Artificial intelligence, or AI, is one of the most disruptive technologies of our time. It enables machines to learn from data, perform tasks that require human intelligence, and create new products and services. AI is transforming every industry, from health care and education to entertainment and finance.
Investors who want to capitalize on this trend should look for companies that have AI as a core part of their business strategy, products, and competitive advantage. These companies are not only innovating in AI, but also generating strong revenue and earnings growth from their AI offerings.
Here are seven AI stocks that stand out from the crowd, according to Bank of America analysts:
1. Baidu Inc. (BIDU)
Baidu is the leading search engine and online advertising platform in China. It also has a strong presence in cloud computing, smart devices, and autonomous driving. Baidu’s AI platform, Apollo, is the world’s largest open-source platform for self-driving cars, with over 210 partners and 55,000 developers. Baidu also operates DuerOS, a voice-based AI assistant that has over 400 million users and 4,000 skills.
Baidu has been investing heavily in AI research and development, hiring top talent and acquiring startups. It has also been expanding its AI capabilities to new areas, such as healthcare, education, and entertainment. Baidu’s AI revenue grew by 28% year over year in the first quarter of 2023, reaching $1.9 billion. Analyst Ming Zhao expects Baidu to maintain its leadership position in China’s AI market and benefit from the growing demand for AI solutions.
2. Nvidia Corp. (NVDA)
Nvidia is the leading provider of graphics processing units, or GPUs, which are essential for powering high-performance computing, gaming, and AI applications. Nvidia’s GPUs are used by cloud giants like Amazon Web Services and Microsoft Azure, as well as by enterprises, universities, and research institutions. Nvidia also offers software platforms and tools for AI development and deployment, such as CUDA, TensorRT, and Jarvis.
Nvidia has been expanding its AI portfolio with strategic acquisitions, such as Mellanox Technologies (a provider of high-speed networking solutions), Arm Holdings (a designer of low-power chips for mobile devices), and DeepMap (a developer of high-definition maps for autonomous vehicles). Nvidia’s AI revenue grew by 79% year over year in the first quarter of 2023, reaching $2.8 billion. Analyst Vivek Arya believes Nvidia has a dominant position in the AI market and a strong growth outlook for the next decade.
3. Meta Platforms Inc. (META)
Meta Platforms, formerly known as Facebook, is the world’s largest social media company, with over 3 billion monthly active users across its platforms, including Facebook, Instagram, WhatsApp, Messenger, and Oculus. Meta Platforms is also a pioneer in AI, using it to enhance its products and services, such as content recommendation, personalization, moderation, advertising, and virtual reality.
Meta Platforms has been investing heavily in AI research and innovation, building state-of-the-art labs and hiring top experts. It has also been developing its own AI hardware and software solutions, such as PyTorch (an open-source framework for deep learning), Big Sur (a custom server for training neural networks), and Caffe2 (a platform for deploying AI models on mobile devices). Meta Platforms’ AI revenue grew by 48% year over year in the first quarter of 2023, reaching $26.2 billion. Analyst Justin Post expects Meta Platforms to continue to leverage its AI capabilities to drive user engagement, monetization, and differentiation.
4. ASML Holding N.V. (ASML)
ASML is the world’s leading supplier of lithography systems for the semiconductor industry. Lithography is the process of printing patterns on silicon wafers to create chips. ASML’s lithography systems use extreme ultraviolet (EUV) light to produce smaller and more powerful chips that are essential for AI applications.
ASML has a dominant position in the EUV market, with over 90% market share and a long-term supply agreement with Intel Corp., one of its largest customers. ASML also offers metrology and inspection systems that use AI to measure and improve the quality of chips. ASML’s revenue grew by 79% year over year in the first quarter of 2023, reaching $5.4 billion. Analyst Didier Scemama expects ASML to benefit from the strong demand for advanced chips for AI and other emerging technologies.
5. Alphabet Inc. (GOOG, GOOGL)
Alphabet is the parent company of Google, the world’s leading search engine and online advertising platform. It also owns YouTube, the world’s largest video-sharing platform; Google Cloud Platform, one of the top cloud computing providers; Waymo, one of the most advanced self-driving car companies; DeepMind, one of the most renowned AI research labs; and many other businesses and initiatives that use AI to create value.
Alphabet has been at the forefront of AI innovation, developing breakthroughs such as Google Search, Google Assistant, Google Photos, Google Translate, Google Maps, Gmail, and Google Duplex. Alphabet’s AI revenue grew by 34% year over year in the first quarter of 2023, reaching $55.3 billion. Analyst Justin Post expects Alphabet to continue to lead the AI market and generate strong cash flow from its AI businesses.
6. SAP SE (SAP)
SAP is the world’s largest provider of enterprise software and cloud services, serving over 400,000 customers in more than 180 countries. SAP offers a comprehensive portfolio of solutions for various industries and functions, such as finance, human resources, supply chain, customer relationship management, and analytics. SAP also offers a platform for AI development and deployment, called SAP AI Business Services, which enables customers to build and integrate AI applications into their business processes.
SAP has been enhancing its products and services with AI capabilities, such as conversational AI, machine learning, computer vision, natural language processing, and robotic process automation. SAP’s AI revenue grew by 17% year over year in the first quarter of 2023, reaching $7.7 billion. Analyst Kirk Materne expects SAP to benefit from the increasing adoption of cloud-based and AI-powered solutions by enterprises.
7. Arista Networks Inc. (ANET)
Arista Networks is a leading provider of cloud networking solutions for data centers, campuses, and edge computing. Arista’s products include switches, routers, software, and services that enable high-performance, scalable, secure, and intelligent network infrastructure. Arista’s solutions are powered by its proprietary operating system, called EOS (Extensible Operating System), which incorporates AI features such as telemetry, analytics, automation, and security.
Arista has been expanding its AI portfolio with strategic partnerships and acquisitions, such as Big Switch Networks (a provider of cloud-native networking software), Awake Security (a provider of network detection and response solutions), and Itential (a provider of network automation software). Arista’s revenue grew by 28% year over year in the first quarter of 2023, reaching $667 million. Analyst Tal Liani expects Arista to benefit from the growing demand for cloud networking solutions that support AI workloads.
Conclusion
AI is one of the most powerful and transformative technologies of our time. It is creating new opportunities and challenges for businesses and consumers alike. Investors who want to participate in this megatrend should look for companies that have a clear vision, strategy, and execution in AI. The seven stocks listed above are some of the best examples of such companies in the market today.
