The artificial intelligence (AI) revolution is picking up speed. Before we know it, AI will be part of our everyday lives. “We are at a pivotal point for its adoption today due to the availability of big data, high-powered computing and advances in algorithms — which all make AI cheaper and faster to implement,” says JP Morgan analyst Stacy Pollard.
She calculates that the AI-related hardware, software and services market could hit $58 billion by 2021 from just $12 billion this year. Indeed, market experts say artificial intelligence will lead the next wave of economic growth and productivity for at least the next couple of decades.
Here, I take a closer look at two top stock ideas with big AI exposure: Micron Technology, Inc.(NASDAQ:MU) and Oracle Corporation (NYSE:ORCL). To find the best investing opportunities in AI right now, I pinpointed seven stocks with a “Strong Buy” consensus rating from the Street’s top analysts.
These are analysts with the highest success rate and average return. By limiting the ratings to only top analysts, I was able to cut out analysts with poor track records. These “Strong Buy” stocks are also more likely to have big upside potential. Of course, Nvidia is a great AI stock, but it only has a cautiously optimistic Street outlook. For this reason I focus below on these more bullish stock picks:
Top AI Stocks to Buy: Micron Technology, Inc.
Micron is one of the world’s three biggest memory companies (Samsung and SK Hynix being the other two). Together these three companies control over 80% of the $122 billion global memory chip market at a time of worldwide memory shortage.
“We believe this global memory chip shortage is set to continue until the end of 2018, at the least” writes Cyrus Mewawalla, the managing director of CM Research. He says demand for DRAM chips and NAND flash chips comes from “new and powerful technology cycles” such as artificial intelligence and augmented reality.
For example, MU chips are used to power self-driving vehicles and help the car’s systems detect hazards on the road. Specifically, Micron says it is already shipping its fastest LPDDR4x memory to “multiple automotive customers,” enabling system bandwidth speeds of 100 GB per second.
MU has received 22 buy ratings versus just 3 hold ratings in the last three months. At the same time, the average analyst price target of $53.24 indicates upside potential of over 33%.
Top AI Stocks to Buy: Oracle Corporation
Database giant Oracle uses AI and machine learning across many parts of its cloud applications. Most notably, Oracle is now using AI and machine learning to automate administration of its latest Oracle Database 18c.
And with this new self-driving database technology, the company has created the world’s first autonomous cloud.
“This is the most important thing we’ve done in a long, long time,” states ORCL CTO Larry Ellison. “The automation does everything. We can guarantee availability of 99.995 percent, less than 30 minutes of planned or unplanned downtime.”
The cloud eliminates human labor, human error and the need for manual tuning.
This ‘Strong Buy’ stock has received 16 buy ratings and 3 hold ratings in the last three months. Given that the stock is currently trading at $48.40, the $59.22 average analyst price target translates into upside potential of 22%.
Drexel Hamilton’s Brian White has a buy rating and $62 price target on the stock. He believes the new innovations “can take the company’s cloud portfolio to a whole new level.”