Artificial intelligence (AI) is one of the fastest-growing parts of the tech sector. Between 2020 and 2028, the AI market is expected to grow at a compounded annual growth rate of 36.1 percent and reach a global value of over $640 billion.
Advances in AI have the potential to transform virtually every area of business, drive innovation and massively improve efficiency and productivity throughout the global economy.
Understandably, investors are eager to get in on the growth potential of AI technology. AI stocks range from startups specializing in artificial intelligence software to established companies that have integrated AI into more traditional business models. Here are 11 of the best AI stocks you should consider if you’re trying to include AI exposure in your portfolio.
Easily one of the leading companies in the AI space, NVIDIA (NASDAQ:NVDA) manufactures chips and graphics processing units that will be critical to the future of artificial intelligence.
As a result, the company is positioned to profit from the investments other companies make in AI systems by providing essential hardware.
Beyond its AI capabilities, NVIDIA is also a leading metaverse stock. The company’s metaverse platform, Omniverse, will allow developers to build and test their own applications in a digital reality.
NVIDIA’s ability to benefit from investments in AI and the metaverse is virtually undeniable. The company’s stock is, however, priced at 93 times its trailing earnings. This multiple is obviously high and should be taken into account when deciding whether to buy NVIDIA stock.
Analyst projections still seem quite bullish, despite this rather high pricing. The 12-month price target for NVIDIA averages $360.17, giving the stock a potential upside of 21.5 percent against its current price of $296.40.
Palantir Technologies (NYSE:PLTR) stands out as one of the strongest players in the AI software space. While the company is attempting to make deeper inroads into the private sector, its core market to this point has been government agencies.
This reliance on government contracts, however, has damaged the stock’s price recently. A partnership announced with IBM earlier this year could help Palantir build its private sector base. Under this agreement, IBM’s cloud computing customers will gain access to the Foundry software platform, one of Palantir’s core AI products.
Palantir’s stock is an attractive option if a somewhat risky one. Slower growth from government contracts has contributed to a 30 percent drop in share price over the past month. That drop, however, may have left Palantir somewhat undervalued.
The average analyst target price for the company is $23. With the stock currently trading at under $19 per share, this estimate leaves a decent bit of upside. Combined with the growth the IBM deal could produce, Palantir is well worth looking at for long-term AI investors.
Like Palantir, C3.ai (NYSE:AI) specializes in providing off-the-shelf AI software solutions to large organizations. The company’s proprietary suite of tools leverages cloud computing to more easily integrate with existing customer systems.
While C3.ai does sell to governments, it isn’t as reliant on government contracts as Palantir. With that said, C3.ai recently secured a $500 million Defense Department contract that should help to bolster the company’s revenues going forward.
Projections for the coming year appear to heavily favor C3.ai. Analysts expect 33 percent revenue growth. The stock also has the advantage of being priced at just 10 times its 2022 sales estimate.
Given the tech industry’s reputation for overly high valuations, C3.ai stands out as a reasonable stock. These positive factors are reflected in the stock’s average target price of $66.89, which suggests considerable upside against its current price.
While you may not ordinarily think of DocuSign (NASDAQ:DOCU) as an AI company, its recent acquisition of Seal Software gave it a foothold in the world of artificial intelligence.
Seal Software uses AI tools to help businesses analyze and improve contracts. As a result, businesses using this software can streamline legal reviews. DocuSign also plans to use Seal’s large AI knowledge base to bolster its proprietary products.
At the moment, there’s a reasonably strong case that DocuSign could be undervalued. On December 3rd, the company’s stock plummeted by more than 40 percent after an earnings call that suggested slower growth going forward.
During that dip, Cathie Wood’s ARK Investment Management group seized the opportunity to buy over 740,000 shares of DocuSign. This interest from a major institutional investor suggests that there’s still much to like about DocuSign and that its stock could recover, especially as it rolls out new AI-enhanced tools. DocuSign currently trades at a substantial discount to the average target price of $209.08.
As a leading industrial technology company, ABB (NYSE:ABB) has applied AI in every area from factory efficiency to transportation.
ABB manufactures AI-powered industrial robots, giving it a strong position in both hardware and software. While the stock was harmed by factory shutdowns amid the COVID-19 pandemic in 2020, it has rebounded nicely and continues to grow.
Unlike some of the other stocks on this list, ABB may not have a great deal of short-term upside. The average analyst target price for ABB stands at $35.64, slightly below its current price.
However, ABB may have considerable future potential as its end markets improve as a result of the general economic recovery. ABB is also one of very few AI stocks that offers a dividend. Currently, the stock’s dividend yield is 1.39 percent.
Online insurance company Lemonade (NYSE:LMND) is using AI to transform the deeply traditional insurance industry.
According to Lemonade, its systems acquire and analyze up to 100 times more data points for each customer than traditional insurance companies can. Analyzing this enormous amount of data gives Lemonade a competitive edge in risk assessment and management. By replacing human risk assessors with AI tools, Lemonade stands to lose less in claims while also keeping its payrolls lean and efficient.
