3 Top AI Stocks to Watch in October: They May Set the Tone for the Rest of the Market.

September was a lackluster month for stocks, with the S&P 500 slipping 0.4% -- so this year, the market experienced the "September Effect," or the weakness that often happens during that month. But the decline wasn't necessarily random, and instead, it may have been in response to various concerns.

Investors have worried about the general economic environment amid rising inflation and turmoil in Iran. And they've also questioned the levels of spending in artificial intelligence (AI) infrastructure — any slowdown here could spark a significant decline in AI stocks. These elements have put pressure on the market periodically this year and likely contributed to last month's decline.

What will happen next? Earnings season will soon kick off, and tech giants, the players that have led market direction in recent years, are expected to begin reporting later in the month. The tech sector has the most companies delivering positive earnings-per-share guidance for the third quarter, according to FactSet Insight. That's 44 compared to the five-year average of about 23 for the industry.

Investors' expectations ahead of these reports, as well as the reports themselves, may set the tone for the rest of the market through year-end. Here are three top AI stocks to watch this month, before and during their earnings reports.

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1. Meta Platforms

Meta Platforms (NASDAQ:META) may be most known for its social media apps, from Facebook to Instagram, but the company has also become a behemoth in AI. This tech giant has invested heavily in data centers and large language models and recently launched its personal AI agent, Muse. The app, powered by Meta's own Spark models, surpassed 5 million downloads faster than giants ChatGPT and Claude, according to press reports.

Though Muse may not immediately add a lot to Meta's revenue, this is one of the company's first big steps toward AI monetization. And investors have recognized this as the stock took off last month.

Meta's spending forecast for the year remained relatively stable during the latest earnings report at $130 billion to $145 billion. And the company said it aims to build on momentum by releasing new products in the coming year. These points will be ones to watch in the upcoming report, and positive progress here could push the stock higher.

2. Alphabet

Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), as the owner of Google Cloud, is a major player in the AI space. This is because customers seeking to run AI workloads turn to cloud companies. All of this has resulted in tremendous earnings growth for Google Cloud, as we can see in the most recent quarter. The unit's revenue soared 82% to $24 billion in the period, boosted by AI demand.

Alphabet also develops its own large language models and products, and the latest to gain attention is AI assistant Gemini. It reached the major milestone of 1 billion monthly users back in August, making it the company's fastest-growing product ever.

As mentioned above, investors have been concerned about the spending levels of AI infrastructure players such as Alphabet. This means that, during the upcoming earnings report, they will be eager to hear about the strength of demand and will closely watch any capex guidance.

Ongoing optimism here may push investors to get in on this company that already is winning in the AI race.

3. Amazon

Like Alphabet, Amazon (NASDAQ:AMZN) is a cloud giant — its Amazon Web Services (AWS) is actually the cloud leader worldwide — and that's helped it generate billions of dollars in revenue. Customers find a variety of AI products and services at AWS, from chips to a fully managed platform called Amazon Bedrock.

Amazon has scored a major victory thanks to the development of its very own chips, Graviton central processing units, and Trainium AI chips, as well as others. Demand has taken off, as these products offer the cost-conscious customer access to quality at a reasonable price. The company said its custom chip business reached an annual revenue run rate of more than $25 billion in the recent quarter. And Amazon says the AI boom could help AWS become a trillion-dollar business one day.

Amazon's messages in recent quarters have been encouraging as AWS' run rate climbed; continuity here could help Amazon finish the year on a positive note and help push the S&P 500 higher too.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.