A huge buzz has been forming around AI stocks lately alongside the viral chatbot, ChatGPT’s fervent rise in popularity. According to the latest available data, Microsoft-backed ChatGPT currently has over 100 million users. And the website now generates 1.8 billion visitors per month. This user and traffic growth was achieved in a record-breaking three-month period (from February 2023 to April 2023). Its meteoric rise has sparked much interest in artificial intelligence technology stocks, as evidenced by the recent performance of the $2.12 billion Global X Robotics & Artificial Intelligence Fund (BOTZ), which is up more than 35% YTD.
Investors have been pouring into rapidly developing AI tech names over the past few months, and this is likely just the beginning. According to Grand View Research, the global artificial intelligence market reached a valuation of $136.55 billion in 2022. It’s projected that by 2030 the industry will command a revenue of nearly $1.9 trillion.
Investors looking to profit from the paradigm shift may wonder which companies stand to gain the most as breakthrough advancements are made in the industry. Here we’ll look at three Buy rated standouts from the burgeoning AI group with average projected upsides of 40% or more.
Xometry (XMTR)
Online business-to-business marketplace Xometry uses artificial intelligence to connect businesses with industrial product manufacturers. Goldman Sachs is one of several firms that believe Xometry, which uses artificial intelligence to run its platform’s core, will continue to grow by keeping AI at the heart of its platform while it expands. “Unlike some of the recent shifts in platform investments across our coverage universe, we would highlight that XMTR has historically been built as a platform with AI/ML at the core of its competitive moat,” the firm said in a note to clients.
XMTR Shares have nearly halved this year on macroeconomic concerns, but Wall Street is optimistic about the stock going forward. The ten analysts offering 12-month price forecasts for the stock have an average price target of $24.50, representing a 42% upside from the current price.
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Luminar (LAZR)
Luminar is at the forefront of lidar technology development with products that integrate sensors with AI, giving cars autonomous safety features to support a human driver. EV makers increasingly embrace LiDAR tech for self-driving vehicles, translating into solid revenue growth for Luminar.
Luminar management aims for triple-digit revenue growth every year for the next five years, and its stock has been gaining momentum. After losing more than 70% of its value in 2022, LAZR is up nearly 45% this year. The stock garners a solid “Buy” rating from the 12 analysts offering recommendations. An average price target of $12 represents a 78% upside from the current price.
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FARO Technologies, Inc. (FARO)
It’s not uncommon for small tech companies to lose money for years before finding success. However, it is why investors have been hesitant about three-dimensional measurement solutions developer Faro Technologies since it boosted investment sharply in the last year, with cash burn ramping by 64%. That does raise some red flags, and there’s no solace in the operating revenue growth of 2.4% in the same time frame. Clearly, however, the crucial factor is whether the company will grow its business in the future.
FARO’s latest offering is its cloud-based information platform, Sphere. With Sphere, users can leverage artificial intelligence and machine learning to automate time-consuming and repetitive tasks. Sphere enables faster 3D data capture, processing, and project management for engineering and construction projects. We expect this technology to grow and develop along with AI and don’t see the company’s extra spending as a deterrent.
Its cash burn of $42 million is about 8.7% of its $478 million market cap. That’s a manageable proportion and shows the company is well on top of its spending. Considering the potential for advancement for this micro-cap, the pros on Wall Street are beginning to take notice. The five analysts offering recommendations for the stock say to Buy FARO, with none recommending to Sell. A median 12-month price target of $22 represents an increase of 44% from the current price.
