Top 3 Artificial Intelligence Stocks to Consider for January

In January 2024, the stock market spotlight is on artificial intelligence (AI), a sector that shows great potential for growth. Despite its robust performance, AI technology is still evolving, with even greater opportunities expected in 2025. This article focuses on three AI stocks to consider investing in this month.

1. Nvidia

Nvidia (NVDA) has been a major player in the AI revolution. The company's revenue has surged dramatically over the past two years. In the fiscal year 2024, Nvidia's revenue increased by 125%, and projections for fiscal year 2025 indicate that revenue may more than double.

Nvidia's graphic processing units (GPUs) are crucial for AI development because they offer the high processing speed necessary for training large language models (LLMs) and AI tasks. They hold a dominant 90% market share in the GPU market, outperforming competitors like Advanced Micro Devices due to the advantages of its CUDA software platform, which simplifies the programming of GPUs for various AI applications.

Investment in AI infrastructure is rapidly increasing. As LLMs demand more power for training, Nvidia's largest customer, Microsoft (MSFT), has committed to spending around $80 billion this year on AI data centers, with a significant portion allocated for GPUs. Given the ongoing rise in capital expenditures from major clients, Nvidia has ample room for growth.

Despite strong stock performance, Nvidia is trading at a forward price-to-earnings (P/E) ratio of approximately 31.5 based on analyst forecasts for 2025 and has a price/earnings-to-growth (PEG) ratio of 0.98, indicating it may be undervalued.

2. Microsoft

Microsoft is also making substantial investments in AI infrastructure, particularly through its cloud computing platform, Azure. Recently, Microsoft reported a remarkable 33% revenue growth in Azure, which has seen its OpenAI usage double in six months. Azure operates on a consumption model, allowing clients to build their AI applications and agents, increasing the use of its data analytics services.

Although Azure's growth is impressive, it faces some capacity challenges. Microsoft anticipates that Azure's revenue growth will enhance in the latter half of its fiscal year due to increased capacity available from previous expenditures. The company is investing heavily in global data center development to satisfy rising demand.

Aside from cloud services, Microsoft has a promising future in AI software. Its AI copilots, integrated into the Microsoft 365 suite of productivity tools, offer features like organizing emails, creating presentations from natural language prompts, and executing Python commands in Excel with simple requests. Available for a subscription fee of $30 per month, these AI tools are expected to boost productivity and drive growth for Microsoft.

With a current P/E ratio of about 32.5, Microsoft's stock is considered reasonably priced.

3. Salesforce

Salesforce (CRM) is setting its sights on becoming a leader in agentic AI, which represents the next stage of AI evolution. While generative AI allows users to create content through prompts, agentic AI can autonomously execute tasks, like planning a vacation by managing travel bookings, accommodations, and more.

A long-standing leader in customer relationship management (CRM) solutions, Salesforce launched its agentic AI platform called Agentforce in October. The platform has shown early signs of success, with over 1,000 teams adopting it shortly after launch. Agentforce enables users to customize AI agents without the need for coding, and it provides pre-built agents for various tasks such as sales, marketing, and customer service.

The company predicts that it will have 1 billion Agentforce AI agents implemented by the end of fiscal 2026. With a cost of $2 per conversation for this service, Salesforce sees significant growth potential ahead.

Salesforce's stock trades at a reasonable valuation of 29 times its fiscal 2026 earnings and boasts a PEG ratio of 0.8, suggesting it is a solid investment option.

There are no disclosed positions regarding the stocks mentioned, and no endorsements are being made. Research and seek professional guidance before investing in stock markets.

stocks, AI, investment