InvestorPlace – Stock Market News, Stock Advice & Trading Tips
On paper, the narrative for artificial intelligence or AI stocks to buy seemingly writes itself. As technologies become more advanced, AI and machine learning protocols can help radically improve productivity. In addition, they can cut down on errors, leading to greater efficiencies and safer operations.
From the economic angle, AI stocks present an extraordinarily compelling case. According to Grand View Research, the global AI market size reached a valuation of $136.55 billion in 2022. Experts there project that the sector will expand at a compound annual growth rate (CAGR) of 37.3% from 2023 to 2030. At the end of the forecasted period, sector revenue should come in at $1.81 trillion.
Nevertheless, with so much competition in the space, it’s difficult to know which AI stocks to target. Like any promising industry, some enterprises may do very well. Others may end up being duds. While it’s no guarantee of success, betting alongside Wall Street experts could improve your odds. Each of the AI stocks below features at least a moderate buy consensus rating. As well, they all enjoy double-digit forecasted gains.
Source: shutterstock.com/Den Rise
A computer technology specialist, Oracle (NYSE:ORCL) sells database software and technology, cloud-engineered systems, and enterprise software products. Through its AI and machine learning (ML) infrastructures, developers and data scientists can build custom applications and operational architectures. Over the trailing year, ORCL gained over 16% of equity value.
Presently, the tech firm offers a compelling deal for investors seeking a fundamentally cheap player among established enterprises. The market prices ORCL at a forward multiple of 15.41 times. As a discount to earnings, Oracle ranks better than 72.28% of the software industry. Additionally, the company benefits from a strong three-year revenue growth rate (12.9%) and a top-notch net margin (19.09%). Both stats rate higher than their respective median values.
Finally, Wall Street gives its nod of approval for Oracle, pegging it a consensus moderate buy. Moreover, their average price target stands at $97.63, implying over 13% upside potential. Thus, ORCL represents one of the AI stocks to buy.
Source: shutterstock.com/YAKOBCHUK V
One of the top tech firms, Microsoft (NASDAQ:MSFT) invested heavily in the AI space. Mainly, the company backs OpenAI, the enterprise responsible for the popular chatbot ChatGPT. Recently, Microsoft announced that it integrated ChatGPT into its Bing search engine. More synergies may be on the way, offering considerable excitement among AI stocks.
According to Gurufocus.com’s proprietary calculations for fair market value (FMV), MSFT rates as modestly undervalued. Operationally, the case for MSFT as one of the AI stocks to buy becomes patently evident. Its three-year revenue growth rate of 17.4% outpaces 72.37% of the competition. Further, its net margin of over 33% beats out 96.7% of the software sector.
At the moment, Wall Street analysts peg MSFT as a strong buy. Further, their average price target stands at $291.70, implying over 15% upside potential. As a small bonus, Microsoft also carries a modest forward yield of 1.08%.
A software specialist, ServiceNow (NYSE:NOW) develops a cloud computing platform to help companies manage digital workflows for enterprise operations. Further, the company offers Now Intelligence, a platform that makes predictions and automates repetitive tasks for enhanced productivity. Since the January opener, NOW gained a remarkable 12%.
To be fair, NOW lost 21.5% of equity value in the trailing year. However, that might make NOW an intriguing bargain. According to Gurufocus.com’s FMV calculations, NOW represents a significantly undervalued investment.
Objectively, ServiceNow enjoys significant operational strengths. For example, its three-year revenue growth rate stands at 26.6%, ranking higher than 82.61% of its peers. Also, its net margin pings at 4.49%, above 60.73% of the industry. Not to be ignored, ServiceNow’s balance sheet offers something of interest. Its Altman Z-Score hit 7.21, reflecting a very low bankruptcy risk. Finally, the company represents one of the AI stocks that Wall Street loves with its consensus strong buy assessment. Plus, analysts’ price target stands at $514.70, implying over 19% upside potential.
Source: metamorworks / Shutterstock.com
A cybersecurity firm, SentinelOne (NYSE:S) cynically benefits from an expanding market. With cyber-crimes rising in scope and scale – while imposing devastating costs to enterprises – having digital protection has never been more important. Further, SentinelOne uses machine learning for monitoring personal computers, Internet of Things (IoT) devices, and cloud workloads.
