AI stocks may be excellent long-term investments.
The global artificial intelligence industry is expected to grow to $554 billion in total revenue by 2024, according to market research firm IDC. 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 as a central part 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. In fact, 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. In March, Nvidia unveiled its new Hopper chip family, including the H100 processor, which Nvidia CEO Jensen Huang said will be the “engine of the world’s AI infrastructure.” Analyst Vivek Arya says Nvidia faces near-term growth headwinds from a cooldown in gaming and cryptocurrency mining impediments, but the stock’s pullback in 2022 is a long-term buying opportunity. Bank of America has a “buy” rating and a $320 price target for NVDA stock, which closed at $186.75 on May 6.
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. It is also the parent company of AI software subsidiary DeepMind and autonomous vehicle company Waymo, which made history by launching the first fully driverless commercial taxi service on public roads in 2020. Analyst Justin Post says YouTube is facing several growth headwinds, including falling engagement and competition from TikTok. However, he says Alphabet has AI and machine learning advantages across its product stack that will benefit long-term investors. Bank of America has a “buy” rating and a $2,940 price target for GOOGL stock, which closed at $2,313.20 on May 6.
Amazon.com Inc. (AMZN)
Amazon has integrated AI into every aspect of its business, including targeted advertisements, 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. Amazon recently announced a new five-year collaboration with Johns Hopkins University to use AI to transform the way humans interact. Post says Amazon remains his top stock pick of 2022 compared to some of the other major tech companies thanks to its strong AWS fundamentals and e-commerce market share gains. Bank of America has a “buy” rating and a $3,770 price target for AMZN stock, which closed at $2,295.45 on May 6.
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 to train AI models with the ultimate goal of producing large AI models and related infrastructure for other organizations and developers. In March, Microsoft completed its acquisition of Nuance Communications Inc., a company that specializes in conversational AI and ambient intelligence applications in health care, financial services and other industries. Analyst Brad Sills says Microsoft is his top defensive stock pick among Big Tech companies, and he predicts the company will maintain at least 18% free cash flow growth in a challenging environment. Bank of America has a “buy” rating and a $365 price target for MSFT stock, which closed at $274.73 on May 6.
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, and IBM recently divested its health care data and analytics assets. Still, IBM remains a market leader in other AI technology, and its AutoML and AutoAI products can help data scientists build and train AI and machine learning models. Analyst Wamsi Mohan says IBM has a defensive portfolio and should benefit from its upcoming Mainframe product cycle. Bank of America has a “buy” rating and a $165 price target for IBM stock, which closed at $137.67 on May 6.
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 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. Meta shares have sold off sharply in 2022, but Post says headwinds from difficult year-over-year comparisons, Apple policy changes, the war in Ukraine and Facebook’s Reels transition will ease in the second half of the year. Bank of America has a “buy” rating and a $262 price target for FB stock, which closed at $203.77 on May 6.
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. DocuSign shares have tumbled more than 50% this year as growth has slowed, but Sills says DocuSign has significantly easier comparisons in the second half of the year and limited downside at its current valuation. Bank of America has a “buy” rating and a $120 price target for DOCU stock, which closed at $74.57 on May 6.
Dynatrace Inc. (DT)
Dynatrace is a cloud computing infrastructure monitoring and observability company. The company’s Davis AI engine is capable of analyzing 368 billion dependencies per second. Davis instantly detects problems in a company’s digital ecosystem, provides context about what went wrong, and determines and prioritizes potential business impacts. Analyst Koji Ikeda says Dynatrace’s Software Intelligence Platform differentiates it from competitors and says the company is well positioned to be a long-term market winner in the high-growth enterprise observability market. He says high margins demonstrate Dynatrace’s attractive financial profile. Bank of America has a “buy” rating and a $70 price target for DT stock, which closed at $35.64 on May 6.
Workday Inc. (WDAY)
Workday is a cloud-based application provider focused on human capital management. The Workday proprietary AI-based optimization engine helps businesses manage shift scheduling and prioritization, hiring and staffing challenges, and fluctuating labor demand. In April, Workday integrated Espressive Inc.’s AI-based virtual assistant into its platform. Sills says Workday’s recent efforts to sell peripheral solutions on top of its core offerings is paying off, including growing contributions from planning, accounting center and procurement offerings. He says Workday has a path to approach $2.3 billion in free cash flow by 2024. Bank of America has a “buy” rating and a $320 price target for WDAY stock, which closed at $189.46 on May 6.
Adobe Inc. (ADBE)
Adobe is a market leader in creative content, marketing automation and e-commerce software solutions. Adobe’s AI platform, Sensei, is now integrated into all its Creative Cloud products. Sensei has a range of applications, including product recommendations, live search results, intelligent budget forecasting and optimization, and intelligent content creation and delivery. Sills says Adobe has opportunities to further penetrate a more than $139 billion total addressable market that includes content creation, electronic signatures, marketing and e-commerce software. He projects at least 13% revenue growth in 2022 and 2023. Bank of America has a “buy” rating and a $560 price target for ADBE stock, which closed at $391.01 on May 6.
10 best artificial intelligence stocks to buy:
— Alphabet Inc. (GOOG, GOOGL)
— Amazon.com Inc. (AMZN)
— Microsoft Corp. (MSFT)
— International Business Machines Corp. (IBM)
— Meta Platforms Inc. (FB)
— DocuSign Inc. (DOCU)
— Dynatrace Inc. (DT)
— Workday Inc. (WDAY)
— Adobe Inc. (ADBE)
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Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
Update 05/09/22: This story was published at an earlier date and has been updated with new information.