Artificial Intelligence Stocks in India: A Look at 2024's Top Players

by Alina Khan

Published On June 3, 2024

In this article

The Indian landscape is witnessing a surge in Artificial Intelligence (AI). From facial recognition software to chatbots and predictive analytics, AI is transforming industries and creating exciting opportunities for investors. Artificial intelligence stocks represent companies that develop, implement, or leverage AI technologies in their products or services. India and its enormous IT industry is well poised to benefit from the AI surge Companies are rapidly implementing AI in a multitude of sectors, including IT, healthcare, finance, and manufacturing.

This blog dives into the world of AI stocks in India, exploring the top AI stocks in 2024, the benefits of investing in them, and crucial factors to consider before making your first investment into the world of Artificial Intelligence in India.

What are Artificial Intelligence Stocks?

AI stocks represent publicly traded companies whose core business revolves around artificial intelligence. These companies may develop AI-powered solutions, integrate AI into existing products and services, or heavily rely on AI for their operations.

Companies have been using AI in multiple ways to automate tasks such as using machine learning algorithms for data analysis and prediction, natural language processing is now essential for chatbots and virtual assistants (what you encounter in Swiggy and Zomato), using it to invest and lastly but potentially most importantly Computer vision for facial recognition and image analysis (filtering content on Instagram and other social media).

By investing in AI stocks, you're essentially gaining exposure to the growth potential of artificial intelligence across various industries.

Best Artificial Intelligence Stocks in India in 2024 as per Market Capitalisation

Company

Dividend Yield (%)

Net Profit (in ₹ cr.)

(P/E) Ratio

Market Cap (in ₹ cr.)

Book Value (₹)

Oracle

3.2

2,219

29.43

65,119

907

Zensar Technologies

0.89

665

23.13

14,039

143.47

Persistent Systems

0.58

1,093

47.8

52,177

322

TCS

1.89

46,099

30.3

1,398,427

250

Bosch

1.64

1,424

51.59

86,885

3,929

HCL Technologies

3.72

15,710

24

376,385

252

Tata Elxsi

0.9

792

55.9

44,357

402

Affle (India)

-

246

56.7

15,415

114

Why Invest in AI Stocks?

Investing in stocks associated with artificial intelligence in India offers a compelling opportunity for investors seeking growth in a high-potential sector. Here's a breakdown of some reasons to consider AI stocks:

  • High Growth Potential: The artificial intelligence market is projected to grow significantly in the coming years. According to a report by Grand View Research, the global AI market size is expected to expand at a compound annual growth rate (CAGR) of 40.2% from 2021 to 2028. AI stocks, as a result, stand to benefit from this expansive growth. The Indian AI market is projected for significant growth, and companies at the forefront stand to benefit immensely. A recent study by the IMARC Group forecasts the Indian AI market to grow by a CAGR of 29.1% over the next 8 years.

  • Government Support: The Indian government has recognized the importance of AI in driving economic growth and has implemented policies to support the AI industry’s development. This includes initiatives like the National Program on AI, which is aimed at fostering innovation and research in AI. Such support can enhance the market environment for companies involved in AI, boosting the prospects for investors in AI stocks.

  • Disruptive Innovation: AI has the potential to disrupt and revolutionise multiple industries, leading to substantial gains for all parties involved. Companies that excel in artificial intelligence technology often possess strong innovative capabilities, giving them a competitive edge. From streamlining healthcare processes to personalising customer experiences, AI is poised to reshape the business landscape in the years to come. Investing in such companies can lead to superior returns as these firms can adapt and thrive even in rapidly changing market conditions.

  • Diverse Applications: AI technologies are being applied across various sectors such as healthcare, finance, education, and automotive, which diversifies the investment opportunities within AI stocks. This wide range of applications helps mitigate sector-specific risks and capitalizes on the growth in multiple industries.

  • Increasing Adoption in India: There is an increasing trend of AI adoption among Indian businesses, driven by the need to improve efficiency and competitiveness. According to a survey by Accenture, 84% of Indian executives believe they must leverage AI to achieve their growth objectives. This widespread adoption signals a growing market for AI solutions and, by extension, artificial intelligence stocks.

  • Enhanced Efficiency and Productivity: AI technologies are pivotal in driving efficiencies and reducing operational costs for companies. Firms investing in AI can often manage larger scales of operation with lower cost bases, which can translate into higher profitability and, potentially, higher stock prices.

