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 AI 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 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)
Software giant Microsoft invested $1 billion in OpenAI in 2019 as part of a partnership that made Microsoft Azure OpenAI’s exclusive cloud provider, and it announced a new multiyear, multi-billion-dollar investment in OpenAI in January 2023. Bank of America analyst Brad Sills says Microsoft is seeking to reinvent its Bing search engine by integrating both the OpenAI model and its own proprietary Prometheus model. Analyst Justin Post says Microsoft Bing is unlikely to take meaningful search share from Google, but Microsoft is leading the charge in AI-enabled enterprise use cases. Bank of America has a “buy” rating and $300 price target for MSFT stock, which closed at $256.87 on March 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 Gmail spam filters. The integration of ChatGPT into Microsoft’s Bing spooked some Alphabet investors, but Post says Google has a bright AI future after investing heavily in AI technology for several years. Google has superior data resources, and its DeepMind Technologies subsidiary is devoted exclusively to AI technology. Post says investors can anticipate more Google AI product visibility in coming months. Bank of America has a “buy” rating and $125 price target for GOOGL stock, which closed at $95.58 on March 6.
Nvidia Corp. (NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. Analyst Vivek Arya says Nvidia’s leading position in the supercomputer graphics processing unit (GPU) market puts it in the lead in the semiconductor AI arms race. Arya says Nvidia’s dominance of the high-performing-systems markets suggests it could have major growth opportunities in the hyperscaler market. Arya says generative AI could help Nvidia generate $14 in earnings per share and more than $80 billion in revenue by 2027. Bank of America has a “buy” rating and $275 price target for NVDA stock, which closed at $235.54 on March 6.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry. Analyst Brad Lin says TSM’s leading edge process and advanced packaging services enable advanced chip design necessary to the development of AI technology. Lin estimates between 15% and 20% of TSM’s revenue is AI related and anticipates a higher mix in the future. TSM’s status as a leading foundry means risk is diversified across multiple customers, including Nvidia and Advanced Micro Devices (AMD). Lin estimates that high-performance computing will account for 44% of TSM’s total revenue in 2024. Bank of America has a “buy” rating and $105 price target for TSM stock, which closed at $89.58 on March 6.
Meta Platforms Inc. (META)
Meta Platforms is a market leader in social media and online advertising and is the owner of Facebook, Instagram and other platforms. Post says Meta has ramped up its spending on AI and machine learning technology, which is a critical component of training advertising models and generating relevant suggested content for social media users. Meta is also building its own AI supercomputer. The company said advertisers reported 20% higher conversion rates in the fourth quarter, driven in large part by AI and ML efficiency. Bank of America has a “buy” rating and $220 price target for META stock, which closed at $184.90 on March 6.
ASML Holding NV (ASML)
ASML produces photolithography systems and other processing equipment used in semiconductor fabrication. Analyst Didier Scemama says lithography tools are a critical part of AI chip production, and ASML’s extreme ultraviolet (EUV) lithography tools are necessary to produce the types of advanced processors required to train AI and ML applications. In addition, AI databases are generally stored on NAND chips produced using ASML’s tools. Scemama estimates between 5% and 10% of ASML’s revenues are directly or indirectly exposed to chips used to run and train AI applications. Bank of America has a “buy” rating and $837 price target for ASML stock, which closed at $620.97 on March 6.
SAP SE (SAP)
SAP is a global leader in enterprise resource planning software solutions. Analyst Frederic Boulan says enterprises will continue to integrate AI into a growing number of software-as-a-service solutions. In addition, AI helps SAP leverage its internal accounting, finance, human resources, supply chain and industrial process data and deliver valuable insights to its customers. In fact, Boulan says SAP is one of the most AI-forward SaaS companies in the world and is already embedding AI into the majority of its customer solutions. Bank of America has a “buy” rating and $131 price target for SAP stock, which closed at $119.73 on March 6.
RELX PLC (RELX)
RELX provides information and analytics for professional and business customers around the world. Analyst David Amira projects AI and other advanced technologies will help RELX generate consistent compound annual earnings growth of between 9% and 10%, triggering earnings multiple expansion for the stock. Amira says AI has helped RELX increase its revenue growth from around 4% annually prior to the COVID-19 pandemic to around 6% in fiscal 2023. AI has also made RELX’s offerings more sophisticated, valuable and appealing to customers. Bank of America has a “buy” rating and $35.50 price target for RELX stock, which closed at $30.52 on March 6.
Baidu Inc. (BIDU)
Baidu is the leading Chinese internet search provider. The company also has several other other businesses, such as its majority stake in streaming video platform iQiyi Inc. (IQ) and its AI and cloud businesses. Baidu has said it plans to launch its own AI chatbot in March, and analyst Eddie Leung says Baidu will be among the first companies in China to do so. He says Baidu has extensive knowledge and experience in utilizing AI for natural language processing, large model construction, machine learning and microprocessor design. Bank of America has a “buy” rating and $234 price target for BIDU stock, which closed at $149.51 on March 6.
Arista Networks Inc. (ANET)
Arista Networks supplies cloud networking solutions to internet companies, cloud service providers and enterprise data centers. Analyst Tal Liani says Arista is a market leader in high-throughput data center switches needed to interconnect the processing power required for intensive AI workloads. He says AI workloads are notoriously bandwidth-intensive and require hundreds of connected processors and gigabits of throughput. GPUs used for AI training can execute billions of operations in parallel. The more powerful AI models become, the more sophisticated the networks they run on will be. Bank of America has a “buy” rating and $170 price target for ANET stock, which closed at $142.58 on March 6.
The 10 best artificial intelligence stocks:
— Microsoft Corp. (MSFT)
— Nvidia Corp. (NVDA)
— Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
— Meta Platforms Inc. (META)
— ASML Holding NV (ASML)
— SAP SE (SAP)
— RELX PLC (RELX)
— Baidu Inc. (BIDU)
— Arista Networks Inc. (ANET)
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Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
Update 03/07/23: This story was previously published at an earlier date and has been updated with new information.
