Inflation is trending downward and approaching the Federal Reserve’s 2% target and unemployment is heading higher. The Fed is widely expected to begin cutting interest rates at its September meeting. In a recent article, Morningstar projected that the central bank’s target range would sink. It would go down from its current 5.25%-5.5% to 4.75%-5% at the end of this year and just 3%-3.25% at the end of 2025. Truth be told, interest rate cuts could spell big things for a lot of stocks.

Similarly, Citi analysts estimate that the central bank may cut its benchmark rate by 2% points between September and July. “A continued softening of activity will provoke cuts at each of the subsequent seven Fed meetings, in our base case,” the bank stated. Meanwhile, although the unemployment rate rose to 4.1% in June from less than 4% earlier in the year, the economy overall appears to be staying fairly resilient. In fact, the Fed estimates that the economy grew at a rather robust 2.7% above inflation last quarter. With those points in mind, here are three stocks to buy to benefit from the upcoming interest rate cuts.

Stocks to Benefit From Interest Rate Cuts: Tesla (TSLA)

Last October, Tesla (NASDAQ:TSLA) CEO Elon Musk correctly stated that high interest rates can make new cars unaffordable for many consumers. That’s probably why the automaker heavily subsidizes interest rates on loans used to purchase its EVs. As U.S. rates come down, these subsidies will become less costly for Tesla, causing its bottom line to climb.

Interest rate cuts are also likely to significantly boost the company’s growing U.S. energy business. This is because consumers frequently use loans to buy those products. In Q1, the company’s revenue from its energy products rose 7% versus the same period a year earlier to $1.6 billion, and in Q2, the firm deployed a record 9.4 gigawatt-hours of energy offerings, more than double the 4.05 gigawatt-hours of such products that it handed over in Q1. Based on the latter figure, the website Elektrek estimates that the firm’s revenue from energy products came in at roughly $3.7 billion in Q2.

Also making me more upbeat on Tesla are indications that deliveries of its Cybertruck are starting to become quite elevated. Based on various data points released by the firm, Elektrek estimates that the automaker delivered an impressive total of 8,000 to 9,000 Cybertrucks in Q2.

Given all of these points, I view Tesla as one of the best stocks to buy to benefit from upcoming interest rate cuts.

Best Buy (BBY)

Best Buy (NYSE:BBY) is best known for selling tech products. It also offers large appliances, and consumers who purchase new homes tend to buy multiple, new appliances. And of course, interest rate cuts tend to cause the demand for new homes to spike.

Further, the demand for Best Buy’s tech products will probably climb as rates drop. As rates drop. consumers will be much more likely to borrow significant amounts of money through their credit cards. They do so in order to finance such purchases.

Meanwhile, consumers are starting to replace the many PCs that they obtained during the coronavirus pandemic. Furthermore, the retailer is likely to benefit from strong demand for AI-enabled PCs, investment bank DA Davidson recently reported. Indeed, research firm Canalys predicts that 25% of PCs shipped this year will have AI capabilities.

These PCs are likely to carry higher price tags than their peers, boosting Best Buy’s top and bottom lines.

Schrodinger (SDGR)

Schrodinger’s (NASDAQ:SDGR) AI and physics-based platform greatly sped up the drug discovery process and increased the odds that selected molecules will become successful treatments.

A large proportion of the firm’s revenue revenue is generated from other drug makers paying it to utilize its platform. In Q1, for example, the latter business accounted for $33.4 million of the company’s total sales of $36.6 million.

It takes a long time for drug candidates to be approved and start generating revenue. Because of this, many pharmaceutical firms have to borrow large amounts of money to finance their activities. Lower rates will greatly decrease their expenses, enabling more of them to pay Schrodinger to access its platform.

Also making me more bullish on SDGR stock is a recent study from Boston Consulting Group. According to the latter firm, molecules identified using AI would likely have a success rate of about 9%-18%. This was well above the historical average of 5%-10%.

As a result, drug makers that incorporate AI would be able “to achieve the same output with fewer resources and cost, or to increase the total number of new drugs launched within the same resources,” the firm stated.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

On the date of publication, Larry Ramer held a long position in SDGR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.