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.
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.
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Here are 10 of the best AI stocks to buy, according to Bank of America:
| Stock | Implied upside over Aug. 7 closing price |
| Microsoft Corp. (ticker: MSFT) | 22.7% |
| Alphabet Inc. (GOOG, GOOGL) | 11% |
| Nvidia Corp. (NVDA) | 21.1% |
| Meta Platforms Inc. (META) | 18.5% |
| Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) | 29.7% |
| ASML Holding N.V. (ASML) | 26% |
| SAP SE (SAP) | 14.9% |
| Relx PLC (RELX) | 18% |
| Arista Networks Inc. (ANET) | 6% |
| Baidu Inc. (BIDU) | 55.1% |
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. Analyst Brad Sills says Microsoft’s guidance that AI will ramp up from being a 1% Azure growth tailwind in the fiscal fourth quarter to a 2% tailwind in the first quarter suggests AI workloads could soon contribute more meaningfully to overall growth. Bank of America has a “buy” rating and $405 price target for MSFT stock, which closed at $330.11 on Aug. 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 Alphabet’s second-quarter earnings report outshined Microsoft’s, potentially easing concerns that Google is losing the AI battle. On Alphabet’s earnings call, the company emphasized its plans to enhance its search business by using new large language models and leveraging AI to make search more intuitive. Bank of America has a “buy” rating and $146 price target for GOOGL stock, which closed at $131.53 on Aug. 7.
Nvidia Corp. (NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. Analyst Vivek Arya estimates at least 75% of Nvidia’s data center sales relate to AI accelerators, and Nvidia accounts for about 75% of the total accelerator market. Cloud servers make up about 35% of all current server sales, and there are about three or four accelerators included in the average server. Arya projects Nvidia will grow accelerator sales to $77 billion and earnings per share to $22 by 2027. Bank of America has a “buy” rating and $550 price target for NVDA stock, which closed at $454.17 on Aug. 7.
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. Meta recently launched a new generative AI tool for advertisers called AI Sandbox. In July, the company announced it is partnering with Microsoft to introduce its AI large language model Llama 2, which is free for research and commercial use. Post says AI is a growing priority for Meta, and AI improvements helped boost Meta’s user engagement by 7% in the second quarter. Bank of America has a “buy” rating and $375 price target for META stock, which closed at $316.56 on Aug. 7.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry. TSM manufactures all of the advanced AI semiconductors for Nvidia and other AI chipmakers. Analyst Brad Lin says Taiwan Semiconductor is perfectly positioned to benefit from generative AI and is a crucial supplier for major graphics processor unit and AI accelerator companies around the world. The company recently said AI demand currently represents about 6% of its revenue and will grow 50% annually over the next five years, driving chip-on-wafer-on-substrate demand. Bank of America has a “buy” rating and $125 price target for TSM stock, which closed at $96.35 on Aug. 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. ASML is the only major producer of the extreme ultraviolet lithography equipment necessary to produce advanced AI chips. Analyst Didier Scemama says EUV lithography technology will support many of the disruptive technology trends of the 2020s, including AI. ASML recently said it expects no incremental impacts from U.S. and Dutch export controls, indicating the company expects to ship its 1980i tool to China starting in 2024. China accounts for 24% of ASML’s sales. Bank of America has a “buy” rating and $874 price target for ASML stock, which closed at $693.42 on Aug. 7.
SAP SE (SAP)
SAP is a global leader in enterprise resource planning software solutions. The company offers several AI-driven business solutions to help companies optimize finance, supply chains, procurement, sales and marketing. In June, SAP announced plans to hire approximately 200 AI engineers to help make its SAP Labs Singapore location an AI technology hub. Analyst Frederic Boulan says SAP management is optimistic about the potential business opportunity generative AI presents. SAP has also announced investments in several AI technology companies, including Aleph Alpha, Anthropic and Cohere. Bank of America has a “buy” rating and $156 price target for SAP stock, which closed at $135.80 on Aug. 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 Relx’s growth uptick in the first half of the year was no fluke. He says growth could accelerate in the medium term as the company rolls out its new generative AI-enabled Lexis+ product later this year. Bank of America has a “buy” rating and $38.80 price target for RELX stock, which closed at $32.87 on Aug. 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 provide the processing power required for intensive AI workloads. The company’s third-quarter guidance highlights demand from Microsoft, Meta Platforms and other customers who are buying up Arista’s 7800 series switches to support AI workloads. Analyst Tal Liani says investors should focus on the company’s potential to serve a $35 billion total addressable market by 2025. Bank of America has a “buy” rating and $190 price target for ANET stock, which closed at $179.27 on Aug. 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. Baidu also recently announced a new $145 million venture fund to invest in AI application startups. Analyst Miranda Zhuang says Baidu is testing more AI features for its search engine, including an AI chat and AI-generated search results. Bank of America has a “buy” rating and $228 price target for BIDU stock, which closed at $147 on Aug. 7.
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Update 08/08/23: This story was previously published at an earlier date and has been updated with new information.
