AI stocks may be excellent long-term investments.
The global artificial intelligence market is on track to hit more than $554 billion in total revenue by 2024, according to market researcher IDC. AI, automation and robotics are disrupting virtually every major industry. From machine learning to the “internet of things,” autonomous vehicles, virtual assistants and smart home appliances, companies that aren’t embracing AI and incorporating it into their business models risk going obsolete. Countless companies stand to benefit from AI, but a handful of companies have business models focused specifically on automation. Here are 10 of the best AI stocks to buy, according to Bank of America.
Nvidia Corp. (ticker: NVDA)
High-end chipmaker Nvidia is providing the massive processing power advanced AI applications will need. In fact, one of the fastest supercomputers, Leonardo, is powered by Nvidia graphics processing units. Nvidia is even planning to build its own AI supercomputer lab in Cambridge, England. Analyst Vivek Arya says AI adoption is still in the early stages and is just one of many long-term growth trends that will generate value for Nvidia investors. He projects 38% data center revenue growth for Nvidia in 2022. Bank of America has a “buy” rating and a $375 price target for NVDA stock, which closed at $281.78 on Jan. 6.
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 LLC, which made history by launching the first fully driverless commercial taxi service on public roads in 2020. Analyst Justin Post says Alphabet has AI and machine learning advantages across its product range, and AI could help the company further fine-tune its industry-leading online advertising business over time. Bank of America has a “buy” rating and a $3,210 price target for GOOGL stock, which closed at $2,754.95 on Jan. 6.
Amazon.com Inc. (AMZN)
Like Alphabet, Amazon has integrated AI into every aspect of its business, including targeted advertising, e-commerce search algorithms and Amazon Web Services. Amazon’s Alexa is one of the most popular virtual assistants and is already installed in many American households. Amazon also offers a wide range of AI services to its AWS cloud customers, including advanced text analytics, automated code reviews and chatbots. Post says many market sectors are still in the early stages of cloud migration, which is great news for Amazon investors. Bank of America has a “buy” rating and a $4,250 price target for AMZN stock, which closed at $3,265.08 on Jan. 6.
Microsoft Corp. (MSFT)
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 LP to train AI models with the ultimate goal of producing large AI models and related infrastructure for other organizations and developers. In late 2021, Microsoft also debuted Context IQ, an AI application that can predict, seek and suggest information for employees. Analyst Brad Sills says Microsoft’s cloud business is accelerating and its margins are expanding, making it a top-tier Big Tech stock pick. Bank of America has a “buy” rating and a $365 price target for MSFT stock, which closed at $313.88 on Jan. 6.
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, genomics and oncology programs powered by Watson 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’s cloud services and AI initiatives will expand the company’s market share of total information technology spending in the long term. Bank of America has a “buy” rating and a $162 price target for IBM stock, which closed at $135.34 on Jan. 6.
Meta Platforms Inc. (FB)
Facebook parent company Meta Platforms has already applied AI technology to its news feed and advertising algorithms, drawing heat from critics who say the company prioritizes engagement and conflict over user safety and societal stability. Meta is now shifting focus to applying AI technology to developing the metaverse, a digital world in which users interact in an immersive virtual environment. Meta recently touted the speed and adaptability of its new AI moderation system. Post says the metaverse will be a costly but potentially transformational investment for Meta. Bank of America has a “buy” rating and a $400 price target for FB stock, which closed at $332.46 on Jan. 6.
DocuSign Inc. (DOCU)
Electronic signature and document automation specialist DocuSign has been investing heavily in AI technology to make contracts and documentation more efficient. Contract AI can help businesses automatically sort through millions of pages of contracts, court cases and regulatory provisions and easily flag potential sources of legal problems, privacy issues, security vulnerabilities or even regulatory breaches. Sills says a disappointing slowdown in billings growth in the third quarter does not change his bullish outlook for DocuSign’s long-term growth potential in a $14 billion e-signature market. Bank of America has a “buy” rating and a $200 price target for DOCU stock, which closed at $143.10 on Jan. 6.
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor Manufacturing is a foundry that produces cutting-edge AI chips designed by Nvidia, Apple Inc. (AAPL), Qualcomm Inc. (QCOM) and other semiconductor leaders. TSM also funds its own in-house AI hardware research in specialized areas such as near-memory and in-memory computing, embedded non-volatile memory technologies, 3D integration and error-resilient computing. A semiconductor shortage is supporting margins, and analyst Robin Cheng says the company is perfectly positioned to benefit from a period of high semiconductor industry growth driven by the digital transformation of the global economy. Bank of America has a “buy” rating and a $147 price target for TSM stock, which closed at $128.47 on Jan. 6.
ABB Ltd. (ABB)
ABB develops 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. The company recently invested in startup BrainBox AI Inc., which uses AI to improve the energy efficiency of large buildings. Analyst Alexander Virgo says ABB has a tremendous growth opportunity given its exposure to the electric vehicle battery supply chain, a $19 billion industry growing at a 15% annual rate. Bank of America has a “buy” rating and a $44.17 price target for ABB stock, which closed at $38.27 on Jan. 6.
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’s AI helps businesses categorize and analyze voice communications, leveraging the power of data analytics to improve business interactions with contact center teams. Analyst Tal Liani says digital transformation and cloud platform adoption are meaningful growth drivers for NICE. In the third quarter, cloud bookings grew by 100% and cloud revenue was up 29% from a year ago. Bank of America has a “buy” rating and a $355 price target for NICE stock, which closed at $284.59 on Jan. 6.
The 10 best AI stocks:
— Nvidia Corp. (NVDA)
— Alphabet Inc. (GOOG, GOOGL)
— 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)