15 AI-related Stocks to Watch 2023

The demand for GPUs has surged due to their crucial role in accelerating AI model training and inference processes. The rising adoption of AI across industries has created limited access to GPUs, further driving up the stock value of GPU makers like Nvidia. Cloud computing is another key driver of the AI boom, as AI algorithms require significant computational power and storage. Tech giants like Amazon, Microsoft and Google provide scalable and efficient cloud platforms for AI applications, leading to remarkable growth in their stocks. What’s noteworthy is the swift pace at which the latter two companies have been striving to develop and release generative AI tools, aiming to win the AI arms race.

Robust data technology and cybersecurity are also vital for the success of AI applications. Specialized companies ensure the reliability of high-quality datasets and protect AI systems from cyber threats. The stocks of companies operating in these domains have gained significant investor attention. In this listicle, we will explore 15+ AI-related stocks to watch this year, taking into account these market dynamics and the potential for growth.

Nvidia (NVDA)

Renowned for its graphics processing units, Nvidia has become a household name in the world of AI. Its financial performance in Q1 2023 was strong, with revenue up 19% year-over-year to $7.19 billion and earnings per share up 44% year-over-year to $0.82. The company’s gaming business was the primary driver of growth, with revenue up 40% year-over-year. The data center business also grew strongly, with revenue up 82% year-over-year.

Nvidia’s stock price has also been on a tear in recent months, rising over 50% since the start of the year. The stock is currently trading at a price-to-earnings ratio of 60. However, investors are betting that Nvidia’s strong growth will continue in the years to come, thanks to the AI boom. Artificial intelligence is a booming field, and Nvidia is a leading supplier of GPUs for artificial intelligence applications.

Analysts’ rating and price target:

• Evercore ISI analyst C.J. Muse: Buy, $300 price target
• Morgan Stanley analyst Katy Huberty: Overweight, $300 price target.
• BMO Capital Markets analyst Ambrish Srivastava: Outperform, $300 price target.

Microsoft (MSFT)

In Q1 2023, Microsoft saw a revenue increase of 18% year-over-year to $50.1 billion and earnings per share up 26% year-over-year to $2.22. The company’s Productivity and Business Processes segment was the primary driver of growth, with revenue up 24% year-over-year. The Intelligent Cloud segment also grew strongly, with revenue up 26% year-over-year.

Its stock price has risen by 40% since the start of the year. The stock is currently trading at a price-to-earnings ratio of 36. This strong performance was driven by the growth of Microsoft’s Productivity and Business Processes and Intelligent Cloud segments. Some factors driving Microsoft’s growth include the growth of the cloud computing market, as Microsoft is the second largest cloud computing provider behind Amazon Web Services (AWS). 

Microsoft has also been investing heavily in AI, including its $13 billion investment in OpenAI and the development of over 50 AI tools. As of June 5, 2023, the median analyst price target for Microsoft stock is $340. 

Analysts’ rating and price target:

• Morgan Stanley: Overweight, $360 price target
• Goldman Sachs: Buy, $350 price target
• Barclays: Overweight, $345 price target
• Jefferies: Buy, $340 price target
• Evercore ISI: Outperform, $335 price target

Alphabet (GOOGL)

Alphabet (GOOGL) reported a revenue increase of 2.6% to $69.79 billion from $68.01 billion in the year-ago period. The company’s earnings per share also increased by 23% to $10.68. GOOGL stock is up around 41% YTD as of June 5, 2023.

The company’s cloud computing business, Google Cloud, is growing rapidly. In the first quarter, Google Cloud revenue increased by 45% year-over-year. Alphabet is also investing heavily in new growth areas, such as artificial intelligence. This year, Google unveiled a host of generative AI tools, including the ChatGPT rival Bard, and introduced new AI capabilities at its I/O event in May.

Analysts’ rating and price target:

• UBS analyst Lloyd Walmsley: Buy, $123 price target.
• Jefferies: Buy, $130 price target.
• Goldman Sachs: Buy, $128 price target.

Baidu (BIDU)

Chinese tech giant Baidu (BIDU) reported strong financial results for the first quarter of 2023, with revenue rising 10% to $4.54 billion from $3 billion year-over-year. The company’s earnings per share also increased by 20% to $1.21. The company’s stock is up over 50% in the past year.

