Virtually every industry is being 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 AI chatbot and Google’s Bard AI chatbot.
[Sign up for stock news with our Invested newsletter.]
Whether it be machine learning, smart applications and appliances, digital assistants, or autonomous vehicles, companies that don’t invest 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:
| Stock | Implied upside over July 7 closing price |
| Microsoft Corp. (ticker: MSFT) | 0.8% |
| Alphabet Inc. (GOOG, GOOGL) | 7.1% |
| Nvidia Corp. (NVDA) | 17.6% |
| Meta Platforms Inc. (META) | 10.1% |
| Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) | 14.7% |
| ASML Holding N.V. (ASML) | 22.7% |
| SAP SE (SAP) | 14.1% |
| RELX Plc (RELX) | 19.8% |
| Arista Networks Inc. (ANET) | 20.3% |
| Baidu Inc. (BIDU) | 64% |
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. Microsoft integrated ChatGPT into its Bing search engine in February, and analyst Brad Sills says AI and machine learning technology will be significant opportunities for Microsoft. Microsoft shares have performed well this year, but Sills says an acceleration of Azure revenue growth could drive the stock price even higher. Bank of America has a “buy” rating and $340 price target for MSFT stock, which closed at $337.22 on July 7.
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. Analyst Justin Post says Google’s search engine market share has increased since ChatGPT launched late last year. AI has been one of Alphabet’s primary foci since 2016, and the company continues to invest heavily in machine learning. Google’s massive trove of search data is a valuable resource for AI training. Bank of America has a “buy” rating and $128 price target for GOOGL stock, which closed at $119.48 on July 7.
Nvidia Corp. (NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. AI networking could be a $10.7 billion market by 2027 compared to $2 billion in 2022, according to forecasts by 650 Group. Analyst Vivek Arya says Nvidia has both InfiniBand and Ethernet assets to support high-performance connectivity for AI networking. He says Nvidia has a sizable inferencing portfolio, which is a critical part of implementing trained AI models. Nvidia is a main supplier for the AI arms race, and Arya says the company could grow its annual earnings per share to $20 by 2027. Bank of America has a “buy” rating and $500 price target for NVDA stock, which closed at $425.03 on July 7.
Meta Platforms Inc. (META)
Meta Platforms is a market leader in social media and online advertising, and it is the parent of Facebook, Instagram and other platforms. Meta recently launched a new generative AI tool for advertisers called AI Sandbox. Meta plans to use AI Sandbox as a testing ground for its initial versions of AI features. Post says Messenger and WhatsApp offer Meta compelling monetization opportunities as it integrates generative AI features into chat experiences. He says AI can improve ad creation, ad distribution and Meta’s customer service offerings. Bank of America has a “buy” rating and $320 price target for META stock, which closed at $290.53 on July 7.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry. TSM manufactures the advanced AI semiconductors for Nvidia and other AI chipmakers. Analyst Brad Lin says chip-on-wafer-on-substrate demand is now exceeding supply thanks to generative AI, and TSM says it is expanding capacity as fast as it can. Over time, the company anticipates AI demand will expand from cloud computing to edge devices, creating further opportunities. Lin says the global semiconductor market will recover in the second half of 2023. Bank of America has a “buy” rating and $115 price target for TSM stock, which closed at $100.23 on July 7.
[READ: Can You Invest in ChatGPT and OpenAI?]
ASML Holding N.V. (ASML)
ASML produces photolithography systems and other processing equipment used in semiconductor fabrication. As more AI applications are created, demand for chips manufactured using advanced process nodes will grow. Analyst Didier Scemama estimates generative AI could generate $3 billion in annual wafer fab equipment spending. Scemama says the semiconductor capital equipment industry, or semicap, is the best way to invest in the AI theme in Europe, and he anticipates earnings multiple expansion for AI semicap stocks over time. Scemama projects at least 22% annual earnings power share growth for ASML through 2025. Bank of America has a “buy” rating and $855 price target for ASML stock, which closed at $696.74 on July 7.
SAP SE (SAP)
SAP is a global leader in enterprise resource planning software. The company offers a number of AI-driven business services to help companies optimize finance, supply chains, procurement, sales and marketing. Analyst Frederic Boulan says SAP is well positioned for the AI era given demand for AI models for analyzing internal accounting, finance, human resources, supply chain and industrial process data. SAP is an AI leader among software-as-a-service companies, and Boulan says revenue growth acceleration could drive further upside for SAP shares. Bank of America has a “buy” rating and $152 price target for SAP stock, which closed at $133.26 on July 7.
RELX Plc (RELX)
RELX provides information and analytics for professional and business customers around the world. RELX is increasingly incorporating AI and machine learning across its legal, risk and science divisions. Those efforts include a recent $36 million acquisition of Aistemos, a company that uses AI to classify patents. Analyst David Amira says the recent news that Thomson Reuters Corp. (TRI) plans to acquire AI legal services specialist Casetext validates his bullish view on RELX’s Lexis+ AI offering. Amira says AI technology will help accelerate RELX’s revenue growth in coming years. Bank of America has a “buy” rating and $37.80 price target for RELX stock, which closed at $31.54 on July 7.
Arista Networks Inc. (ANET)
Arista Networks supplies cloud networking solutions to internet companies, cloud service providers and enterprise data centers. Arista’s high-performance cloud networking solutions and high-throughput data center switches are necessary to provide the processing power required for intensive AI workloads. Analyst Tal Liani says Arista customers are in the early stages of investing in and deploying AI technology, and AI could be a potential growth accelerator for Arista in 2024 and 2025. Liani says Arista is gaining market share from competitors, particularly in 400G switching, a high-speed networking standard. Bank of America has a “buy” rating and $190 price target for ANET stock, which closed at $158 on July 7.
Baidu Inc. (BIDU)
Baidu is the leading Chinese internet search provider. The company also has several other businesses, including its AI and cloud businesses and its majority stake in streaming video platform iQIYI Inc. (IQ). In March, Baidu unveiled ERNIE Bot, its large language model generative AI product and response to ChatGPT. Analyst Miranda Zhuang says ERNIE Bot integration boosted Baidu’s AI Cloud sales leads by 400% year over year in March, and the company has reported hundreds of thousands of testing requests. Baudi also has massive troves of useful AI training data. Bank of America has a “buy” rating and $234 price target for BIDU stock, which closed at $142.66 on July 7.
More from U.S. News
8 Best Stocks to Buy Now With $1,000
9 Short Squeeze Stocks That Could Take Off in July
2023’s 10 Best-Performing Stocks
Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com
Update 07/10/23: This story was previously published at an earlier date and has been updated with new information.
