This AI Stock Has Generated 60 Times More Returns Than Microsoft, Alphabet, SPY In 2023

The artificial intelligence wave is sweeping across, with the popularity of OpenAI's ChatGPT giving this new-age technology a boost. Several AI-related stocks have capitalized on the buzz and ringed in massive gains this year.

Market Shows Resilience: After a not-so-promising performance in 2022, when the S&P 500 Index fell about 20%, the stock market has had a strong run so far this year. The strength has come despite the specter of more rate Fed rate hikes looming on the horizon, fears concerning an imminent recession, stubbornly elevated inflation and a mixed fourth-quarter reporting season.

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For the year-to-date period, the S&P 500 Index, a broader gauge of stock market performance, has gained 5.4% and the tech-heavy Nasdaq Composite a steeper 11.7%.

The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the performance of the S&P 500 Index, is up about 5.7% year-to-date.

Some of the high-profile, mega-cap stocks such as Tesla Inc. TSLA and Meta Platforms Inc. META have made a strong comeback. These two stocks are up 60.75% and 53.94%, respectively in the year-to-date period.

AI Stocks On Tear: Microsoft Corp. MSFT, which announced a big investment in OpenAI to use the latter’s GPT technology in its Bing search engine and cloud services, has gained about 6.45% this year. And Alphabet Inc. GOOGL GOOG, which announced its own ChatGPT equivalent, is up 6.14%.

AI mania has proved more healthy for smaller AI players, including c3ai Inc. AI, SoundHound AI Inc. SOUN and BigBear.ai Holdings Inc. BBAI.

Incidentally, BigBear.ai has been the best-performing technology stock this year, having jumped 372% year-to-date. The return from the stock is about six times more than that of either Meta or Tesla, over 57 times more than either Microsoft or Alphabet and about 65% more than the SPY.

Valuation Justified? The strong gains of the small AI stocks may trigger fears of frothiness or irrational exuberance.

BigBear ai for one went public in December 2021 through a SPAC deal and the merger with GigaCapital4, the SPAC, valued the company at $1.378 billion on a pro forma basis.

Columbia, Maryland-based BigBear ai provides AI-powered analytics and cyber-engineering solutions to aid decision-making in a complex real-world environment. The company counts among its customers the federal government and other federal agencies, including the Department of Defense, as well as commercial organizations.

Only one analyst covers the stock, going by TipRanks’ database.

The third-quarter results released in early November show the company’s topline flatlining at $40.7 million and the net loss widening by more than five times. In its investor presentation in June 2022, the company said it has $459 million in federal contracted backlog and that it has added over 200 commercial customers from its ProModel acquisition. It also touted its addressable market opportunity at about $310 billion by 2026.

The company is due to release its fourth-quarter results on March 13.

Benzinga’s Take: Given that the shares of bigger rival Palantir Technologies Inc. PLTR have not been able to gain much ground to date, investors considering taking a position in BigBear ai should adopt a cautious approach. That said, it could be a better bet for those looking to trade the momentum in the stock, fueled by the AI revolution.

Price Action: BigBear ai ended Friday’s session 11.97% higher, at $3.18, according to Benzinga Pro data.

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