AI stocks may be excellent long-term investments.
Virtually every industry is being disrupted by artificial intelligence, automation and robotics. In 2022, the world got a firsthand look at the remarkable advances in AI technology, including the launch of OpenAI’s ChatGPT chatbot and expanded public access to OpenAI’s DALL-E 2 AI image and art generator. 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 firms stand to benefit from AI, but a handful of stocks work on AI and automation as key products. Here are 10 of the best AI stocks to buy, according to Bank of America.
Microsoft Corp. (ticker: MSFT)
Software giant Microsoft invested $1 billion in OpenAI in 2019 as part of a partnership that made Microsoft Azure OpenAI’s exclusive cloud provider. Microsoft is expected to invest an additional $10 billion, according to a report released by Semafor on Jan. 9. The recent success of ChatGPT, DALL-E 2 and other OpenAI technologies have the company positioned to generate $1 billion in revenue in 2024. According to the report, Microsoft will receive 75% of OpenAI’s profits until it makes back its investment, after which it will gain a 49% stake in the firm. Microsoft also plans to launch an AI version of its Bing search engine powered by ChatGPT by the end of March 2023 and is likely incorporating OpenAI technology in all other facets of its business as well. Analyst Brad Sills says Microsoft will continue to generate double-digit revenue growth for at least the next three years. Bank of America has a “buy” rating and $300 price target for MSFT stock, which closed at $228.85 on Jan. 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 is a growth stock with an attractive valuation that makes for an excellent defensive investment in a difficult economic environment. Bank of America has a “buy” rating and $114 price target for GOOGL stock, which closed at $88.42 on Jan. 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, its cloud computing arm. The company’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 November, Amazon unveiled its new warehouse robotic arm called Sparrow that uses computer vision and AI and is capable of moving products of various sizes prior to boxing. Post says Amazon’s recent wave of layoffs is not a positive signal for the business, but cost-cutting measures could help improve investor sentiment. Bank of America has a “buy” rating and $137 price target for AMZN stock, which closed at $89.87 on Jan. 10.
Nvidia Corp. (NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. Facebook parent company Meta Platforms Inc. (META) is building the world’s largest AI supercomputer, which already includes 6,080 A100 Nvidia graphics processing units and is equipped with the company’s Quantum InfiniBand networking system. Nvidia’s new H100 and A100 AI chips are so powerful that the U.S. government recently restricted their sales to China and Russia on national security grounds. In October, Nvidia said it is expanding its partnership with Oracle Corp. (ORCL) to include tens of thousands of chips to help boost the company’s AI-related cloud capabilities. Analyst Vivek Arya says Nvidia’s AI technology pipeline can help offset a difficult macroeconomic environment in 2023. Bank of America has a “buy” rating and $215 price target for NVDA stock, which closed at $159.09 on Jan. 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 plans to invest $20 billion in New York over the next decade to develop and manufacture semiconductors, mainframe computers and technology used for AI and quantum computing. Analyst Wamsi Mohan says the IBM revenue growth turnaround will continue, and the company has both a defensive portfolio and an attractive 4.7% dividend. Bank of America has a “buy” rating and $145 price target for IBM stock, which closed at $144.80 on Jan. 10.
Intuitive Surgical Inc. (ISRG)
Intuitive Surgical sells the da Vinci surgical system, which employs 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. It’s been 22 years since the da Vinci 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 third quarter. Analyst Travis Steed says Intuitive Surgical is one of the best-positioned medical tech stocks and has margin expansion opportunities in the next several years. Bank of America has a “buy” rating and $300 price target for ISRG stock, which closed at $271.36 on Jan. 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. The product answers employee questions about HR issues. Sills says Workday should generate significant operating leverage through at least 2024. Sills says margin expansion coupled with revenue growth of higher than 20% is a powerful combination that will likely create long-term value for investors. Bank of America has a “buy” rating and $200 price target for WDAY stock, which closed at $160.21 on Jan. 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, and 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. Palantir shares fell by 64.7% in 2022, but analyst Mariana Perez Mora says the company remains one of the biggest long-term beneficiaries of the deployment of commercial and government AI platforms. Bank of America has a “buy” rating and $14 price target for PLTR stock, which closed at $6.70 on Jan. 10.
Dynatrace Inc. (DT)
Dynatrace is a cloud computing infrastructure monitoring and observability company. The company’s Davis AI engine can analyze 368 billion dependencies per second and instantly detects problems in a company’s digital ecosystem, provides context about what went wrong, and determines and prioritizes potential business impacts. Dynatrace was recently named a market leader in AI for IT operations by Forrester. Analyst Koji Ikeda projects 20.8% revenue growth in fiscal 2023 and says Dynatrace has a unique AI-based platform that will be difficult for competitors to emulate. Bank of America has a “buy” rating and $45 price target for DT stock, which closed at $36.69 on Jan. 10.
UiPath Inc. (PATH)
UiPath develops robotic process automation technology that allows companies to improve efficiency and reduce costs by automating tedious and repetitive processes. UiPath’s AI technology allows software to perform tasks such as reading documents and emails, analyzing language and images, and understanding the content and intent of communications. Sills says UiPath will continue to gain process automation market share thanks in part to its large installed base of more than 12,000 customers and its patented computer vision technology. Bank of America has a “buy” rating and $16 price target for PATH stock, which closed at $12.75 on Jan. 10.
The 10 best AI companies:
— 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)
More from U.S. News
6 Best Cheap Dividend Stocks to Buy Under $10
5 of the Best Stocks to Buy for January
7 S&P 500 Stocks With the Biggest Stock Buybacks
Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
