our list of the best machine learning stocks to invest in.
This June, Jefferies analyst Brent Thill raised his price target on Microsoft Corporation (NASDAQ: MSFT) shares from $290 to $310, keeping a Buy rating on the stock as well.
In the fiscal third quarter of 2021, Microsoft Corporation (NASDAQ: MSFT) had an EPS of $1.95, beating estimates by $0.17. The company’s revenue was $41.71 billion, up 19.09% year over year and beating estimates by $852.09 million. Microsoft Corporation (NASDAQ: MSFT) has gained 29.84% in the past 6 months and 29.04% year to date.
As of the end of the first quarter of 2021, 251 hedge funds out of the 866 tracked by Insider Monkey held stakes in Microsoft Corporation (NASDAQ: MSFT) worth roughly $58.9 billion. This is compared to 258 hedge funds in the previous quarter with a stake value of about $52.8 billion.
