These 2 Under-The-Radar AI Stocks Could Outperform In 2024 – Unity Software (NYSE:U)

New AI Beneficiaries Expected to Lead the Way in 2024

After a year of remarkable gains in the Magnificent 7 mega-cap tech stocks, analysts are predicting that new names will take the lead in 2024. Gene Munster, from Deepwater Asset Management, agrees with this consensus and has identified two underappreciated AI beneficiaries that could experience significant growth this year.

In 2023, the Magnificent 7, including tech giants like Nvidia and Apple, led the markets to higher levels with impressive gains. Nvidia Corp was the best performer of the group, with gains of over 235%, while Apple Inc experienced a jump of nearly 50% in 2023, despite being the laggard among the mega caps.

However, moving into 2024, most analysts, including Munster, expect the Magnificent 7 to take a back seat to the rest of the market. Munster believes that the real performance will come from companies with a market capitalization of less than $20 billion. He predicts a “seismic shift” in the AI industry, which will benefit smaller market cap companies and ultimately lead the Russell 2000 to outperform the S&P 500 in 2024.

Munster recommends a “dumbbell approach” for investors, where they maintain exposure to the mega caps while also investing in underappreciated AI names like Unity Software Inc and Etsy Inc. Unity Software, known for game development, is starting to work on building spatial environments using AI technology, which could boost the stock. Etsy, an e-commerce company, is expected to implement AI to help create more creative products, which should be favorable for the stock.

On the other side of the barbell, Munster’s top picks in the Magnificent 7 for 2024 are Alphabet Inc and Apple. He believes that tech stocks are heading into a three- to five-year bull run, but he is not betting on the usual suspects to lead the charge in 2024.

At publication time, Unity shares were down 5.5% at $38.62, while Etsy shares were down 0.3% at $80.73. It remains to be seen how these stocks will perform throughout the year.

Overall, analysts and experts are anticipating a shift in the tech industry in 2024, with new AI beneficiaries taking the lead. Investors are advised to consider a diversified approach, investing in both mega caps and underappreciated AI names, to potentially capitalize on the expected growth in this sector.

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