As I’m sure everyone reading this is aware, artificial intelligence, or AI, has been quite a volatile sector in the recent past. All indicators suggest this will continue in the near to semi-long-term future.
Many are skeptical of the high valuation AI companies carry, often comparing it to those seen before the dot-com crash. Statistically speaking, we are far away from that level of inflated valuations — at least for now.
AI companies rise and fall every day. In a way, they can be seen as a “playground” for investors who want to take risks to reap awards, but are too risk-averse to invest in even more volatile sectors, such as biotechnology.
While there are many AI-centric companies that are likely to benefit from the seemingly exponential growth trend, here are three that I believe will be your safest bets for the long run.
Shopify (SHOP)
Shopify (NYSE:SHOP) is a prominent up-and-coming e-commerce company that offers websites, tools and back-end support for businesses. It also heavily uses AI to improve the end-user experience by automating stores, providing relevant suggestions and being compatible with multiple third-party AI tools.
SHOP stock has slid recently, down almost 30% over the last six months. However, I believe it is ripe for a comeback. While it is currently making a loss, with negative profit margins of 2.82%, the company has seen solid growth lately. Quarterly revenue was up 23.40% int the most recent period and it maintains cash flows of over $1 billion. Earnings have consistently surprised investors, too.
Five analysts on Yahoo Finance! give this stock an average price target of $108, setting its implied upside at over 80% at the time of writing. Shopify’s biggest strength is its ease of use, as it allows merchants to seamlessly start selling products. This, along with rapid revenue growth and adoption by some of the world’s biggest celebrities, has led people to compare SHOP to the next Amazon (NASDAQ:AMZN). While this isn’t certain, SHOP remains a great AI stock to buy.
Intuitive Surgical (ISRG)
Intuitive Surgical (NASDAQ:ISRG) is a global technology leader in minimally invasive care and the pioneer of robotic-assisted surgery. The company develops, manufactures and markets the da Vinci surgical system and related instruments and accessories, which are designed to enable complex surgery using a minimally invasive approach.
The robotics stock is using AI to enhance its robotic-assisted surgery systems and is enjoying tremendous profits as a result. ISRG profit and operating margins of 27.65% and 28.23%, respectively, indicate the company is a leader. This is also seen by its year-over-year (YOY) revenue growth rate of 25.20%. The stock is up 33% over the past month though down 5% this week, making it the prime time to invest.
The company’s AI-driven products improve surgical outcomes, reduce operation times and minimize patient recovery periods. ISRG has a 75% share of the surgical robotics market, a huge number considering the market is valued at around $94 billion. The stock enjoys industry-wide backing, with more than 89% of the stock held by institutions and insiders. Given its strong market position and growth potential, ISRG is one of the best AI stocks to buy.
Micron Technologies (MU)
Micron Technologies (NASDAQ:MU) is a global leader in semiconductor solutions, specializing in memory and storage technologies. The company designs and manufactures memory products essential for data centers, automotive and industrial applications. It also plays a significant role in advancing artificial intelligence and machine learning capabilities.
MU stock is currently trading at around $110 per share with a market cap of $121.3 billion. The stock has fallen almost 17% over the past month but I expect that to reverse soon because of its strong fundamentals. The stock has consistently beaten EPS predictions over the past year, with an average surprise of 75%. However, that is primarily due to a huge 268% EPS beat in the first quarter.
The company is set to report third-quarter earnings on Sept. 26. With a target price of $159.47, MU stock has a growth potential of 45.75% implied.
The companywill benefit from increased demand for memory and storage solutions driven by AI advancements. This is seen with the YOY quarterly revenue growth rate of 81.50%, and an increase in revenue of $2.81 billion over the past year. These factors position MU stock as a compelling AI stock to buy due to its significant growth potential fueled by the demand for AI-optimized memory solutions.
On the date of publication, Achintya Pasricha did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
