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.
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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. 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:
| AI stock | Implied upside over Sept. 7 close |
| Microsoft Corp. (ticker: MSFT) | 22.8% |
| Alphabet Inc. (GOOG, GOOGL) | 7.9% |
| Nvidia Corp. (NVDA) | 40.6% |
| Meta Platforms Inc. (META) | 25.6% |
| Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) | 38.8% |
| ASML Holding NV (ASML) | 37% |
| SAP SE (SAP) | 3.6% |
| RELX PLC (RELX) | 15.4% |
| Arista Networks Inc. (ANET) | -2.8%* |
| Baidu Inc. (BIDU) | 62% |
*ANET stock is a long-term play on AI-driven cloud networking solutions.
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.
In July, MSFT shares jumped after the company announced a new $30-per-month generative AI subscription service for Microsoft 365. Analyst Brad Sills says AI offerings will contribute meaningfully to both Azure and Office’s growth numbers. Bank of America has a “buy” rating and $405 price target for MSFT stock, which closed at $329.91 on Sept. 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. Google is also reportedly testing Genesis, a tool that uses AI software to write news stories.
Analyst Justin Post says Google plans to further enhance its search business by integrating large language models, including Palm 2 and Gemini. In addition, Post says search and YouTube growth accelerated in the second quarter. Bank of America has a “buy” rating and $146 price target for GOOGL stock, which closed at $135.26 on Sept. 7.
Nvidia Corp. (NVDA)
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. Nvidia has been the best-performing stock in the entire S&P 500 in 2023, and it’s largely due to the company’s AI exposure. The stock got another boost in August when Nvidia announced a new partnership with Google to sell its AI technology through Google’s cloud.
Analyst Vivek Arya says generative AI adoption is still in the early stages, but major cloud and enterprise customers are embracing Nvidia’s accelerated computing technology. Bank of America has a “buy” rating and $650 price target for NVDA stock, which closed at $462.41 on Sept. 7.
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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 and an AI tool for writing and debugging code called Code Llama, which is built on top of its Llama 2 large language model.
Post says AI has become a focus for Meta, and growing AI capabilities and new AI services for users and advertisers could help drive earnings multiple expansion. Bank of America has a “buy” rating and $375 price target for META stock, which closed at $298.67 on Sept. 7.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry. Taiwan Semiconductor manufactures all of the advanced AI semiconductors for Nvidia and other AI chipmakers. In late July, TSMC said demand for AI chips is outpacing the company’s ability to supply them and announced it is investing $2.9 billion in an advanced packaging facility to produce high-performance chips.
Analyst Brad Lin says TSMC will benefit from generative AI technology as a key supplier for Nvidia and other global advanced graphics processing unit and accelerator companies. Bank of America has a “buy” rating and $125 price target for TSM stock, which closed at $90.05 on Sept. 7.
ASML Holding NV (ASML)
ASML produces photolithography systems and other processing equipment used in semiconductor fabrication. ASML is the only major producer of the extreme ultraviolet (EUV) lithography equipment necessary to produce advanced AI chips. Analyst Didier Scemama says ASML’s next-generation EUV lithography technology will support many of the most disruptive tech trends of the decade, including AI technology.
Scemama projects 17% compound annual revenue growth for ASML over the next four years. In addition, he estimates the company will enter 2024 with a more than $37 billion backlog. Bank of America has a “buy” rating and $874 price target for ASML stock, which closed at $637.79 on Sept. 7.
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SAP SE (SAP)
SAP is a global leader in enterprise resource planning software solutions. The company offers a number of 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 an AI technology hub.
Analyst Frederic Boulan says cloud momentum will support improving margins, and generative AI monetization could produce medium-term upside for the company. Boulan says investors should expect new premium AI offerings this fall. Bank of America has a “buy” rating and $145 price target for SAP stock, which closed at $139.95 on Sept. 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 Ltd., a company that uses AI to classify patents. In May, RELX launched its Lexis+ AI platform, which features conversational search, insightful summarization and intelligent legal drafting capabilities.
Analyst David Amira says RELX shares trade at an attractive valuation relative to peers, especially given its AI opportunities. Bank of America has a “buy” rating and $38.80 price target for RELX stock, which closed at $33.62 on Sept 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. In the second quarter, Arista launched a cloud-based, AI-driven network identity service for information technology operations and enterprise security.
Analyst Tal Liani says investors should look beyond any near-term weakness in Arista shares given the company’s ability to generate long-term growth and support surging bandwidth demand. Bank of America has a “buy” rating and $190 price target for ANET stock, which closed at $195.54 on Sept. 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 fully launched Ernie Bot to the Chinese public in late August.
Analyst Miranda Zhuang says Baidu’s core advertising business is recovering, its cloud business is profitable and its AI technology provides upside potential. Bank of America has a “buy” rating and $222 price target for BIDU stock, which closed at $137.07 on Sept. 7. That represents an upside potential of 62%.
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Update 09/08/23: This story was previously published at an earlier date and has been updated with new information.