There are several factors that are driving Baidu’s growth. The company’s online advertising business is growing rapidly. In the first quarter, online advertising revenue increased by 15% year-over-year. Like its big tech counterparts in the US, Baidu is also investing heavily in new growth areas, such as artificial intelligence and its autonomous driving service Apollo Go. 

Baidu has been investing heavily in AI for many years, and it has made significant progress in a number of areas, including natural language processing, computer vision, and machine learning. The company is working on releasing its Ernie chatbot soon and is reportedly launching a $145 million VC fund to back Chinese AI companies.

Analysts’ rating and price target:

• Citigroup: Buy, $186 price target
• HSBC: Buy, $$168 price target
• UBS: Buy, $180 price target

In Q1 2023, Meta’s revenue was $28.65 billion, an increase of 3% from $27.8 billion a year ago. The company’s advertising business is growing rapidly as its online advertising revenue increased by 4.1% year-over-year in the first quarter of this year.

As its VR division Reality Labs continues to suffer losses, Meta has been shifting its focus away from the metaverse to invest heavily in AI instead. CEO Mark Zuckerberg said in the Q1 earnings report that the company’s “AI work is driving good results across our apps and business.” Recently, Meta introduced AI-powered ad tools and expanded its AI team, as the company is developing a computing chip that can train AI models.

Analysts’ rating and price target:

• Morningstar: Buy, $280 target price.
• Goldman Sachs: Buy, $300 target price.
• Credit Suisse: Outperform, $277 target price.

IBM (IBM)

IBM (IBM) reported mixed financial results for the first quarter of 2023, with revenue rising 0.4% to $14.3 billion. However, the company’s earnings per share fell by 27% to $1.53. As of writing this, the stock is down by more than 8% in the past year.

IBM has been working on AI applications for the past 40 years. In 1997, the company’s supercomputer, Deep Blue, famously beat world chess champion Garry Kasparov in a six-game match. Despite IBM’s deep AI knowledge, the company’s stock hasn’t been performing as well as Microsoft, Google, and Nvidia due to its unsuccessful push years ago for Watson Health to be used for drug discovery, according to Barron’s.

Recently, IBM unveiled Watsonx, a new AI and data management platform for enterprises. Unlike Google and Microsoft, IBM is not building large language models. Instead, the company wants to help customers create their own AI apps to extract more value from their data, per Barron’s interview with IBM CEO Arvind Krishna. 

Analysts’ rating and price target:

• Morningstar: Hold, $126 price target.
• Morgan Stanley: Hold, $135 price target.
• Evercore ISI: Hold, $140 price target.

Marvell Technology (MRVL)

On May 26, Marvell Technology saw a 28% price surge in its stock value in a single day, peaking at $63 after releasing its Q1 2023 earnings report. Marvell offers a wide range of semiconductor products and technologies that cater to various industries, including data storage, networking, cloud computing, automotive, and the Internet of Things (IoT).

The chipmaker reported a Q1 net revenue of $1.447 billion, up 74% year-on-year as tech giants seek additional ways to access chips amid the AI boom. However, financial consultant Nikhil S. Goklaney said that Marvell Technology “actually suffered a loss of $232 million in Q1 2023 as against a profit of $39 million in Q1 2022” and the numbers reported “do not reflect the great growth story.” Currently, MRVL is priced at $57.90.

Analysts’ rating and price target:

• Jefferies: Buy, $68 price target.
• JP Morgan: Overweight, $70 price target.
• Goldman Sachs: Buy, $60 price target.

Oracle (ORCL)

The AI boom has also contributed to the growth of Oracle (ORCL). Its revenue for Q1 2023 was $11.4 billion, up 18% year-over-year and its earnings per share for Q1 2023 was $0.56, up 23% year-over-year. Oracle’s stock price closed at $119.75 on March 10, 2023, up 15% year-to-date.

The company’s AI-related products include the Oracle Cloud Infrastructure (OCI), Oracle Analytics Cloud, and Oracle AI Platform. OCI is a suite of cloud computing services that includes computer, storage, networking, and database services. It also offers a number of AI-related services, such as the Oracle Autonomous Database, which is a fully managed database service that uses AI to automate database management tasks. 

