AI is changing the structure of stock market leaders.

Wall Street analysts like to group stocks, which helps investors differentiate the best performing stocks in the market from others. For example, FAANG was first proposed by CNBC financial analyst Jim Cramer in 2017 to describe the five largest technology companies at the time: Facebook (Meta), Apple (A), Amazon (A), Netflix, and Google (Alphabet), respectively.

By 2023, Bank of America analyst Michael Hartnett named a new set of tech stocks the “Big Seven US Stocks,” namely Meta, Apple, Amazon, Alphabet, Microsoft, Nvidia, and Tesla. These seven stocks all convincingly outperformed the S&P 500 last year. They also have one thing in common: every company is developing AI in its own unique way.

While AI is being developed, this isn't enough to keep them in one group. When the market opened in 2024, most of the “Big Seven” stocks showed room to rise, with the exception of Tesla, which plummeted 23% in January alone. Cramer believes Tesla should be removed from the “Big Seven.” Meanwhile, Glen Kacher, an analyst at hedge fund Light Street Capital, believes that the group needs a complete restructuring.

To this end, Kacher launched the latest five stocks leading the US stock market, namely Nvidia, Microsoft, AMD, TSMC, and Broadcom, and called them “AI 5” (the five biggest names in artificial intelligence).

1. Nvidia

It's no surprise that Nvidia is on the list; its H100 data center GPU is the first choice for developers to build, train, and deploy their AI models.

In the recently announced third quarter of fiscal year 2024 (ending October 29, 2023), Nvidia's total revenue was US$18.1 billion, an increase of 206% over the previous year. Of this, data center revenue accounted for US$14.5 billion, an increase of 279% year over year. These incredible growth rates helped Nvidia stock soar 239% last year and continue the upward trend until 2024.

Today, Nvidia is preparing for the widespread launch of its new H200 data center chip. As Nvidia strives to meet market demand, its strong momentum is expected to continue.

2. Microsoft

Microsoft is another dominant force in the emerging AI industry, and the company is leveraging its historical advantage to focus on the software sector. Last year, Microsoft invested $10 billion in leading AI startup OpenAI. Since then, Microsoft has used OpenAI's technology to integrate generative AI applications into its entire software product.

Recently, Microsoft also surpassed Apple to become the company with the highest market capitalization in the world, with a market capitalization of more than 3 trillion US dollars. Microsoft is one of the few companies that have successfully monetized AI software, which could drive the next phase of its growth.

3. AMD

Right now, all eyes are on its new MI300 data center GPU. These GPUs are designed to compete with AI chips from the leader Nvidia and are off to a good start. Tesla CEO Musk also recently stated that he plans to buy AI chips from AMD.

In terms of stock prices, AMD has performed well since the beginning of the year, and has already risen 28%. This year, investors will keep a close eye on MI300 demand information. Initial indications are that AMD is an eligible “AI 5” member.

4. TSMC

TSMC is arguably the most important company in the chip industry. It makes more than half of the world's chips, including advanced GPUs designed by companies like Nvidia and AMD. Without TSMC, who knows what the AI industry will look like now?

Wall Street expects TSMC's revenue to grow 22% to $85 billion in 2024, and a further 20% increase in 2025, bringing the company's revenue to surpass $100 billion for the first time. Given TSMC's key role in making AI chips in all categories, its stock should be a good bet.

5. Broadcom

In the AI space, Broadcom may not be the focus of many investors, but the company is developing this technology in a few different ways. Not to mention, Broadcom's stock price has more than tripled in the past five years, so it's worth watching.