Artificial Intelligence Stocks: The 10 Best AI Companies | Investing

Artificial intelligence, automation and robotics are changing nearly every industry. In 2023, the world got a firsthand look at remarkable advances in AI technology from OpenAI, Microsoft and Google.

Whether it be machine learning, large language models, smart applications and appliances, digital assistants, synthetic media software 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 Argus Research:

Stock Implied upside from Jan. 2 close
Microsoft Corp. (ticker: MSFT) 15.9%
Alphabet Inc. (GOOG, GOOGL) 10.7%
Amazon.com Inc. (AMZN) 10.1%
Nvidia Corp. (NVDA) 24.6%
Meta Platforms Inc. (META) 8.3%
Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) 8.3%
Adobe Inc. (ADBE) 16.4%
ASML Holding NV (ASML) 18.6%
International Business Machines Corp. (IBM) 2.2%
Arista Networks Inc. (ANET) 18.8%

After announcing a $1 billion investment in OpenAI in 2019, Microsoft reportedly upped its stake in OpenAI to 49% in January 2023 and integrated ChatGPT into its Bing search engine shortly thereafter. In September 2023, Microsoft announced that it would integrate its AI copilots into a single AI experience called Microsoft Copilot. OpenAI has reportedly made impressive breakthroughs with its new AI model, called Q*. Analyst Joseph Bonner says the recent dispute at OpenAI between CEO Sam Altman and the board of directors will not have a meaningful financial impact on Microsoft. Argus has a “buy” rating and $430 price target for MSFT, which closed at $370.87 on Jan. 2.

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 2023. In September, the company integrated Bard into its full suite of tools, including YouTube, Google Drive and Google Flights. In December, Google announced Gemini, calling it “the most capable and general model” the company has ever made. Bonner says Google is a market leader in emerging technologies such as AI, virtual and augmented reality, and quantum computing. Argus has a “buy” rating and $153 price target for GOOGL stock, which closed at $138.17 on Jan. 2.

Amazon has integrated AI into every aspect of its business, including targeted advertisements, marketplace search and recommendation algorithms, and Amazon Web Services. Amazon offers a wide range of AI and machine learning services to its AWS cloud customers, including advanced text analytics, automated code reviews and chatbots. In September, Amazon integrated generative AI capabilities into its Alexa personal assistant, one of which adds the ability to express opinions. Analyst Jim Kelleher has praised Amazon’s cloud deal with AI technology company Anthropic and says AI technology could help AWS sales growth accelerate. Argus has a “buy” rating and $165 price target for AMZN stock, which closed at $149.93 on Jan. 2.

High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. Nvidia was the best-performing stock in the entire S&P 500 in 2023, and it’s largely due to the company’s AI exposure. AI-related demand for Nvidia’s graphics processing units helped Nvidia triple its revenue year over year in its fiscal third quarter despite new U.S. export restrictions on high-end chips. Kelleher says Nvidia’s unparalleled position at the epicenter of the AI technology boom suggests the red-hot stock still has significant upside potential ahead. Argus has a “buy” rating and $600 price target for NVDA stock, which closed at $481.68 on Jan. 2.

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 is reportedly developing a new AI system built to be as powerful as the most advanced OpenAI model. The company is also reportedly testing more than 20 generative AI features across its various platforms, including updates to search, advertising and business messaging. Bonner says Meta is a leader in the generative AI space, and he anticipates AI will provide opportunities to further optimize performance. Argus has a “buy” rating and $375 price target for META stock, which closed at $346.29 on Jan. 2.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry. Taiwan Semi manufactures all the advanced AI semiconductors for Nvidia and other AI chipmakers. Booming AI chip demand helped offset Taiwan Semiconductor’s slumping smartphone and laptop chip sales in the third quarter. Kelleher says Taiwan Semi’s AI-related demand continues to strengthen even as the overall semiconductor market has struggled through a cyclical downturn. He says advanced nodes will support the company’s AI growth, and Taiwan Semi estimates AI processor demand already accounts for 6% of total revenue. Argus has a “buy” rating and $110 price target for TSM stock, which closed at $101.53 on Jan. 2.

Adobe produces creative content software and other applications used for marketing and e-commerce. The company’s Firefly generative machine learning model is already generating considerable customer interest across Photoshop, Illustrator and other platforms. Adobe has also applied its Sensei AI and machine learning technology to its Adobe Analytics, Campaign and Target products. Bonner says Adobe will likely continue to invest heavily in new AI products as it captures more of a rapidly growing total addressable market. He says Adobe’s revenue growth and high margins make it an excellent investment. Argus has a “buy” rating and $675 price target for ADBE stock, which closed at $580.07 on Jan. 2.

ASML produces photolithography systems and other processing equipment used in semiconductor fabrication. ASML is the only major producer of the extreme ultraviolet lithography equipment needed to produce advanced AI chips. Unfortunately, ASML has said U.S. export controls will impact 10% to 15% of its current shipments to China, but it expects China demand will nevertheless remain strong. Kelleher says ASML is a key supplier of both primary semiconductor companies like Intel Corp. (INTC) and merchant foundries like Taiwan Semiconductor, giving ASML diversified exposure to the AI technology boom. Argus has a “buy” rating and $850 price target for ASML stock, which closed at $716.92 on Jan. 2.

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. IBM’s portfolio of Watson AI solutions includes applications to improve customer service, automate workflow processes and predict outcomes. IBM’s Watson Studio even helps enterprise customers build proprietary AI applications. Kelleher says AI will play a central role in IBM’s future as customers upgrade their infrastructure. He says the company’s open-source approach to AI, which includes Watsonx.ai, is a unique alternative to Alphabet and Microsoft’s closed systems. Argus has a “buy” rating and $165 price target for IBM stock, which closed at $161.50 on Jan. 2.

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. In early 2023, Arista launched a cloud-based, AI-driven network identity service for information technology operations and enterprise security. Kelleher says generative AI models have triggered accelerating growth in cloud-based data center networking to support large language models, and Arista is the market leader in enterprise and data center cloud networking. Argus has a “buy” rating and $275 price target for ANET stock, which closed at $231.56 on Jan. 2.

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