To be fair, SentinelOne represents more of an aspirational trade. For instance, while it features strong gross margins, both its operating and net margins rate well into negative territory. Objectively, shares trade at a trailing multiple of 11.67, which is extremely overvalued. Presently, the industry median is only 2.49.
However, the cybersecurity specialist features a strong balance sheet. Its cash-to-debt ratio stands at 25.31 times, outpacing nearly 73% of the competition. Also, its Altman Z-Score pings at 4.42, reflecting low bankruptcy risk. As for the subject of this article, S definitely represents one of the AI stocks that Wall Street loves. It features a moderate buy consensus view and a price target that implies a 28% upside potential.
Alphabet (GOOG, GOOGL)
While tech juggernaut Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) may have taken a beating last year, here’s the good news: it runs in the market as a relatively discounted trade today. As for its AI cred, the whole enterprise eats and sleeps AI and machine learning. From providing greater utility and better recommendations with its Google ecosystem to promoting self-driving cars, Alphabet does it all.
Per Gurufocus.com’s proprietary FMV calculations, Alphabet ranks as a significantly undervalued investment. Objectively, the company enjoys significant operational strengths. Despite its well-established business, Alphabet still offers significant growth. Over the past three years, revenue jumped higher to the tune of 22.9%, outpacing nearly 74% of its peers.
On the bottom line, Alphabet’s net margin stands at 21.2%, beating out over 83% of its rivals. As well, it benefits from balance sheet stability. Specifically, its Altman Z-Score pings at 9.14, reflecting very low bankruptcy risk. Finally, Wall Street analysts peg GOOG as a consensus strong buy. In addition, their average price target stands at $124.60, implying over 35% upside potential.
Another cybersecurity-related example of AI stocks to buy, CrowdStrike (NASDAQ:CRWD) provides cloud workload and endpoint security, threat intelligence and cyberattack response services. According to its website, CrowdStrike harnesses world-class AI and machine learning to detect and prevent modern threats with the speed and scale of the cloud. Since the January opener, CRWD gained nearly 9% of its equity value.
Per Gurufocus.com’s proprietary FMV calculations, CrowdStrike is significantly undervalued. Financially, the greatest strengths center on its operational stats. For instance, its three-year revenue growth rate stands at 63.6%, outpacing 95% of the competition. Also, its EBITDA growth rate during the same period hit 26.1%, beating out over 71% of peers. To be fair, its net margin currently sits below breakeven. However, the company enjoys a decent balance sheet. Its Altman Z-Score is 5.53, sitting in the safe zone regarding bankruptcy risk. Turning to Wall Street, analysts peg CRWD as a consensus strong buy. Also, their average price target stands at $160.26, implying almost 43% upside potential.
After getting torn to shreds last year, Amazon (NASDAQ:AMZN) might rank among AI stocks to buy. However, it’s risky as I’ll explain below. Earning its reputation as an e-commerce juggernaut, Amazon over the years entered into the AI space. Per its website, the company’s AWS cloud platform offers the broadest and deepest set of AI and machine learning services.
While AMZN gained over 10% since the January opener, in the trailing year, it’s down 37%. However, this dynamic presents risks and rewards. On the former side, Gurufocus.com warns its readers that AMZN represents a possible value trap.
However, on the flip side, Amazon still ranks among the growth machines. Its three-year sales growth rate stands at 21.9%, beating out over 84% of the competition. Further, after losing three quarters worth of negative free cash flow, this metric went strongly positive in the fourth quarter. Lastly, Wall Street analysts peg AMZN as a strong buy, warts and all. Plus, their average price target stands at $137.05, implying nearly 45% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
More From InvestorPlace
- Buy This $5 Stock BEFORE This Apple Project Goes Live
- The Best $1 Investment You Can Make Today
- It doesn’t matter if you have $500 or $5 million. Do this now.
- Massive Bear Market “Divergence Event” Ahead… And The #1 Way to Play It
The post 7 AI Stocks That Wall Street Loves (and You Should, Too!) appeared first on InvestorPlace.