Artificial intelligence (AI) makes people’s lives easier. And what’s more convenient than online shopping? Naturally, e-commerce stores use this technology to make personalized product recommendations to increase sales. Businesses use chatbots to address frequently asked questions and avoid repetitive tasks for customer support teams. The technology can also auto-generate lines of code and content.
The technology continues to advance and integrate within more businesses. Many consumers also enjoy using AI products or appreciate the AI-powered personalized experiences companies provide online.
The technology’s prominence has attracted a lot of money and investors. Analysts have been gushing over some of the top-rated AI stocks, so let’s take a look at these three picks.
Axcelis Technologies (ACLS)
Axcelis Technologies (NASDAQ:ACLS) uses ion implantation technology to assist with the production of semiconductors. You can find these chips in various goods such as computers, cars, video game consoles, appliances, and more. Semiconductors are also the foundation for artificial intelligence.
Axcelis Technologies has experienced rising demand for its services due to AI chips becoming more popular. The company is rated as a strong buy and has a $182.25 average price target from five analysts. The highest price target is $215.
Axcelis Technologies offers many reasons to justify the current optimism. The stock trades at an 18 P/E ratio and has produced solid earnings over several quarters. The company generated $292.3 million in sales during the third quarter. It’s a 27.6% year-over-year increase. Net income came in at $65.9 million which represents 63.7% year-over-year growth.
Axcelis Technologies’ profit margin has exceeded 20% for a few quarters. All factors considered, the company looks undervalued. But like many AI stocks, Axcelis Technologies is more volatile than most assets. ACLS currently has a 1.79 beta.
Symbotic (SYM)
Symbotic (NASDAQ:SYM) is a riskier AI stock than Axcelis Technologies, but it can generate higher returns for investors. While ACLS grew by 64% year-to-date, SYM has soared by 347% during the same amount of time.
A strong earnings report featuring 61% year-over-year revenue growth and the company’s first quarter of a positive net adjusted profit worked wonders for the stock. Shares rallied by over 40% on the next day.
Symbotic uses artificial intelligence to increase warehouse efficiency. Its robots perform manual tasks, and the company’s software helps people keep track of inventory. Walmart (NYSE:WMT) is a large customer and has a 62% stake in Symbotic.
The stock has a lofty valuation and doesn’t yet have a P/E or a forward P/E ratio. However, the company seems poised to deliver profitable quarters soon. High-growth companies on the cusp of profitability tend to report substantial profit margin improvements soon after they become profitable.
Symbotic can follow that trend and eventually end up with a reasonable valuation. The company’s solid Q1 FY24 guidance suggests the stock’s valuation can improve next year.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) has invested billions of dollars into artificial intelligence. The company is hoping to offer better office tools and enhance Microsoft Azure through this technology. Artificial intelligence can strengthen Microsoft’s edge while introducing new business opportunities.
Microsoft made a big investment in OpenAI that briefly turned into a saga. The OpenAI board fired Sam Altman and then brought him back as the CEO within a week after intense backlash.
Recent drama aside, Microsoft has continued to deliver exceptional returns for investors and is one of the leaders in the AI industry. Shares have gained 58% year-to-date and are up by 266% over the past five years.
Analysts are quite bullish about Microsoft. The stock is rated as a strong buy and has an average price target of $410.03. The highest price target among 33 analysts is $450. Microsoft has many business segments that go beyond artificial intelligence. The company is well-diversified and is a top position in many mutual funds, index funds, and ETFs.
On this date of publication, Marc Guberti held long positions in ACLS and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.