Oracle Analytics Cloud also offers several AI-related features, such as natural language processing and machine learning. Oracle AI Platform is a platform that enables developers to build and deploy AI applications. It includes several pre-trained AI models, as well as tools for data preparation, model training, and model deployment.

Analysts’ rating and price target:

• Jefferies: Buy, $125 price target.

C3.ai

C3.ai is a relatively new enterprise AI application software company founded in 2009 by American billionaire businessman Thomas Siebel. The company reported a revenue of $72.4 million in fiscal fourth quarter 2023 and full fiscal year ended April 30, 2023, slightly more than the expected $71 million. 

Since the beginning of the year, the company’s stock has surged an astonishing 252%. However, Wall Street analysts remain unimpressed despite C3.ai’s projected revenue for its fiscal year 2024, which is expected to range between $295 million and $320 million. Data from S&P Global Market Intelligence indicates that analysts had anticipated revenues closer to $321 million for the entire year.

C3.ai offers a number of AI applications, including C3 AI Applications for Customer Service, C3 AI Applications for Finance, and C3 AI Applications for Manufacturing. These applications are designed to help businesses improve their operations by using AI to automate tasks, make better decisions, and improve customer service. The company has partnered with Google, Microsoft, AWS, and counts the U.S. Missile Defense Agency as one of its customers.

Analysts’ rating and price target:

• Morgan Stanley: Sell/don’t buy, $20 price target.

Arteris Inc (AIP)

Network-on-Chip interconnect IP provider Arteris Inc reported a Q1 2023 revenue of $13.2 million, up 12% year-over-year. Arteris’s stock price is also up more than 50% year-to-date.

Founded in 1998, the company is focused on developing and marketing interconnect IP solutions that can be used to accelerate the development of AI applications. It offers a number of AI interconnect IP solutions, including its FlexNoC AI Interconnect, which is a high-performance, low-power interconnect IP solution that is designed to meet the needs of AI applications. The company also offers AI development tools, including its FlexNoC AI Toolkit, which is a software development kit that provides developers with the tools they need to design and implement AI applications using Arteris’s AI interconnect IP.

Analysts’ rating and price target:

• Northland Capital: Moderate buy, $16 price target

Soundhound (SOUN)

Soundhound posted revenue of $6.7 million, up 56% year-over-year, fueled by the recent popularization of AI and large language models. During Q1, the company launched SoundHound Chat AI, a new voice assistant that delivers voice AI by combining SoundHound and third-party Generative AI models, like ChatGPT. It also debuted Dynamic Interaction with Generative AI, an extension of the company’s multimodal Dynamic Interaction interface, able to be integrated with any vehicle or smart device.

Founded in 2003, SoundHound is focused on developing and marketing voice recognition and NLP technologies for a variety of applications, including SoundHound app, the Amazon Echo, and the Apple CarPlay. The company’s AI technologies are designed to help users interact with their devices in a more natural and intuitive way.

Its stock price closed at $1.45 on March 31, 2023, down 20% year-to-date, but it has since increased to $2.75 as of June 5, 2023.

Analysts’ rating and price target:

• B. Riley Securities analyst Christopher Rolland: Buy, $5 price target.
• Needham & Company analyst Laura Martin: Buy rating, $4 price target.
• Canaccord Genuity analyst Michael Walkley: Buy rating and $4 price target.

Cadence Design Systems (CDNS)

Cadence Design Systems is a leading provider of electronic design automation (EDA) software, hardware, and IP products to help semiconductor companies design and verify their chips. The company reported first-quarter 2023 revenue of $1.022 billion, up 14% from the same period in 2022. Non-GAAP earnings per share were $1.29, up 23% from the prior year. The company also raised its guidance for full-year 2023 revenue to a range of $4.03 billion to $4.07 billion, up from its previous guidance of $3.97 billion to $4.01 billion.

