The AI industry has major growth ahead, analysts say.
The global artificial intelligence industry is expected to grow to $554 billion in total revenue by 2024, according to market research firm IDC. That amounts to some serious growth for an industry that generated revenue of $51.5 billion in 2021, according to market researcher Gartner. Virtually every industry is being disrupted by AI, automation and robotics. Whether it be machine learning, smart applications and appliances, digital assistants or autonomous vehicles, companies that aren’t investing in AI products and services risk becoming obsolete. Countless companies stand to benefit from AI, but a handful of stocks have AI and automation at the center of their businesses. Here are 10 of the best AI stocks to buy, according to Bank of America.
Nvidia Corp. (ticker: NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. One of the fastest supercomputers, Leonardo, is powered by Nvidia graphics processing units. Nvidia is even planning to build its own AI supercomputer lab in Cambridge, England. Bank of America analyst Vivek Arya says Nvidia has a leadership position in AI, gaming, cloud computing, next-generation automobiles and the metaverse. In addition, he says Nvidia’s upcoming analyst day event on March 22 could be a bullish catalyst for the stock. Bank of America has a “buy” rating and a $375 price target for NVDA stock, which closed at $213.52 on March 8.
Google and YouTube parent company Alphabet uses AI and automation in virtually every facet of its business, from ad pricing to content promotion to email spam filters. Google is also the parent of autonomous vehicle company Waymo LLC, which made history by launching the first fully driverless commercial taxi service on public roads in 2020. Alphabet is also the parent of AI software subsidiary DeepMind Technologies Ltd. Analyst Justin Post says Alphabet has AI advantages across its product stack and deserves a premium valuation relative to peers. Bank of America has a “buy” rating and $3,510 price target for GOOGL stock, which closed at $2,542.09 on March 8.
Amazon.com Inc. (AMZN)
Like Alphabet, Amazon has integrated AI into every aspect of its business, including targeted advertising, e-commerce search algorithms and Amazon Web Services. Amazon’s Alexa is one of the most popular virtual assistants and is already installed in many American households. Amazon also offers a wide range of AI services to its AWS cloud customers, including advanced text analytics, automated code reviews and chatbots. Post says Amazon is a top pick in 2022 because of its improving profit outlook and ongoing e-commerce market share gains. Bank of America has a “buy” rating and $4,450 price target for AMZN stock, which closed at $2,720.29 on March 8.
Microsoft Corp. (MSFT)
In 2020, Microsoft announced the construction of a new supercomputer hosted in Azure, Microsoft’s cloud computing network. The supercomputer was built in collaboration with OpenAI LP to train AI models with the ultimate goal of producing large AI models and related infrastructure for other organizations and developers. In late 2021, Microsoft also debuted Context IQ, an AI application that can predict, seek and suggest information for employees. Analyst Brad Sills says Microsoft is likely to maintain free cash flow growth in the high teens percentage range. Bank of America has a “buy” rating and a $365 price target for MSFT stock, which closed at $275.85 on March 8.
International Business Machines Corp. (IBM)
For years, IBM has been developing ways to adapt its AI supercomputer Watson to revolutionize health care, finance, law and academia. Unfortunately, genomics and oncology programs powered by Watson didn’t live up to expectations. Still, Watson recently performed as well as or even better than AI services from Amazon, Microsoft and Google in tests by the Allen Institute for Artificial Intelligence. Analyst Wamsi Mohan says IBM is well positioned to gain market share in information technology spending thanks to its AI and cloud businesses. Bank of America has a “buy” rating and a $162 price target for IBM stock, which closed at $125.68 on March 8.
Meta Platforms Inc. (FB)
Facebook parent company Meta Platforms has already applied AI technology to its news feed and advertising algorithms. Meta is now shifting focus to applying AI technology to developing its version of the metaverse, a digital world in which users interact in an immersive virtual environment. In January, Meta introduced its new AI Research SuperCluster, which it says will be the most powerful supercomputer in the world once it is fully constructed in mid-2022. Post says investors should remain patient and wait out Facebook’s transition year in 2022. Bank of America has a “buy” rating and a $333 price target for FB stock, which closed at $190.29 on March 8.
DocuSign Inc. (DOCU)
Electronic signature and document automation specialist DocuSign has been investing heavily in AI technology to make contracts and documentation more efficient. Contract AI can help businesses automatically sort through millions of pages of contracts, court cases and regulatory provisions and easily flag potential sources of legal problems, privacy issues, security vulnerabilities or even regulatory breaches. Sills says DocuSign shares will remain range-bound in the near term as billings growth decelerates in the challenged economy. However, he says DocuSign remains a leader in the $14 billion e-signature market. Bank of America has a “buy” rating and a $200 price target for DOCU stock, which closed at $91.98 on March 8.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is a semiconductor foundry that produces cutting-edge AI chips designed by Nvidia, Apple Inc. (AAPL), Qualcomm Inc. (QCOM) and other semiconductor leaders. TSM also funds its own in-house AI hardware research in specialized areas such as near-memory and in-memory computing, embedded non-volatile memory technologies, 3D integration and error-resilient computing. Analyst Robin Cheng says Taiwan Semiconductor should generate at least 15% annual revenue growth and grow its free cash flow through 2025. The stock is one of Cheng’s top Asia-Pacific stock picks for 2022. Bank of America has a “buy” rating and a $172 price target for TSM stock, which closed at $100 on March 8.
Dynatrace Inc. (DT)
Dynatrace is a cloud computing infrastructure monitoring company. The company’s Davis AI engine instantly detects problems in a company’s digital ecosystem, provides context about what went wrong and determines and prioritizes potential business impacts. Dynatrace shares were down 33% year to date as of March 8 as heavy investments have weighed on operating margins, but analyst Koji Ikeda says the pullback has created an attractive entry point for long-term investors. Ikeda says Dynatrace’s AI platform is unique and difficult to replicate. Bank of America has a “buy” rating and $70 price target for DT stock, which closed at $40.40 on March 8.
Workday Inc. (WDAY)
Workday is a cloud-based company that makes financial and human capital management software. The Workday AI-based optimization engine helps businesses manage shift scheduling and prioritization, hiring and staffing challenges and fluctuating labor demand. Sills says Workday should generate significant operating leverage and approach $2.3 billion in free cash flow by 2024, while growing revenue by at least 15% annually. Sills says Workday’s differentiated platform is a market leader, while its financial management business has emerged as a sizable growth opportunity. Bank of America has a “buy” rating and a $320 price target for WDAY stock, which closed at $219.90 on March 8.
The 10 best AI companies:
— Nvidia Corp. (NVDA)
— Alphabet Inc. (GOOG, GOOGL)
— Amazon.com Inc. (AMZN)
— Microsoft Corp. (MSFT)
— International Business Machines Corp. (IBM)
— Meta Platforms Inc. (FB)
— DocuSign Inc. (DOCU)
— Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
— Dynatrace Inc. (DT)
— Workday Inc. (WDAY)
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Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
Update 03/09/22: This article was published at an earlier date and has been updated with new information.