  • Long-Term Investment: AI is a transformative technology with long-term implications. Investing in best AI stocks can offer a solid long-term play, potentially providing consistent returns over longer time frames.

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Benefits of Investing in Artificial Intelligence Stocks in India

Investing in artificial intelligence stocks in India presents several advantages, reflecting the dynamic growth and transformative impact of AI technologies in the marketplace. Here are the benefits of investing in AI stocks in this emerging market:

  • High Growth Trajectory: The AI industry in India is on a high growth trajectory. As technology continues to evolve, artificial intelligence stocks are expected to benefit from the increasing integration of AI across various sectors. This provides a lucrative growth opportunity for investors looking to capitalize on technological advancements.

  • Government Support: The Indian government’s supportive stance on AI technology through various initiatives and funding boosts the ecosystem for artificial intelligence stocks. This governmental backing is crucial for nurturing innovation and attracting investments into the AI sector, thereby benefiting stocks associated with this domain.

  • Diversification of Investment Portfolio: Investing in artificial intelligence stocks in India allows investors to diversify their portfolios beyond traditional sectors. Given the broad application of AI technologies—from healthcare to automotive and finance—this diversification can reduce risk and enhance potential returns.

  • Competitive Advantage: Companies that incorporate AI into their operations often gain a competitive advantage through improved efficiencies, innovative product offerings, and better customer service. These advantages can translate into better financial performance and, consequently, higher stock valuations.

  • Rising Domestic Demand: As the adoption of AI increases among Indian businesses and consumers, companies positioned at the forefront of this trend stand to benefit immensely. This rising demand within the country ensures a robust market for AI products and services, supporting the growth of AI stocks.

  • Early Mover Advantage: For investors, entering the AI market early—especially in a fast-growing economy like India—can lead to significant gains. As the market matures and more players recognize the potential of AI, early investors in artificial intelligence stocks can reap substantial rewards from their foresight and investment.

  • Innovation-Driven Returns: Companies that lead in AI innovation often achieve high returns on investment due to unique products or services that can disrupt traditional industries. Investing in such companies can yield high returns as they redefine market norms and consumer expectations.

  • Skilled Workforce: India boasts a large pool of skilled IT professionals, aiding AI innovation and development at comparatively cheaper costs.This skilled workforce is a significant advantage for Indian AI companies competing in the global market.

  • Cost-Effectiveness: India offers a cost-competitive advantage for AI development, attracting global companies looking to outsource AI projects. This cost advantage can translate to higher profit margins for Indian AI companies who export their services to other markets too.

Factors to Consider Before Investing in AI Stocks

Investing in artificial intelligence stocks, particularly in a burgeoning market like India, requires careful consideration of various factors. These considerations ensure that investments align with individual risk profiles and investment objectives. Here's what to consider before making any investment decisions:

  • Market Volatility: AI stocks, by nature, are often more volatile than stocks in more established sectors. This is due to the rapid pace of technological change and market speculation. Investors should assess their risk tolerance and investment horizon to determine if they can handle potential short-term fluctuations in the value of artificial intelligence stocks.

  • Technological Understanding: A basic understanding of AI technology and its applications is crucial before investing in artificial intelligence stocks. An investor's ability to gauge the potential and limitations of AI technologies can significantly impact investment decisions and outcomes.

  • Regulatory Landscape: The regulatory environment surrounding AI is ever evolving. Staying informed about potential regulations that might impact the industry should be a consideration for anyone looking to invest in AI stocks. New regulations could potentially affect how AI companies operate and generate revenue.

  • Sector Exposure: AI is being deployed across various sectors. Investors should consider which industries are most likely to benefit from AI advancements and select artificial intelligence stocks in these sectors. Diversifying investments across different AI applications can also help mitigate sector-specific risks.

  • Innovation and R&D Investment: The potential of AI stocks often hinges on continuous innovation and research and development (R&D) efforts. Companies that invest heavily in R&D may be better positioned to advance in the competitive AI market. Reviewing how much a company invests in innovation can provide insights into its future growth potential.

