Grab These 5 AI-Powered Stocks
The buzz was there for years: artificial intelligence (AI) is the next big thing. As usual when it comes to technology innovation, the opening salvos from private equity and others took quite a while to catch up with reality. That all changed last year with the introduction of OpenAI’s ChatGPT, and then the company offered expanded access to its DALL-E 2 AI image and art generator.
With almost unlimited potential and possibilities for machine learning, smart applications and appliances, autonomous vehicles and robotic applications, the brave new world is here now. Numerous companies stand to benefit from the technological advances that AI will provide, and those that fail to use the technology in the coming years will surely regret it.
As usual, mega-cap technology companies are likely to benefit first as they have been embracing the onslaught and potential for AI applications for years. They have the deep pockets to go get or make deals with the companies that are providing breakthrough technologies like OpenAI, C3.ai and others.
We screened our 24/7 Wall St. technology and AI research universe looking for the companies likely to benefit near term. Five big companies made the cut, and almost all their stocks have been hit hard and are offering the most outstanding entry points in years. While these five stocks are rated Buy, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
There should be no surprise that the Google parent and search giant is all-in on the AI revolution. Alphabet Inc. (NASDAQ: GOOG) provides various products and platforms in North America, Europe, the Middle East, Latin America and elsewhere.
Its Google Services segment offers products and services, including ads, Android, Chrome, hardware, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search and YouTube. It is also involved in the sale of apps and in-app purchases and digital content in the Google Play store, as well as Fitbit wearable devices, Google Nest home products, Pixel phones and other devices, and in the provision of YouTube non-advertising services.
The Google Cloud segment offers infrastructure, platform and other services; Google Workspace that includes cloud-based collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar and Meet; and other services for enterprise customers. The Other Bets segment sells health technology and internet services.
Alphabet is reported to be using AI applications in almost all the firm’s central business silos, from ad pricing to content to spam filters. Alphabet is the parent company for software subsidiary DeepMind and autonomous vehicle company Waymo.
The Goldman Sachs team has a $135 price target for Alphabet stock, and the consensus target is $123.80. Monday’s closing share price was $95.58.
This company is very possibly the best value for investors, after taking a harsh beating this year. Amazon.com Inc. (NASDAQ: AMZN) engages in the retail sale of consumer products and subscriptions globally. It sells merchandise and content purchased for resale from third-party sellers through physical and online stores.
The company also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Rings and Echo and other devices. It provides Kindle Direct Publishing, an online service that allows independent authors and publishers to make their books available in the Kindle Store, and it develops and produces media content.
Amazon also offers programs that enable sellers to sell their products on its websites, as well as its stores, and its programs allow authors, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content. Further, the company provides computing, storage, database, analytics, machine learning and other services, as well as fulfillment, advertising, publishing, and digital content subscriptions.
Its Amazon Prime membership program provides free shipping of various items, access to streaming movies and series, and other services.
Given the incredible logistical needs for Amazon, the company has incorporated AI hybrid applications across much of its overall business for years. From e-commerce algorithms for search to the very popular Alexa personal assistant and AWS advancements for customers that include advanced text analytics, automated code reviews and chatbots, AI has provided the company with a massive leg up.
The Goldman Sachs target price is $165, while Amazon.com stock has a consensus target of $133.64. Shares closed on Monday at $93.75.
This blue chip giant still offers investors an incredibly solid entry point. International Business Machines Corp. (NYSE: IBM) is a leading provider of enterprise solutions, offering a broad portfolio of IT hardware, business and IT services and a full suite of software solutions. The company integrates its hardware products with its software and services offerings in order to provide high-value solutions.
IBM operates in five major segments: Cognitive Solutions, Global Business Services, Technology Services & Cloud Platforms, Systems, and Global Financing. The analysts have cited the company’s potential in the public cloud as a reason for their positive outlook going forward.
The company posted a strong fourth quarter, with the cloud and Red Hat (the software giant the firm bought in 2019) proving to be big. Red Hat’s open hybrid cloud technologies are now paired with the unmatched scale and depth of IBM’s innovation and industry expertise and sales leadership in more than 175 countries.
An AI and supercomputer pioneer with Watson, IBM moved away from past projects in 2022 but has vowed to invest 20 billion over the next decade to develop and manufacture semiconductors, mainframe computers and technology used for AI and quantum computing.
IBM stock investors receive a 5.15% dividend. Stifel’s $158 price objective compares with the $146.76 consensus target and Monday’s closing print of $130.19.
This is a more conservative way for investors to participate in the massive cloud growth. Microsoft Inc. (NASDAQ: MSFT) develops, licenses and supports software, services, devices and solutions worldwide. The company operates in the following three segments.
The Productivity and Business Processes segment offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, and Skype for Business; Skype, Outlook.com, OneDrive and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions.
The Intelligent Cloud segment licenses SQL, Windows Servers, Visual Studio, System Center and related Client Access Licenses. GitHub provides a collaboration platform and code hosting service for developers, while Nuance provides health care and enterprise AI solutions, and Azure is a cloud platform. It also offers enterprise support, Microsoft consulting and nuance professional services to assist customers in developing, deploying and managing Microsoft server and desktop solutions, as well as training and certification on Microsoft products.
The More Personal Computing segment provides Windows original equipment manufacturer (OEM) licensing and other non-volume licensing of the Windows operating system; Windows Commercial, such as volume licensing of the Windows operating system, Windows cloud services and other Windows commercial offerings; patent licensing; and Windows Internet of Things. It also offers Surface, PC accessories, PCs, tablets, gaming and entertainment consoles and other devices; Gaming, including Xbox hardware and Xbox content and services; video games and third-party video game royalties; and Search, including Bing and Microsoft advertising. The company sells its products through OEMs, distributors and resellers; and directly through digital marketplaces, online stores and retail stores.
This top company is making the chips that supply the incredible computing power required to run complex AI applications. Nvidia Corp. (NASDAQ: NVDA) provides graphics and computing and networking solutions in the United States, Taiwan, China, and elsewhere. Its Graphics segment offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/Nvidia RTX GPUs for enterprise workstation graphics; vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building 3D designs and virtual worlds.
Its Compute & Networking segment provides data center platforms and systems for AI, HPC and accelerated computing; Mellanox networking and interconnect solutions; automotive AI Cockpit, autonomous driving development agreements, and autonomous vehicle solutions; cryptocurrency mining processors; Jetson for robotics and other embedded platforms; and Nvidia AI Enterprise and other software.
The company’s products are used in gaming, professional visualization, data center and automotive markets. It sells its products to original equipment manufacturers, original device manufacturers, system builders, add-in board manufacturers, retailers/distributors, independent software vendors, internet and cloud service providers, automotive manufacturers and tier-1 automotive suppliers, mapping companies, start-ups and other ecosystem participants.
Nvidia stock has a $275 target price at BofA Securities. The consensus target of $248.44 is closer to Monday’s close at $235.54 a share.
Artificial intelligence is here to stay, and there will continue to be heated discussions of the pros and cons concerning the industry and the multitude of applications and solutions that can and will be provided. Elon Musk founded OpenAI in 2015 and left the board in 2018 and has cut ties with the company. He has had some harsh words about some of the so-called woke issues arising from the technology and is working on his own “anti-woke” AI to rival the company. That proves that we are still in the formative years, and big money will be made in the future.
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