Three Stocks for the A.I. Revolution

Artificial Intelligence (AI)  might be the most important new industry of the twenty-first century. AI, which has long been a focus of science fiction, is no longer a fascinating topic to consider for the far future — it has arrived. AI is being used by market leaders every day. In fact, removing AI capabilities from many firms that utilize the technology would immediately reduce their profitability — and several of them are trillion-dollar corporations, only emphasizing the new technology’s relevance to the economy and the marketplace in 2021. AI is advancing at a rapid pace.

Machine learning, which entails training a system with massive data, is initially used to build AI. It then applies what it has learned to create conclusions about fresh data it has never seen before. A system intended to recognize objects in pictures is the most basic example. This procedure involves deciphering photos containing certain items, and it “learns” how to recognize them in subsequent images. The detection algorithm grows more accurate as it finds more items in pictures.

AI is used in two ways by businesses. Many utilize AI to improve the efficiency of their existing operations, such as through applications like robots, self-driving vehicles, and virtual assistants. For example, Google, a subsidiary of Alphabet (GOOGL), uses AI to filter spam for Gmail users. Amazon (AMZN) utilizes AI to provide product suggestions to customers, while Netflix (NFLX) uses AI to help with content production and recommendations. Businesses also take advantage of AI by earning from it directly through selling the technology’s hardware and software services. With the continuous, rapid, and inevitable growth in technology today, it’s a safe bet that AI isn’t going anywhere.

Let’s take a brief but detailed look at three different stocks that are not only currently pushing the boundaries of AI but are also considered by analysts to be wise portfolio picks:

Micron Technology (MU)

Micron Technology (MU) was founded on October 5th, 1978, headquartered in Boise, ID. MU makes memory chips such as Dynamic Random-Access Memory (DRAM) and NAND flash memory chips used as commodity items. Due to supply and demand issues, vicious cycles in the semiconductor industry can occur. MU’s expected to stay high in 2021, fueled by the expansion of mobile networks, 5G, cloud computing, and other resources. Also, a chip scarcity has pushed up prices for MU‘s semiconductors.

Micron reports earnings again soon, but they boast an EPS (Earnings-per-share) of $2.33 per share and $8.2 billion in revenue for the quarter thus far. Analysts’ projections show annual and quarterly growth in both MU’s EPS and Sales. MU has a consensus price target of 111.00 among analysts that provide 12-month price projections, with a high of 165.00 and a low of 75.00. The median estimate is up 49.07% from its most recent price. The consensus among economists gives MU a strong buy rating.

International Business Machines Corp (IBM)

The well-known heritage tech firm IBM was founded by Thomas J. Watson Sr. and Charles Ranlett Flint on June 16th, 1911, and is based out of Armonk, NY. IBM serves major business customers as an integrated provider of hardware, software, and other services. Its core computer systems are still used in several industries, and it frequently signs multi-year technology agreements for hundreds of millions of dollars. IBM‘s AI goal aims to use the technology to enhance human intellect, boost efficiency, and reduce expenses. IBM‘s AI technology is being utilized in the healthcare business to build customized care plans, speed up bringing new medications to market, and enhance care quality. IBM is also using AI to assist clients with the arduous chore of financial regulatory compliance in the financial services business.

Although the market for AI products and services is fragmented, IBM remains the global leader. IBM was the worldwide leader of AI software in 2019, with an 8.8% market share and $303.8 million in sales, up 26% from the previous year. They have continued to show healthy growth since. IBM reports again on October 10th, but in the meantime, shows an EPS of $2.52 per share and $17.8 billion in sales. The Revenue and EPS forecasts from analysts all look strong on both a quarterly and annual basis. The consensus price target for IBM among analysts that provide yearly price projections is 149.50, with a high of 176.00 and a low of 115.00. The median estimate reflects an increase of 9.24% over its most recent price. Nearly all the experts agree to buy or hold shares in IBM.

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Amazon.com, Inc. (AMZN)

Although it’s one of the most popular and priciest, Amazon (AMZN) is still very much worth recommending when it comes to their success in the market as a whole, let alone their involvement in AI. AMZN may be the firm that currently uses AI the most. Founder and executive chairman Jeff Bezos has long been a proponent of artificial intelligence and machine learning. While Amazon began as an online store, technology has always been at the heart of the firm. Alexa, AMZN‘s industry-leading voice-activated technology, Amazon Go cashier-less grocery stores, and Amazon Web Services Sagemaker, a cloud infrastructure tool that deploys high-quality machine learning models for data scientists and developers, are all examples of AI in action at Amazon today.

We’re already aware of AMZN’s success. As for the market, its fiscal second-quarter earnings report impressed Wall Street by beating analysts’ EPS projections by 23%, coming in at $15.12 per share. AMZN reports again in another month (October 28th), but for the current quarter, it shows impressive numbers: An EPS of $8.92 per share and $111.6 billion in revenue so far.  AMZN has a median price target of 4,105.00, with a high of 5,000.00 and a low of 3,775.00 among the analysts that provide 12-month price estimates. From the previous price, the consensus forecast implies a 20.55% gain. The growth forecasts from analysts look good, with yearly and quarterly growth both optimistically represented. Although it’s pricy, it’s at least worth a look, because the only thing stronger than the analysts’ financial projections may be their buy rating for investing in AMZN.

PAUL MAMPILLY

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