Rise Of AI-Linked Stocks: Nvidia, Meta, Symbotic, Others Rally By 100-200% YTD; What's The Deal In Long Run?

Nearly nine months have passed of 2023, and the year has been broadly volatile for the equities market but that's not the case for stocks that have the essence of artificial intelligence (AI) as they witness more money inflows. Either be billionaire Mark Zuckerburg's Meta Platform or the AI world leader Nvidia, these stocks have given triple-digit returns year-to-date, becoming multibaggers. The adoption of generative AI makes these stocks even more attractive. Big deal wins, product launches and sky-high earnings especially for Nvidia have only boosted sentiments. AI is seen as the game changer for transforming corporate operations, but will the rally in AI-linked stocks will continue in the long run?

If you talk about the AI wave, the word Nvidia will cross your mind. This US-based tech player is an AI behemoth and has skyrocketed by over 190% so far in 2023. In the second quarter of 2023, the company earned a record revenue of $13.51 billion rising by 101% YoY, while net income came in at $6.188 billion registering a breathtaking 843% YoY growth. Demand for Nvidia increases due to its booming AI business as industries are transitioning to adopt generative AI.

Even in India, Nvidia's footprint has started to rise as the chipmaker ties with giants like Reliance Industries, Tata Group, and the latest to be Infosys for transforming AI infrastructure in the country.

Then comes Meta which was formerly known as Facebook! This popular social media giant of Zuckerburg is stepping up its game with AI chatbots, and investors have cheered over the development. Meta stock has rallied nearly 140% so far in 2023.

Another Nasdaq listed, Symbotic Inc is also among the AI-listed stocks to give robust returns by over 155% year-to-date. What makes Symbotic unique is its end-to-end automation services consisting of fully autonomous robots with advanced vision and sensing capabilities to address global supply-chain complexities. Symbiotic systems service more than 2,600 stores for some of the world's largest retailers, grocers and wholesalers, including Walmart, Albertsons and C&S Wholesale Grocers. It recently even partnered with SoftBank to create a joint venture to address the more than $500 billion annual warehouse-as-a-service market opportunity.

Moving on, California-based C3.ai Inc listed on NYSE has also zoomed by over 113% in 2023 so far. C3 AI provides over 40 turnkey Enterprise AI applications that meet the business-critical needs of global enterprises in manufacturing, financial services, government, utilities, oil and gas, chemicals, agribusiness, defense and intelligence, and more. Companies like Shell, Engie, Koch, and Baker Hughes, apart from the US Air Force have joined hands with C3.ai for digital transformation.

Other AI-listed stocks have also given double-digit returns YTD. These are -- search engine Google's parent Alphabet Inc. whose shares rallied over 44%, and Bill Gates' Microsoft with its adoption of AI has also zoomed by over 30%. Also, stocks like Arista Networks jumped over 47%, Helix Energy Solutions Group climbed 59%, and PROS Holdings advanced by 20%. Stocks listed in other countries also recorded stellar upsides like Toronto-listed ATS Corp stock advanced over 36% YTD, while London-listed Relx PLC gained 20%, Hong Kong-listed Baidu Inc up by 14%, and Taiwan Semiconductor Manufacturing Co has also jumped over 15%.

These AI-listed stocks are not just bringing smoother and more efficient methods for running a business, they are also making many investors rich.

Explaining the reason behind the upsurge in AI-listed stocks, Michael Cembalest the Chairman of Market and Investment Strategy for J.P. Morgan Asset Management in his famous "Eye on the Market" report dated September 26, said, "The major US equity catalyst this year has been the rise in AI-linked stocks. They've come off the boil since July, but there's still a lot of optimism regarding AI's impact on growth, profits and productivity."

After grading GPT 4.0 based on its responses to 71 questions from the Eye on the Market, Cembalest in the report highlighted that the results were mixed, and he quoted "That's how I view AI's long-run impact on equity markets" adding, "better than recent investment fads but not the transformational productivity shock that its most vocal adherents expect."

Recently, Emkay Global hosted R. Srikrishna, CEO, of Hexaware, to gauge technology demand trends and growth outlook. As per Srikrishna, Gen AI is the new digital and is likely to be a net positive for the industry over the medium term. He expects the business impact from the Gen AI cycle to be quicker compared with previous technology cycles.

Also, earlier this month, Emkay in another research note highlighted that all companies, without any exception, have highlighted the potential of AI to transform the way enterprises operate. AI is now part of every company-client discussion. Companies have already jumped on the AI bandwagon and started embedding AI as part of their offerings.

Emkay's note said, " We believe the initial impact of AI will be felt in productivity improvement with use cases like code generation, content creation, and contact centers seeing initial attraction. Adoption of AI continues to remain in
the nascent stage, with enterprises still in the process of 'experimenting' and building PoC for use cases."

It added, " We believe enterprises will scale up the adoption of generative AI over time and IT companies are likely to play a major role in this process, with revenue possibly starting to accrue as early as in the next couple of quarters. As in the past, we believe the 'real benefits' of AI should start to accrue only post this transition process, which is still a few years away. We believe, over the longer term, AI will have a net positive impact; however, in the interim, it may have a deflationary impact due to better productivity."