AI stocks may be excellent long-term investments.
The global artificial intelligence industry is expected to grow from $59.6 billion in 2021 to $422 billion by 2028, according to Zion Market Research. 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 analysts.
Microsoft Corp. (ticker: 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 with the ultimate goal of producing large AI models and related infrastructure for other organizations and developers. Microsoft is also collaborating with TikTok parent company ByteDance on a project called KubeRay to develop software to help companies run AI apps more efficiently. Bank of America analyst Brad Sills says that even at a nearly $2 trillion market capitalization, Microsoft is positioned to generate double-digit revenue growth for at least the next three to five years. Bank of America has a “buy” rating and $345 price target for MSFT stock, which closed at $258.09 on Sept. 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 Gmail 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. Bank of America analyst Justin Post says Alphabet’s recent decision to postpone its elimination of third-party cookies in its Chrome browser from 2022 to 2024 is a positive for the company’s leading online advertising business. Bank of America has a “buy” rating and $125 price target for GOOGL stock, which closed at $108.38 on Sept. 8.
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 $1.7 billion buyout of home robotics firm iRobot Corp. (IRBT), which may help Amazon expand its AI presence in global households. Post says Amazon is a rare internet growth acceleration story in 2022, and it is his top “FAANG” stock pick. Bank of America has a “buy” rating and $170 price target for AMZN stock, which closed at $129.82 on Sept. 8.
Meta Platforms Inc. (META)
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 AI Research SuperCluster, which it said will be the most powerful supercomputer in the world. Facebook’s new AI BlenderBot 3 has had some early issues, but Post says Meta’s 2022 share price weakness has created a buying opportunity for long-term investors. Bank of America has a “buy” rating and $218 price target for META stock, which closed at $162.06 on Sept. 8.
Nvidia Corp. (NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. In fact, one of the world’s fastest supercomputers, Leonardo, is powered by Nvidia graphics processing units. Nvidia is even planning to build its own AI supercomputer lab in Cambridge, England. Nvidia’s new H100 “Hopper” processor will help AI developers accelerate their research and build more advanced AI models. Bank of America analyst Vivek Arya says Nvidia’s gaming segment may be a headwind in the near term, but the company’s high-margin data center business will help support profitability in a difficult environment. Bank of America has a “buy” rating and $205 price target for NVDA stock, which closed at $139.90 on Sept. 8.
Adobe Inc. (ADBE)
Adobe is a market leader in creative content, marketing automation and e-commerce software. 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, budget forecasting and optimization, and intelligent content creation and delivery. Bank of America’s Sills says Adobe is well positioned to gain market share in professional, communicator and consumer creative content segments. He says Adobe’s guidance for fiscal 2022 margins of 45% is impressive given the company’s exposure to Russia and other foreign exchange headwinds. Bank of America has a “buy” rating and $450 price target for ADBE stock, which closed at $383.63 on Sept. 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, 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’s high exposure to recurring sales, cost-cutting opportunities, impressive balance sheet and relatively stable margins make it an excellent defensive AI stock investment. Bank of America has a “buy” rating and $155 price target for IBM stock, which closed at $128.47 on Sept. 8.
Intuitive Surgical Inc. (ISRG)
Intuitive Surgical sells the Da Vinci Surgical System, which uses advanced robotics and computerized visualization technology to perform minimally invasive surgeries. Intuitive is working to integrate big data and AI to build tools such as real-time guidance for surgeons and enhanced training modalities. In early August, Intuitive announced a $1 billion accelerated share repurchase, or ASR, program, which Bank of America analyst Travis Steed says is an excellent buy signal for investors. The stock outperformed in the 12 months following its previous two ASR programs in 2014 and 2017. Bank of America has a “buy” rating and $250 price target for ISRG stock, which closed at $214.78 on Sept. 8.
Workday Inc. (WDAY)
Workday is a cloud-based application provider focused on human resources. 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’s AI-based virtual support agent, dubbed Barista, into its platform. Sills says Workday reported impressive numbers, including 22% revenue growth and 23% subscription revenue growth, in a difficult macroeconomic environment in the second quarter. He says Workday has a differentiated software-as-a-service business model that is likely to generate significant operating leverage. Bank of America has a “buy” rating and $220 price target for WDAY stock, which closed at $167.58 on Sept. 8.
Dynatrace Inc. (DT)
Dynatrace is a cloud computing infrastructure monitoring company. Its Davis AI engine is capable of analyzing billions of data points in milliseconds. Davis instantly detects problems in a company’s digital ecosystem, provides context about what went wrong, and determines and prioritizes potential business impacts. Bank of America analyst Koji Ikeda says Dynatrace is off to a strong start to its fiscal 2023, including 34% growth in first-quarter annual recurring revenue, key new product launches on track for later this year and the potential for a healthy margin profile over the medium term. Bank of America has a “buy” rating and $55 price target for DT stock, which closed at $39.74 on Sept. 8.
10 AI stocks that could be winners in the long run:
— Microsoft Corp. (MSFT)
— Alphabet Inc. (GOOG, GOOGL)
— Amazon.com Inc. (AMZN)
— Meta Platforms Inc. (META)
— Nvidia Corp. (NVDA)
— Adobe Inc. (ADBE)
— International Business Machines Corp. (IBM)
— Intuitive Surgical Inc. (ISRG)
— Workday Inc. (WDAY)
— Dynatrace Inc. (DT)
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Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
Update 09/09/22: This story was previously published and has been updated with new information.