  • Company Focus: Evaluate a company's core AI offerings and its potential for sustained growth in the AI space. Not all companies labeled as "AI" are heavily invested in the technology. A lot of companies are just frolicking around the buzzword. As with any investment, evaluating the fundamentals of companies offering AI stocks is vital. This includes understanding their financial health, management quality, competitive positioning, and earnings prospects. It’s important to invest in companies with strong fundamentals that are likely to withstand market pressures and capitalize on AI opportunities.

  • Financial Stability: Analyse the company's financials, including profitability, debt levels, and overall financial health. A company with strong financials is better positioned to weather the turbulent markets and have the necessary funds to invest in future growth.

  • Valuation Metrics: AI stocks can sometimes be overvalued due to high investor expectations. It's important to analyze valuation metrics to ensure you are not paying too much for future growth prospects. Comparing price-to-earnings ratios, sales growth, and other financial metrics with industry averages can help determine if a stock is reasonably priced.

  • Impact of AI on Society and Ethics: The societal impact and ethical considerations of AI technologies are becoming increasingly important. Companies that proactively address these concerns are likely to fare better in terms of public perception and regulatory compliance. Investors should consider the ethical stance of companies when investing in AI stocks.

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    The Future of Artificial Intelligence Stocks in India

    The future of AI stocks in India appears bright. With continued government support, a skilled workforce, and a growing market, Indian AI companies are well-positioned for success. As AI adoption accelerates across industries, these companies are likely to be at the forefront for driving innovation. Here are some insights into the future of AI stocks in this rapidly evolving market:

    • Continued Growth in Technology Adoption: As industries continue to harness the power of AI for innovation and efficiency, the demand for artificial intelligence technologies is expected to surge. This growing adoption is a positive sign for AI stocks, as it will drive revenue and growth for companies in this space.

    • Expansion Across Sectors: Initially concentrated in technology and finance sectors, AI applications are expanding into healthcare, retail, manufacturing, and agriculture. This diversification not only broadens the market for AI solutions but also stabilizes the growth prospects for AI stocks against sector-specific downturns.

    • Governmental Support and Initiatives: The Indian government has been proactive in supporting AI development, recognizing its potential to boost economic growth and address national challenges. Initiatives such as the National Strategy for Artificial Intelligence and investments in AI research hubs are expected to bolster the ecosystem for artificial intelligence stocks in India.

    • Innovation and R&D Focus: Indian AI firms are increasingly focusing on innovation and research and development to compete globally. This focus is crucial for maintaining a competitive edge and ensuring that AI stocks continue to offer cutting-edge solutions that attract investment.

    • Global Collaboration and Investment: India is becoming a hub for AI development, attracting attention and investments from global technology giants and venture capitalists. This international interest can provide additional funding and expertise, enhancing the growth potential of artificial intelligence stocks in India.

    • Ethical AI and Regulation: As AI becomes more integrated into critical sectors, the emphasis on ethical AI practices and robust regulatory frameworks will grow. Companies that lead in establishing ethical guidelines and compliance may gain investor confidence, positively influencing their stock values.

    • Technological Accessibility and Talent Development: With improvements in technological infrastructure and a focus on education and training in AI, there is an increasing pool of talent available to drive AI innovations. This talent pool is essential for the sustained growth and success of AI companies and their stocks.

    The future of artificial intelligence stocks in India looks robust, with multiple drivers supporting the growth and stability of this sector. For investors, staying informed about technological advancements, regulatory changes, and market dynamics will be key to capitalizing on the opportunities presented by AI stocks in this vibrant market.

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    Bottom Line

    The landscape of artificial intelligence stocks in India presents a dynamic and promising frontier for investors. With the convergence of technological advancements, supportive government policies, and broadening sectoral applications, AI stocks are poised for significant growth. The future of artificial intelligence in India is characterized by innovative breakthroughs and an expanding ecosystem that is both compelling and profitable for investors.

    However, investing in AI stocks requires a nuanced understanding of the technology, the market potential, and the associated risks. By carefully evaluating companies based on their innovation capabilities, financial health, and ethical considerations, investors can make informed decisions that align with their financial goals.

    As India continues to position itself as a global hub for AI innovation and development, the opportunities within the artificial intelligence stocks market are expected to expand. For those looking to invest in a technology-driven future, AI stocks offer a potent combination of growth potential and strategic importance in the digital age. Thus, staying informed and agile in this rapidly evolving market will be key to successful investment in artificial intelligence stocks in India.

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