Artificial Intelligence (AI) was one of the major themes of 2023, wowing investors with increasingly innovative use cases and capturing headlines with demonstrations of how it will become a disruptive force in global industry.

In 2024, however, it's likely the technology will have to start proving its worth on the bottom line as investors increasingly seek proof that the billions spent on AI development can make a return on investment.

Alex Zukin, tech analyst at Wolfe Research, wrote last month: "We are at peak AI hype with a likely slide into the trough of disillusionment, as actual GenAI revenue dollars take longer to materialize."

Many of the top gainers of 2023 have strong links with AI: chipmakers, such as Nvidia (NVDA  ) and Intel (INTC  ) increasingly focused on the next generation of semiconductors that will provide the processing power for new generative AI (GenAI) models.

Indeed, Nvidia, with an outstanding annual gain of more than 220%, was the best performing stock on the S&P 500 in 2023, while rivals AMD (AMD  ) and Intel came in with annual gains of 115% and 73% respectively.

Is A Repeat Performance In 2024 Likely?

Can they keep up these performances in 2024? So far, all three are down during the first two trading sessions of 2024. It's highly probable that this is little more than profit taking after such a mighty run, but the correction could have further to go.

Microsoft (MSFT  ), which has invested a whopping $13 billion in OpenAI, will be expecting the headlines in 2023 to be about how well its AI partner is contributing to its bottom line, rather than the antics of the OpenAI board and its founder Sam Altman - as was the case in 2023.

In its last quarterly earnings review, Microsoft CFO Amy Hood, said: "We are really focused on making sure that every dollar we commit is back to the priorities we talked about, which is commercial cloud leadership and leading the AI wave."

Shares in Microsoft gained 56% in 2023, but have lost 1.1% in the past two trading sessions.

Keith Noonan, writing for the Motley Fool, believes that Nvidia and Microsoft remain among the best AI stocks to buy for 2024.

"While some smaller companies will undoubtedly emerge as winners, the competitive advantages granted by infrastructure and data strengths suggest the AI race will continue to favor large players," he said.

Palantir And CrowdStrike

Other potential winners in 2024 may have to display a proven track record.

Outside the mega-cap stocks stands Palantir Technologies (PLTR  ) which, during November and December when all other stocks were soaring, tumbled following a badly-received contract with Britain's National Health Service.

Despite this, its shares were up nearly 150% during 2023, and analysts believe it remains undervalued at $16 compared with its 2020 peak at nearly $40.

The company boasts many high-ranking government contracts and launched its Artificial Intelligence Platform last May. By November, the platform had attracted around 300 organizations as customers.

One of the most cited use cases for AI has been in the field of cybersecurity. Among the leaders here, and already using the technology to combat cybercrime, is CrowdStrike (CRWD  ). Its shares have also enjoyed a stellar 2023 with gains of 134%.

Whether they can resume their rally in the next few weeks will largely depend on the quality of earnings they report over the coming quarters.