[Editor’s note: This story was originally published June 2017. It has since been updated and republished, as we believe these artificial intelligence stocks remain valuable.]
Everyone is buzzing about artificial intelligence stocks right now. Before we know it, AI will be part of our everyday lives. Market experts say artificial intelligence will lead the next wave of economic growth and productivity for at least the next couple of decades. But many AI stocks have a cautious outlook from the Street.
Take, for example, Nvidia Corporation (NASDAQ:NVDA), which despite its gains has a “moderate buy” consensus rating from the analyst community. And then there’s Advanced Micro Devices, Inc. (NASDAQ:AMD) and Tesla Inc (NASDAQ:TSLA), which average out to “moderate buy” and “hold” ratings, respectively. In many cases, that’s largely because of high valuations and overheated shares.
To find the best investing opportunities in AI right now, we looked for five stocks with a “strong buy” consensus rating from the Street’s top analysts. These are analysts with the highest success rate and average return. By limiting the ratings to best-performing analysts, we cut out analysts with poor track records to find recommendations investors can trust.
Stocks with “strong buy” ratings are also more likely to have significant upside potential from the current share price.
Artificial Intelligence Stocks: Salesforce (CRM)
On June 15, cloud computing giant Salesforce.com, Inc. (NYSE:CRM) launched its Einstein Analytics platform. “We have more customer data than ever before and we need AI to turn data into something actionable for the business user,” says CRM exec Arijit Sengupta.
Salesforce wants a slice of the fast-growing AI market. A new report by IDC and commissioned by CRM found that AI technologies will create more than 800,000 new jobs and add $1.1 trillion to global GDP by 2021.
CRM has a very strong outlook from the Street, with 23% upside potential from its current share price.
Artificial Intelligence Stocks: Microsoft (MSFT)
Microsoft Corporation (NASDAQ:MSFT) acquired Canadian AI company Maluuba this year. Maluuba teaches machines to think and ask questions through deep learning. You may have heard of Maluuba when it made the impossible possible and used AI to beat the notoriously difficult Ms. Pac-Man arcade video game.
Microsoft CEO Satya Nadella says he wants to “democratize AI” and bring the technology to more industries such as healthcare, education and manufacturing.
“Microsoft is back to showing durable double-digit EPS growth — and investors should be willing to pay a higher multiple for that growth,” says Morgan Stanley’s Keith Weiss. He raised his price target from $130 two weeks ago.
Artificial Intelligence Stocks: Alphabet (GOOGL)
Alphabet Inc (NASDAQ:GOOG) has made the most AI purchases out of any tech firm calculated research firm Quid, which shows that GOOG has made 20 acquisitions, including predictive analytics platform Kaggle in Q1 2017.
Google CEO Sundar Pichai recently spoke about Google’s “AI first” future. At Google’s developer conference, he showed the Google Lens (a camera that can recognize what it sees) and AutoML. AutoML uses neural networks to build better neural networks, essentially creating an AI that can create itself.
GOOG received 26 buy ratings and no sell or hold ratings, and it has 23% upside.
Artificial Intelligence Stocks: Baidu (BIDU)
Chinese internet company Baidu Inc (ADR) (NASDAQ:BIDU), the “Google of China”, has been investing heavily in AI. It thinks artificial intelligence can give it an edge over local rivals Tencent Holdings Ltd. (OTCMKTS:TCEHY) and Alibaba Group Holdings Ltd (NYSE:BABA).
Baidu spent $2.9 billion on R&D in just 2.5 years, with most of this going on AI. The money has funded a 1,700-member research team and four separate research labs. Crucially, Baidu has an AI advantage because of the huge data it gains from its 665 million monthly search engine users.
BIDU received eight buy ratings and one “hold” rating in three months and has impressive upside of 39%.
Artificial Intelligence Stocks: Delphi Automotive (DLPH)
U.K.-based auto tech company Delphi Automotive PLC (NYSE:DLPH) is on the rise. Delphi grew by 30% in 2016 and is predicting revenue of $16.5 billion to 16.9 billion for the full year 2017.
Delphi has just dropped its powertrain business to focus on self-driving cars and electric vehicles. With BMW, Intel Corporation (NASDAQ:INTC) and Mobileye NV (NYSE:MBLY), Delphi plans to launch self-driving cars by 2021.
DLPH received four buy ratings and one “hold” rating recently and has 22% upside potential for the next 12 months.
TipRanks tracks and ranks over 4,500 analysts from eight different market sectors.