CDNS stock price has been on an upward trend since the beginning of the year, and is trading at $232.69 per share, as on June 5, 2023. The stock is up 25% year-to-date due to the increase in demand for EDA solutions as chipmakers race to develop new technologies, such as 5G and artificial intelligence. These tools are used by chipmakers to design and manufacture faster, more efficient chips. 

Analysts’ rating and price target:

• Deutsche Bank: Buy, $222 price target.
• Wells Fargo: Overweight, $235 price target.
• Baird: Outperform, $223 price target.

Snowflake (SNOW)

For its first quarter of fiscal 2024, ended April 30, 2023, Snowflake’s revenue was $623.6 million, representing 48% year-over-year growth. The company now has 373 customers with trailing 12-month product revenue greater than $1 million and 590 Forbes Global 2000 customers. Snowflake’s stock price is trading at $180 per share as of June 5, 2023, up 12% year-to-date.

The company offers a cloud-based data warehouse platform that is designed to support AI and machine learning workloads. The platform is built on a unique architecture that allows it to scale horizontally, which makes it ideal for storing and processing large amounts of data. Companies that want to train AI models on their own data would require the services of companies like Snowflake that store and analyze information. 

Snowflake recently acquired AI-powered search engine Neeva to bring search and conversation across its data cloud so that its customers can find the right data point, data asset, or data insight they need.

Analysts’ rating and price target:

• Citigroup: Buy, $189 price target.
• Capital One: Equalweight, $160 price target.
• Morningstar: Buy, $231 price target.

Palo Alto Networks (PANW)

Global cybersecurity leader Palo Alto Networks’ revenue for the fiscal third quarter of 2023 grew 24% year over year to $1.7 billion, compared with total revenue of $1.4 billion for the fiscal third quarter 2022. PANW is up 55% year-to-date. It’s currently trading at $227.57 as of June 5, 2023.

Palo Alto Networks’ strong financial performance results from a number of factors, including the growing demand for cybersecurity solutions and the increasing sophistication of cyber threats, as AI applications heavily rely on vast amounts of data for training and decision-making. This data often includes sensitive and confidential information. AI systems are also susceptible to various cyber threats, including malware, phishing, and denial-of-service attacks. 

Palo Alto Networks’ portfolio includes advanced firewall systems, cloud security solutions, threat intelligence, and endpoint protection, among others. These security offerings are applicable to various industries, including those utilizing AI technologies.

Analysts’ rating and price target:

• Deutsche Bank: Buy, $225 price target.
• Credit Suisse: Outperform, $260 price target.
• Evercore ISI: Outperform, $240 price target.

ZScaler (ZS)

For its third quarter of fiscal year 2023, ended April 30, 2023, cloud security company Zscaler posted revenue of $418.8 million, an increase of 46% year-over-year. The company’s income loss from operations was $55.7 million, or 13% of revenue, compared to $86.6 million, or 30% of revenue, in the third quarter of fiscal 2022. As of today, June 5, 2023, Zscaler’s stock price is up 27.25% YTD, trading at $142.39.

Zscaler’s cloud security platform operates as a Security-as-a-Service (SaaS) model, offering secure access to applications and data regardless of the user’s location or device. The platform uses a globally distributed network of data centers to deliver security services and inspect network traffic in real-time. The company’s growth might be driven by the increasing demand for robust and comprehensive cloud security solutions, including those specifically tailored for AI applications.

Analysts’ rating and price target:

• Capital One Securities: Equalweight, $139 price target.
• Wells Fargo: Buy, $175 price target.
• Evercore ISI: Moderate buy, $170 price target.

FAQ

Conclusion

While the rising value of AI-related stocks presents a compelling investment opportunity, it is crucial to conduct thorough research before making any investment decisions. The AI landscape is subject to various market forces, technological advancements, and regulatory changes that can significantly impact the performance of AI-related stocks. 

Therefore, it is essential for investors to stay informed about the latest developments in the AI industry, track the financial performance and growth prospects of the companies they are interested in, and carefully assess the risks associated with their investment choices. Investors should also be mindful of the AI boom potentially being a bubble like the dotcom boom of the early 2000s.

It’s also important to note that analyst ratings and price targets are just opinions, and they do not guarantee that any particular stock will reach the target price. However, they can be a helpful starting point for investors who are considering buying or selling the stock.

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