AI stocks may be excellent long-term investments.
The rise of artificial intelligence, automation and robots is disrupting virtually every major industry and business. From machine learning to the “internet of things,” or IoT, to smart appliances and autonomous vehicles, companies that aren’t developing and incorporating AI into their businesses run the risk of becoming obsolete. While countless companies stand to benefit from AI, a handful of them have business models focused specifically on AI and automation — an industry that market intelligence firm IDC projects will grow to $554 billion by 2024. Here are 10 of the best AI stocks to buy, according to Bank of America analysts.
Nvidia Corp. (ticker: NVDA)
High-end chipmaker Nvidia is positioned to provide the massive amount of processing power AI applications will need. In fact, Nvidia is planning to build its own AI supercomputer lab in Cambridge, England. The world’s fastest supercomputer, Leonardo, is even powered by Nvidia graphics processing units. Analyst Vivek Arya says AI, deep learning and big data are just three examples of secular technology growth trends that will require unprecedented processing power. He estimates Edge AI — which is machine learning algorithms running on the devices or local networks themselves, as opposed to the cloud — will generate $15 billion in revenue for Nvidia by 2024. Bank of America has a “buy” rating for NVDA stock.
Google and YouTube parent company Alphabet uses AI and automation in virtually every facet of its business, from ad pricing to content promotion to email spam filters. Google is also the parent of autonomous vehicle company Waymo, which made history by becoming the first company to launch a fully driverless commercial robotaxi service on public roads in 2020. Analyst Justin Post says Alphabet has AI and machine learning advantages across its product stack and a travel industry rebound could be a bullish near-term catalyst. Bank of America has a “buy” rating and a $3,210 price target for GOOGL stock, which closed at $2,977.04 on Nov. 5.
Amazon.com Inc. (AMZN)
Like Alphabet, Amazon has integrated AI into every aspect of its business, including targeted advertising, e-commerce search results and Amazon Web Services. Amazon’s Alexa is one of the most popular virtual assistants and has become integrated into many American homes. Amazon also offers a wide range of AI services to its AWS cloud customers, including advanced text analytics, automated code reviews and chatbots. Despite difficult pandemic comparisons and supply chain challenges in the near term, Post says Amazon is still the best e-commerce stock to buy. Bank of America has a “buy” rating and a $4,250 price target for AMZN stock, which closed at $3,518.99 on Nov. 5.
Microsoft Corp. (MSFT)
Microsoft is investing heavily in ensuring its early leadership position in the AI market. In 2020, Microsoft announced the construction of a new supercomputer hosted in Azure, Microsoft’s cloud computing network. The supercomputer was built in collaboration with OpenAI to train AI models with the ultimate goal of eventually making large AI models and related infrastructure available for other organizations and developers. Analyst Brad Sills says Microsoft’s Azure, Office 365, Xbox and Game Pass gaming business should help the company maintain double-digit revenue growth. Bank of America has a “buy” rating and a $365 price target for MSFT stock, which closed at $336.06 on Nov. 5.
International Business Machines Corp. (IBM)
For years, IBM has been developing ways to adapt its AI supercomputer Watson to revolutionize health care, finance, law and academia. Unfortunately, programs like Watson for Genomics and Watson for Oncology didn’t live up to expectations. Still, Watson recently performed as well as or even better than AI services from Amazon, Microsoft and Google in tests by the Allen Institute for Artificial Intelligence. Analyst Wamsi Mohan says IBM is positioned to gain information technology services market share over time thanks to its cloud and AI offerings. Bank of America has a “buy” rating and a $172 price target for IBM stock, which closed at $123.61 on Nov. 5.
Meta Platforms Inc. (FB)
Facebook parent company Meta Platforms has already applied AI technology to its newsfeed and advertising algorithms, drawing heat from critics who say Meta is prioritizing engagement and conflict over user safety and societal stability. Former IBM Watson head Jerome Pesenti joined Facebook’s AI team in 2018 as the company shifts its focus to applying AI technology to building and developing the metaverse, a digital world in which users live and interact. Post says the metaverse will be a major investment, but Meta stock is attractively valued. Bank of America has a “buy” rating and a $400 price target for FB stock, which closed at $341.13 on Nov. 5.
DocuSign Inc. (DOCU)
Electronic signature and document automation specialist DocuSign has been investing heavily in AI technology to make contracts and documentation more efficient. The company even acquired AI contract analysis company Seal Software for $188 million in 2020. Contract AI can help businesses automatically sort through millions of pages of contracts, court cases and regulatory provisions and easily flag language that could potentially be a source of legal problems, privacy issues, security vulnerabilities or even regulatory breaches. Sills says the e-signature market is a $24 billion opportunity for DocuSign. Bank of America has a “buy” rating and a $360 price target for DOCU stock, which closed at $267.49 on Nov. 5.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is a foundry that produces the cutting-edge AI chips designed by Nvidia, Apple Inc. (AAPL), Qualcomm Inc. (QCOM) and other semiconductor leaders. TSM is also funding its own in-house AI hardware research in areas such as near-memory and in-memory computing, embedded non-volatile memory technologies, 3D integration and error-resilient computing. Analyst Robin Cheng says the proliferation of IoT, the rise of AI and the increasing complexity of mobile software will drive demand for TSM services and double-digit revenue growth in coming years. Bank of America has a “buy” rating and a $146 price target for TSM stock, which closed at $117.80 on Nov. 5.
ABB Ltd. (ABB)
There are also plenty of AI investments outside of U.S. megacap tech stocks. ABB is focused on developing industrial automation technologies that both improve performance and reduce environmental impact. ABB’s Industrial AI Accelerator program provides AI tech startups with resources and support in developing industrial AI technology. Analyst Alexander Virgo says margins from its Process Automation business are at multiyear highs as global industry recovers from 2020 shutdowns. While supply chain constraints are a near-term headwind, Virgo says ABB is a market leader in industrial electrification, robotics and automation. Bank of America has a “buy” rating and a $38.65 price target for ABB stock, which closed at $34.53 on Nov. 5.
NICE Ltd. (NICE)
NICE is a leading provider of software applications that manage call center operations and customer interactions. NICE’s AI and machine learning technology also streamlines fraud detection and regulatory compliance. The company uses AI to help businesses categorize and analyze voice communications, leveraging the power of data analytics to improve the way businesses interact with contact center teams. Analyst Tal Liani says many businesses are ramping up investments in customer engagement initiatives in the post-pandemic world, and NICE is a market leader in the contact center as a service market. Bank of America has a “buy” rating and a $335 price target for NICE stock, which closed at $276.52 on Nov. 5.
Best AI stocks:
— Nvidia Corp. (NVDA)
— Amazon.com Inc. (AMZN)
— Microsoft Corp. (MSFT)
— International Business Machines Corp. (IBM)
— Meta Platforms Inc. (FB)
— DocuSign Inc. (DOCU)
— Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
— ABB Ltd. (ABB)
— NICE Ltd. (NICE)
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Artificial Intelligence Stocks: The 10 Best AI Companies originally appeared on usnews.com