The field of artificial intelligence is dynamic to say the least. This is evident in the many advancements that have arrived in recent years. In fact, at the beginning of 2023, the world became aware, and obsessed, with the possibilities of ChatGPT.
But this is a sector that has its best growth still to come. We know this because companies continue to invest billions into a market that is already worth hundreds of billions. That's because analysts say that by the end of 2030, this market will be valued at $1.6 trillion. And companies want their piece of that market.
That's also why you should be considering an investment in one of the many companies that are leading the way in this sector. The tech sector can be volatile. But when you are looking at growth stocks to buy as long-term investments, artificial intelligence is a solid place to look. And many of the stocks in this presentation are names that many investors associate with being the best-in-class among technology stocks.
Quick Links
- Microsoft
- Alphabet
- Amazon
- Nvidia
- Medtronic
- Schrodinger
- Exscientia
#1 - Microsoft (NASDAQ:MSFT)
The 2022 launch of OpenAI’s chatbot, ChatGBT, is putting a focus on Microsoft Corporation (NASDAQ: MSFT). The company has already invested over $1 billion in OpenAI and is likely to increase its investment as it tries to incorporate ChatGBT into its Bing search engine.
If successful, it would make Bing an even more formidable competitor to Alphabet’s dominance in search. Bing is already the number two search engine behind Google, but it currently only has a single-digit market share (Google has about 70% market share).
There are legitimate questions regarding how much Microsoft will have to spend to get those clicks and how that will sit with investors putting earnings under more scrutiny in 2023. But the company has already said it plans to use AI in every product in its portfolio. That type of long-term focus is exactly what’s needed with MSFT stock.
At the time of this writing, Microsoft was trading around 25x earnings. However, the stock is at the lower end of its 52-week range. And unlike many stocks in this sector, Microsoft pays a dividend that the company has been increasing for the past 20 years.
About Microsoft
Microsoft Corporation develops and supports software, services, devices and solutions worldwide. The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services.
Read More - Current Price
- $415.49
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 27 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $503.03 (21.1% Upside)
#2 - Alphabet (NASDAQ:GOOGL)
Speaking of Google, the next company on this list of AI stocks is Google’s parent company, Alphabet Inc. (NASDAQ: GOOGL). Alphabet knows that ChatGBT threatens its supremacy in the world of search.
But while that day may be coming sooner than expected, it’s not here. And Alphabet is not likely to give up market share lightly. Plus, while Alphabet, via Google, is best known for its search engine, it’s also using AI as part of its cloud computing. Here it is a distant competitor to Amazon Web Services, but it’s still an area of the business that could be an opportunity.
GOOGL stock fell in lock step with many tech stocks in 2022. That’s brought the company’s valuation down to a much more appealing 18x earnings. That puts it at a discount to the S&P 500 Index, which has a P/E of around 28x and makes it a good target for long-term investors looking to capitalize on AI.
About Alphabet
Alphabet Inc offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America. It operates through Google Services, Google Cloud, and Other Bets segments. The Google Services segment provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
Read More - Current Price
- $175.98
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 35 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $205.90 (17.0% Upside)
#3 - Amazon (NASDAQ:AMZN)
Amazon.com (NASDAQ: AMZN) illustrates that even the best of companies can only do so much to fight a weakening economy. AMZN stock is down 62% in the last 12 months. That makes sense when you consider that the company’s two largest business units (I.e., e-commerce and Amazon Web Services) saw slowing revenue and earnings due to a weakening economy.
To be clear, AMZN stock may have further to fall particularly if the economy tips into a recession in 2023. But the company is well positioned to recover along with the economy. And a key reason for this is the company’s strategic use of AI in all its platforms.
That use of AI will undoubtedly be incorporated into the company’s plans for its recent acquisition of OneMedical. Artificial intelligence is becoming a key part of the healthcare sector.
With all that said, AMZN stock is still quite expensive, with a P/E ratio of over 85x. However, analysts surveyed by MarketBeat give the stock a price target of $145.87, which is 55% higher than its current price.
About Amazon.com
Amazon.com, Inc engages in the retail sale of consumer products, advertising, and subscriptions service through online and physical stores in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS). It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Echo, Ring, Blink, and eero; and develops and produces media content.
Read More - Current Price
- $202.88
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 41 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $235.77 (16.2% Upside)
#4 - Nvidia (NASDAQ:NVDA)
For AI to do what it does requires hardware, and that’s where Nvidia Corporation (NASDAQ: NVDA) comes in. Nvidia manufactures the artificial intelligence chips that are essential in this market. The company is well-rooted in the data center sector. But they’re also working closely with both Microsoft and Alphabet.
The stock is down a whopping 82% in the last 12 months, which is related to the weakness in the broader economy. And the company is part of the semiconductor industry, a notoriously cyclical industry that is still trying to get back to its pandemic-fueled growth.
