AI stocks may be excellent long-term investments.
The global artificial intelligence industry is expected to grow from $59.7 billion in 2021 to $422.4 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.
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 to train AI models with the ultimate goal of producing large AI models and related infrastructure for other organizations and developers. In October, Microsoft launched Microsoft Designer, a graphic design app that uses AI technology to create unique social media posts, invitations and other graphics. Analyst Brad Sills says that even at a $1.6 trillion valuation, Microsoft is well positioned to generate double-digit revenue growth for at least the next three to five years. Bank of America has a “buy” rating and $300 price target for MSFT stock, which closed at $242.98 on Nov. 10.
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. Analyst Justin Post says Alphabet shares are attractively valued, it has minimal competition in its search business, it generates significant cash flow that can support buybacks, and it is an excellent defensive investment in an uncertain environment. Bank of America has a “buy” rating and $114 price target for GOOGL stock, which closed at $93.94 on Nov. 10.
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. In August, Amazon 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 will continue to benefit from massive, secular technology growth trends, such as e-commerce, cloud computing, online advertising and connected devices. Bank of America has a “buy” rating and $137 price target for AMZN stock, which closed at $96.63 on Nov. 10.
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. Facebook parent company Meta Platforms Inc. (META) is building the world’s largest AI supercomputer, which already includes 6,080 A100 NVDA graphics processing units and is equipped with Nvidia’s Quantum InfiniBand networking system. Nvidia’s new H100 and A100 AI chips are so powerful that the U.S. government recently restricted their sale to China and Russia on national security grounds. Analyst Vivek Arya says Nvidia is a key supplier for high-growth markets such as high-end gaming, enterprise graphics, cloud computing, AI and advanced automotive technology. Bank of America has a “buy” rating and $205 price target for NVDA stock, which closed at $157.50 on Nov. 10.
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 divested its health care data and analytics assets in early 2022. 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 product portfolio and an attractive 4.7% dividend. He says IBM’s recent rebound in revenue and free cash flow will continue. Bank of America has a “buy” rating and $145 price target for IBM stock, which closed at $141.23 on Nov. 10.
Intuitive Surgical Inc. (ISRG)
Intuitive Surgical sells the da Vinci Surgical System, which utilizes 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. It’s been 22 years since the da Vinci Surgical System was approved by the U.S. Food and Drug Administration, but Intuitive still reported 13% year-over-year growth in installed systems in the most recent quarter. Analyst Travis Steed says Intuitive is one of the best-positioned companies in the medical technology market given its opportunities to expand into a broader range of surgical procedures. Bank of America has a “buy” rating and $250 price target for ISRG stock, which closed at $257.86 on Nov. 10.
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 2022, Workday integrated Espressive’s AI-based virtual support agent, Barista, into its platform. Sills says Workday will grow revenue by at least 15% annually and generate significant operating leverage through 2024, including operating margins of at least 20% and free cash flow margins of at least 25%. In addition, he says strong renewal rates will help expand Workday’s margins. Bank of America has a “buy” rating and $220 price target for WDAY stock, which closed at $153.13 on Nov. 10.
Palantir Technologies Inc. (PLTR)
Palantir Technologies is an AI-powered data analytics software company. In September 2022, IDC named Palantir the No. 1 AI software platform in the world by both revenue and market share. A large part of Palantir’s business comes from the U.S. government’s intelligence and defense sectors. The company recently secured a new $85.1 million contract with the U.S. Army Materiel Command to help deploy AI and machine learning software to improve equipment reliability and predictive maintenance, and optimize supply chains. Analyst Mariana Perez Mora says Palantir has a long-term growth opportunity given rapidly developing demand for both commercial and government AI platforms. Bank of America has a “buy” rating and $13 price target for PLTR stock, which closed at $7.64 on Nov. 10.
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 has a large and rapidly growing addressable market and is poised to continue to grow revenue by roughly 20% per year through at least 2025. In addition, he says the company’s high margins differentiate it from less profitable peers. Bank of America has a “buy” rating and $45 price target for DT stock, which closed at $36.75 on Nov. 10.
UiPath Inc. (PATH)
UiPath develops robotic process automation, or RPA, technology that allows companies to improve efficiency and reduce costs by automating tedious and repetitive processes. UiPath’s AI technology can allow software robots to perform tasks such as reading documents and emails, analyzing language and images, and understanding the content and intent of communications. In addition, AI robots can perform cognitive tasks, resolve inconsistencies and navigate uncertain situations. Sills estimates the RPA market is worth roughly $38 billion, and UiPath has unique advantages over peers, including its patented computer vision technology and its broad bot technology portfolio. Bank of America has a “buy” rating and $18 price target for PATH stock, which closed at $11.87 on Nov. 10.
10 best artificial intelligence stocks to buy now:
— Microsoft Corp. (MSFT)
— Alphabet Inc. (GOOG, GOOGL)
— Amazon.com Inc. (AMZN)
— Nvidia Corp. (NVDA)
— International Business Machines Corp. (IBM)
— Intuitive Surgical Inc. (ISRG)
— Workday Inc. (WDAY)
— Palantir Technologies Inc. (PLTR)
— Dynatrace Inc. (DT)
— UiPath Inc. (PATH)
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Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
Update 11/11/22: This story was published at an earlier date and has been updated with new information.
