Artificial intelligence, automation and robotics are changing almost every industry. In 2023, the world got a first-hand glimpse of the remarkable advancements in AI technology being made by OpenAI, Microsoft, and Google.
Whether it’s machine learning, large language models, smart apps and devices, digital assistants, synthetic media software or autonomous vehicles, companies that don’t invest in AI products and services risk becoming obsolete. Countless companies stand to benefit from AI, but a handful of stocks are putting AI and automation at the core of their businesses.
Here are 10 of the best AI stocks to buy, according to Argus Research:
| Action | Implied increase from January 2 close |
| Microsoft Corp. (symbol : MSFT) | 15.9% |
| Alphabet Inc. (GOOG, GOOGLE) | 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 SA (ASML) | 18.6% |
| International Business Machines Corp.IBM) | 2.2% |
| Arista Networks Inc. (A NET) | 18.8% |
After announcing a billion-dollar investment in OpenAI in 2019, Microsoft reportedly increased its stake in OpenAI to 49% in January 2023 and integrated ChatGPT into its Bing search engine shortly after. 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 will not have a significant financial impact on Microsoft. Argus has a “buy” rating and $430 price target on MSFT, which closed at $370.87 on January 2.
Alphabet, parent company of Google and YouTube, 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-purpose 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 on GOOGL stock, which closed at $138.17 on January 2.
Amazon has integrated AI into every aspect of its business, including targeted advertising, 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 praised Amazon’s cloud deal with AI technology company Anthropic and says AI technology could help accelerate AWS’ sales growth. Argus has a “buy” rating and $165 price target on AMZN stock, which closed at $149.93 on January 2.
High-end chipmaker Nvidia provides the massive processing power needed to run advanced AI applications. Nvidia has been the best-performing stock in the entire S&P 500 in 2023, and that’s largely due to the company’s exposure to AI. AI-driven demand for Nvidia’s graphics processing units helped Nvidia triple its revenue year-over-year in its fiscal third quarter, despite new U.S. restrictions on processing. exporting high-end chips. Kelleher says Nvidia’s unprecedented 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 on NVDA stock, which closed at $481.68 on January 2.
Meta Platforms Inc. (META)
Meta Platforms is a market leader in social media and online advertising and owns Facebook, Instagram and other platforms. Meta is reportedly developing a new AI system designed 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 field of generative AI and he expects AI to provide opportunities to further optimize performance. Argus has a “buy” rating and $375 price target on META stock, which closed at $346.29 on January 2.
Taiwan Semiconductor Manufacturing Co. Ltd.TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play company semiconductor foundry. Taiwan Semi manufactures all advanced AI semiconductors for Nvidia and other AI chip manufacturers. Growing demand for AI chips helped offset Taiwan Semiconductor’s falling sales of smartphone and laptop chips in the third quarter. Kelleher says AI-related demand for Taiwan Semi continues to strengthen even as the overall semiconductor market faces a cyclical downturn. He claims that advanced nodes will support the company’s AI growth, and Taiwan Semi estimates that demand for AI processors already represents 6% of total revenue. Argus has a “buy” rating and $110 price target on TSM stock, which closed at $101.53 on January 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 seeing significant 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 a rapidly growing total addressable market. He says Adobe’s revenue growth and high margins make it a great investment. Argus has a “buy” rating and $675 price target on ADBE stock, which closed at $580.07 on January 2.
ASML produces photolithography systems and other processing equipment used in semiconductor manufacturing. ASML is the only major producer of extreme ultraviolet lithography equipment needed to produce advanced AI chips. Unfortunately, ASML said U.S. export controls would affect 10% to 15% of its current shipments to China, but it expects Chinese demand to remain strong nonetheless. Kelleher says ASML is a key supplier to two major 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 on ASML stock, which closed at $716.92 on January 2.
International Business Machines Corp.IBM)
For years, IBM has been developing ways to adapt its AI supercomputer Watson to revolutionize healthcare, finance, law and academia. IBM’s Watson AI solutions portfolio includes applications to improve customer service, automate workflow processes, and predict outcomes. IBM’s Watson Studio even helps enterprise clients create proprietary AI applications. Kelleher says AI will play a central role in IBM’s future as clients upgrade their infrastructure. He says the company’s open source approach to AI, which includes Watsonx.ai, provides a unique alternative to the closed systems of Alphabet and Microsoft. Argus has a “buy” rating and $165 price target on IBM stock, which closed at $161.50 on January 2.
Arista Networks Inc. (A NET)
Arista Networks provides cloud networking solutions to Internet companies, cloud service providers and enterprise data centers. Arista’s high-performance cloud networking solutions and high-speed data center switches provide the processing power required for AI-intensive workloads. In early 2023, Arista launched a cloud-based, AI-powered network identity service for enterprise IT operations and security. Kelleher says generative AI models have sparked accelerated growth in cloud-based data center networks to support large language models, and Arista is the market leader in enterprise cloud and data center networks. data. Argus has a “buy” rating and $275 price target on ANET stock, which closed at $231.56 on January 2.