Investors may not see that growth in 2023, at least not in the first half. Analysts expect the company to post double-digit year-over-year losses in revenue and earnings in Q4 2022 earnings. But as a long-term investment in the AI sector, NVDA stock looks like a sound bet.
About NVIDIA
NVIDIA Corporation provides graphics and compute and networking solutions in the United States, Taiwan, China, Hong Kong, and internationally. The 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; virtual GPU or vGPU software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and Omniverse software for building and operating metaverse and 3D internet applications.
Read More - Current Price
- $145.89
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 40 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $154.63 (6.0% Upside)
#5 - Medtronic (NYSE:MDT)
Next on this list of AI stocks to buy is Medtronic plc (NYSE: MDT). The company uses AI and machine learning in its robotic-assisted surgery platforms, its coloscopy and endoscopy systems, and insulin pumps. The company also has launched the only FDA-cleared “smart” insulin pen that integrates glucose sensor data.
But the last two years have been anything but a smooth ride for investors. The stock climbed nearly 80% from the onset of the pandemic to August 2021. But it’s down 22% in the last 12 months. MDT stock has a P/E ratio of around 24x, which is in line with the sector average, but its revenue and earnings projection are in the single digits for the next five years.
However, an investment in MDT stock comes with an attractive dividend with a yield of 3.42% and has been increasing for 46 consecutive years.
About Medtronic
Medtronic plc develops, manufactures, and sells device-based medical therapies to healthcare systems, physicians, clinicians, and patients worldwide. Its Cardiovascular Portfolio segment offers implantable cardiac pacemakers, cardioverter defibrillators, and cardiac resynchronization therapy devices; cardiac ablation products; insertable cardiac monitor systems; TYRX products; and remote monitoring and patient-centered software.
Read More - Current Price
- $84.11
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 9 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $95.19 (13.2% Upside)
#6 - Schrodinger (NASDAQ:SDGR)
To this point we’ve focused on large-cap stocks. The last two stocks on this list are small-cap stocks. While they do carry more risk, small-cap stocks have historically led equities out of recessions. The first of these stocks is Schrodinger, Inc. (NASDAQ: SDGR).
The company has an AI-based drug discovery platform. It has an extensive pipeline, and in 2022 received FDA approval to study its novel computer-designed candidate for the treatment of non-Hodgkin lymphomas in clinical trials. Additionally, the company has successfully brought two therapies to market via collaborations.
Like many early-stage biopharma companies, Schrodinger is not yet profitable. That adds an element of risk, mainly when the economy is weak. But the analysts surveyed by MarketBeat give the stock a price target of over $55. That would be a 134% upside from its current level.
About Schrödinger
Schrödinger, Inc, together with its subsidiaries, develops physics-based computational platform that enables discovery of novel molecules for drug development and materials applications. The company operates in two segments, Software and Drug Discovery. The Software segment is focused on licensing its software to transform molecular discovery for life sciences and materials science industries.
Read More - Current Price
- $19.17
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $32.90 (71.6% Upside)
#7 - Exscientia (NASDAQ:EXAI)
The development of the first mRNA vaccines for Covid-19 has opened the door to the field of precision medicine. Like Schrodinger, that’s the bullish thesis for Exscienta plc (NASDAQ: EXAI). The UK-based company is “re-imagining the way drug discovery is implemented, combining the latest AI technique with experimental innovation to engineer a new set of processes for drug discovery.”
One of the intriguing elements of the company is that they are focusing on finding oncology drugs. The company has an extensive pipeline but only has one candidate in the early clinical trial phase.
That means it could be years before the company has a commercially available product. And that also means that investors will be waiting for profit and meaningful revenue. That’s plenty of risks. But if you’re looking for long-term investments, EXAI stock has a consensus price target of over $15, which is a gain of 159% from its current price.
About Exscientia
Exscientia plc, an artificial intelligence (AI) driven Pharma-tech company, engages in design and develop differentiated medicines for diseases with high unmet patient needs. The company's lead product candidate GTAEXS617, a CDK7 inhibitor, which is currently in a Phase 1/2 trial to manage the potential toxicities associated with CDK7 as well as optimizing pharmacokinetics for maximizing on-target efficacy.
Read More - Current Price
- $4.84
- Consensus Rating
- Hold
- Ratings Breakdown
- 0 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $7.00 (44.6% Upside)
Artificial intelligence is going to touch many aspects of our life. You already experience AI in your smartphone and streaming services. In the future, AI will expand into areas such as content creation to elective surgeries and so much more. It's going to be nearly impossible to avoid the impact of AI in our lives.
Still, this is an emerging field. While many AI stocks may be in investor's portfolios for reasons other than the company's exposure to AI, there are other names that are less familiar. That doesn't mean they're bad investments, it just means that you'll have to make sure you do your due diligence.
If you're looking for exposure to AI without the need to pick individual stocks, you can consider one of the many artificial intelligence exchange-traded funds (ETFs). Some of the popular choices include the Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ) and the iShares Robotics and Artificial Intelligence ETF (NYSEARCA:IRBO).
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