Virtually every industry could be disrupted by artificial intelligence, automation and robotics. In recent months, the world has gotten a firsthand look at the remarkable advances in AI technology, including expanded public access to OpenAI’s DALL-E 2 AI image and art generator and the public launches of OpenAI’s ChatGPT chatbot and Google’s Bard AI chatbot.
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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.
Here are 10 of the best AI stocks to buy, according to Bank of America:
| STOCK | IMPLIED UPSIDE OVER MAY 17 CLOSING PRICE |
| Microsoft Corp. (ticker: MSFT) | 8.3% |
| Alphabet Inc. (GOOG, GOOGL) | 5.9% |
| Nvidia Corp. (NVDA) | 12.7% |
| Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) | 32% |
| Meta Platforms Inc. (META) | 23.7% |
| ASML Holding NV (ASML) | 24.8% |
| SAP SE (SAP) | 10.1% |
| RELX PLC (RELX) | 15.1% |
| Baidu Inc. (BIDU) | 79.3% |
| Arista Networks Inc. (ANET) | 25.2% |
Microsoft Corp. (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, multibillion-dollar investment in OpenAI in January 2023. Analyst Brad Sills says Microsoft is looking to reinvent its Bing search engine by integrating ChatGPT and its own Prometheus AI model. Sills says Bing is unlikely to gain meaningful market share from Google, but Microsoft is staying ahead of the curve in AI-enabled enterprise services. Bank of America has a “buy” rating and $340 price target for MSFT stock, which closed at $314 on May 17.
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. Google launched its Bard AI chatbot in March, and Post says AI could help expand the internet search use case, creating opportunities for improved advertising relevance and performance. While ChatGPT has gotten a first-mover advantage in media coverage, Post says Google’s I/O conference on May 10 highlighted the company’s AI advantages in infrastructure, data, distribution and mobile technology. Bank of America has a “buy” rating and $128 price target for GOOGL stock, which closed at $120.84 on May 17.
Nvidia Corp. (NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. Analyst Vivek Arya says Nvidia is the “picks and shovels leader in the AI gold rush.” He projects a $50 to $60 billion total addressable market in AI accelerators by 2027. Competition will likely increase pressure on Nvidia’s 75% GPU market share. However, Arya says success in AI requires full-stack computing, scale and experience across several high-tech fields, and Nvidia’s business is deeper and more well rounded than other competitors. Bank of America has a “buy” rating and $340 price target for NVDA stock, which closed at $301.78 on May 17.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry. Analyst Brad Lin says TSM is the key enabler for the production of the most advanced AI chips given its leading-edge process technology and advanced packaging. Furthermore, the company’s status as the leading foundry means it is somewhat indifferent to which customers develop the top AI chip designs. Lin estimates AI-related applications represent 15% to 20% of TSMC’s revenue. He projects a return to positive revenue and earnings growth in 2024. Bank of America has a “buy” rating and $120 price target for TSM stock, which closed at $90.88 on May 17.
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’s investments in GPU technology to support its AI development turned him bullish on the stock in early 2023. He says Meta is taking an ecosystem approach to AI development, constructing an environment in which users, creators and companies can build on Meta’s platform. Meta has AI-enabled ad content and engagement opportunities, and Post says AI could help expand the stock’s earnings multiple. Bank of America has a “buy” rating and $300 price target for META stock, which closed at $242.49 on May 17.
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ASML Holding NV (ASML)
ASML produces photolithography systems and other processing equipment used in semiconductor fabrication. Analyst Didier Scemama says ASML’s lithography tools are a critical part of AI chip manufacturing, and there are no other tools available in the market to produce the advanced processors used to train algorithms for AI and machine learning applications. Scemama says 2024 should be a growth year for ASML, and the company has a strong backlog heading into the second half of 2023. In addition, demand from IBM and China is strong. Bank of America has a “buy” rating and $837 price target for ASML stock, which closed at $670.50 on May 17.
SAP SE (SAP)
SAP is a global leader in applications for managing business operations, known as enterprise resource planning software. Analyst Frederic Boulan says AI will play an increasing role in SAP’s business as its customers leverage the company’s massive data pool to improve their operational efficiency. Boulan says SAP is generating impressive cloud momentum, landing strong new customer deals and pushing toward a rebound to double-digit earnings growth. Bank of America has a “buy” rating and $146 price target for SAP stock, which closed at $132.62 on May 17.
RELX PLC (RELX)
RELX provides information and analytics for professional and business customers around the world. Analyst David Amira projects long-term annual revenue growth in the 9% to 10% range as AI enables the company to improve its product offerings and advanced technologies. RELX recently hosted a demo of its new Lexis+ AI service, which Amira says is a “significant enhancement” to the current legal research platform. He says the combination of generative AI technology and RELX’s trusted reputation for legal information could be a powerful growth driver. Bank of America has a “buy” rating and $35.50 price target for RELX stock, which closed at $30.84 on May 17.
Baidu Inc. (BIDU)
Baidu is the leading Chinese internet search provider. The company also has several other businesses, such as its majority stake in streaming video platform iQiyi Inc. (IQ) and its AI and cloud businesses. In late March, Baidu officially launched ERNIE, its enterprise-scale, large language model chatbot service. Analyst Miranda Zhuang says Baidu has already upgraded ERNIE four times since launch, doubling its computing utilization and increasing its inference efficiency by tenfold. In addition, Baidu AI Cloud is upgrading six of its product lines using ERNIE. Bank of America has a “buy” rating and $234 price target for BIDU stock, which closed at $130.52 on May 17.
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 will be a major player in the buildout of AI infrastructure, and AI workloads will be a growing revenue contributor for the company in 2023. Liani says Arista’s AI opportunity is still in its infancy, and management expects 2023 will be a key year in Arista 7800 platform trials transitioning to production to support AI workloads. Liani says gross margins should expand throughout 2023. Bank of America has a “buy” rating and $170 price target for ANET stock, which closed at $135.83 on May 17.
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Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
Update 05/18/23: This story was previously published at an earlier date and has been updated with new information.