In recent months, Lemonade’s stock price has proven extremely volatile. Despite this, the stock is likely a good long-term buy at the moment. Shares of Lemonade currently trade under $50 per share, down from a sentiment-driven high of over $180 in January 2021.
The stock’s average target price is $71.86. Overall, Lemonade is a disruptive company that will likely grow well in the coming years. Volatility notwithstanding, the insurance company stands out as a top AI stock.
NICE Systems (NASDAQ:NICE) uses technology solutions to detect fraud, support customer engagement and manage call centers. NICE’s most prominent foray into AI has been its NICE Enlighten AI Routing system. This system uses artificial intelligence and machine learning to evaluate the unique requirements of customers and route their calls to the best agent for their needs. The system aims to improve overall customer experience and engagement with AI-powered analytics.
While NICE may not have the explosive growth potential of some AI startups, its well-established business and substantial moat make it a reasonably safe choice with decent upside.
The average target price for NICE stock is $347, an upside of about 13 percent from its current price. For investors seeking exposure to AI-driven growth without the risks associated with investing in unproven startups, NICE offers a good middle ground.
As one of the largest and longest-standing tech giants, it should come as no surprise that Microsoft (NASDAQ:MSFT) appears on a list of the best AI stocks.
Microsoft has been at the cutting edge of AI for years, implementing it in a variety of different products and industries. The company’s best-known AI achievement is its Azure AI suite of tools. Azure AI allows developers to integrate AI capabilities into their own applications. The tools comprising Azure AI include low-code options, making it widely accessible for businesses of all sizes.
Microsoft stock is a mixed bag from an investment perspective. Zacks analysts currently give the stock a “C” for value and an “A” for both growth and momentum.
The average target price for Microsoft shares is $370.23, representing about 10% upside from current levles. While it may not be a prime value stock, Microsoft still appears to have ample room to grow and is worth considering as a well-established tech stock. Microsoft also pays a small but reliable dividend, currently returning a yield of 0.74 percent.
Formerly known as Facebook, Meta Platforms (NASDAQ:FB) already had a strong AI team in place to moderate harmful content on its social media platform.
Recently, Meta announced its plan to move that team into augmented reality and virtual reality development. Meta’s AI professionals will now be working on building the virtual world that the company sees as the next technological frontier.
In this regard, Meta will be competing directly with Nvidia as both companies seek to become dominant forces in the emerging field of metaverse technology.
Meta presents both risks and opportunities for investors seeking AI exposure. If the metaverse really is the future of the internet, Meta could use its AI expertise to position itself as a market leader and capitalize on massive growth.
The investment needed to achieve this goal, however, will be staggering. In the nearer term, Meta’s strong cash flow and low debt make it an appealing stock to own. The stock maintains an average target price of $406.31.
In addition to its ubiquitous e-commerce platform, Amazon (NASDAQ:AMZN) is a market leader in a variety of digital technologies. AI is an integral part of the Amazon Web Services platform, which enables businesses to implement artificial intelligence and machine learning in their own applications.
Amazon has also put AI to use to improve efficiency in its core business and return more relevant results for customer search queries.
In deciding whether to buy Amazon stock, it’s impossible to separate the company’s AI-powered future from the performance of its e-commerce business and other technology projects. Luckily, these businesses seem set to grow going into 2022.
Amazon has made critical investments in its e-commerce infrastructure and has also begun an expansion into the lucrative healthcare market. The average price target for Amazon is $4,127.50.
While not a pure AI investment, Amazon is a good choice for investors looking to gain exposure to a variety of tech innovations.
The parent company of Google, Alphabet (NASDAQ:GOOG) is a major force in the world of artificial intelligence technology.
Google has invested heavily in AI research, enabling it to develop both hardware and software solutions powered by artificial intelligence.
Alphabet has also made widespread AI investments in everything from autonomous vehicles to city planning. The company has even announced the launch of a new subsidiary that will use AI to discover and develop new pharmaceuticals.
Unlike Amazon, an investment in Alphabet is fundamentally an investment in AI technology. While the company does bring in large revenues from advertising and services, it’s clear that Alphabet’s focus is on the opportunities presented by artificial intelligence.
Alphabet’s large moat and rapid sales growth both make it an attractive long-term investment. The average target price for Alphabet currently stands at $3,350. .
Best AI Stocks To Buy: Wrap Up
As you can see, these AI stocks offer a diverse range of business models, specializations and potential for the future. Whatever your investment goals are, there’s a good chance that one or more of these stocks deserves a place in your portfolio.
The rise of AI will transform the business world, unlocking opportunities and providing previously unavailable insights. To make sure you’re able to benefit from this emerging technology, consider adding AI stocks to your investment plan. By investing now, you’ll be in a good position to see rapid growth as artificial intelligence becomes a larger part of day-to-day life.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.