In this article, we discuss 5 best artificial intelligence stocks to buy now. If you want to read the introduction and detailed analysis of the artificial intelligence market, go to 11 Best Artificial Intelligence Stocks To Buy Now.
5. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders (Q1): 131
Apple Inc. (NASDAQ:AAPL) is the world’s biggest company by market capitalization as of June 2022. It is one of the Tech Giants of IT. Apple Inc. (NASDAQ:AAPL)’s Siri was launched in 2011 and was the first widely used AI and NLP-powered assistant. Moreover, Apple chipsets use AI algorithms to understand the world around them.
For Q2 2022, Apple Inc. (NASDAQ:AAPL) reported an EPS of $1.20, outperforming the estimates of $1.16, and generated a revenue of $82.9 billion which was in line with the estimates. Through the quarter, the company generated a free cash flow of $20.79 billion. The free cash flow margins were recorded at 25.1%. The company exited the quarter with cash and cash equivalents of $28.86 billion with an inventory of $5.43 billion. Moreover, while global smartphone sales dropped by 9% YoY, Apple Inc. (NASDAQ:AAPL)’s iPhone shipments increased by 8% YoY in the second quarter of 2022.
On August 16, Credit Suisse analyst Shannon Cross upgraded Apple Inc. (NASDAQ:AAPL) to Outperform from Neutral and boosted her price target to $201 from $166. The analyst noted that Apple’s “management focuses on high customer satisfaction by improving ease of use, product quality and continuity between devices.” She added that the company increased its dividend for the 10th consecutive year and further added to shareholder returns through $90 billion in share repurchases.
Here is what Wedgewood Partners had to say about Apple Inc. (NASDAQ:AAPL) in its Q2 2022 investor letter:
“Apple grew revenues +9%, driven by +17% growth in the Services segment. While iPhone revenues grew a modest +5%, it was on an exceptional year ago comparison of +66%. iPhone continues to capture most industry smartphone profits by focusing on high-end price tiers. Apple is taking nearly two-thirds of the revenue share in the premium ($400 and above) smartphone segment. Further, most of the growth was driven by expansion in the “ultra-premium” price tier of $1000 or more per unit.[1] As we have highlighted in the past, Apple’s relentless focus on the development and integration between hardware (especially integrated circuits) and software continues to add significant value for customers of its products and services. We expect this favorable competitive dynamic to continue for the foreseeable future.”
4. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders (Q1): 200
Meta Platforms, Inc. (NASDAQ:META), formerly known as Facebook, Inc. is a California-based technology conglomerate. The company’s Meta AI is working towards developing artificial intelligence in the digital world.
In the second quarter of 2022, Meta Platforms, Inc. (NASDAQ:META) generated $28.822 billion in revenue, with 98.43% of its revenue coming from the Family of Apps segment. The company had a high EBIT margin of 33.41% and a profit margin of 80.47%. Furthermore, the company uses its shareholder equity effectively and has an RoE of 25.48%. Additionally, the 5-year CAGR for the company has been recorded at 29.20%. The trailing 12-month cash flow yield of Meta Platforms, Inc. (NASDAQ:META) generates approximately $40 billion of free cash flow annually on average.
On July 28, JMP Securities analyst Andrew Boone reiterated an Outperform rating on Meta Platforms, Inc. (NASDAQ:META)’s shares with a price target of $215, down from $240. Boone considers META to be a “must buy” for advertisers and believes that the risk/reward of the company is positive at the current levels.
Here’s what Polen Capital said about Meta Platforms, Inc. (NASDAQ:META) in its Q1 2022 investor letter:
“What Would You Pay for the World’s Largest Communication and Entertainment Platform? How Does 5x Earnings Sound?
Meta Platforms also had solid, if not slightly lower-than-expected revenue growth last quarter but guided to a significant slowdown in revenue growth for 1Q 2022. Meta called out TikTok, a competitor for people’s time and attention, seeming to imply it as one of the factors causing the growth slowdown. This appeared to stoke fears that the company’s user engagement and value proposition was eroding for its users and marketers and subsequently would lead to lower advertising revenue growth and market share loss.
We do not doubt that TikTok is taking time and attention away from many forms of digital media, core Facebook and Instagram included. That said, we believe TikTok has mostly expanded the pie. Meta’s user engagement has been stable, even on the very mature core Facebook app. Our research shows that most of the growth headwinds are more likely attributable to a combination of factors. These factors include a preference for short-form video while spending time on the platform (Facebook and Instagram Reels), which is not monetized effectively yet, a COVID-19 pull-forward impact like Netflix, and changes to Apple’s (AAPL) iOS operating system.
More specifically, the changes to iOS make it more difficult for Facebook and Instagram to measure certain types of ads accurately, at least for now. Meta has quantified that the Apple impact as roughly a $10 billion revenue headwind for fiscal 2022, or approximately 7% of total revenue. This is a bit larger than we would have expected, and it is taking longer than expected for Facebook to develop with their own measurement tools. But, excluding the Apple impact alone, Facebook would be growing close to what we would have expected in a more normal environment. Although it could take some time to alleviate, we believe the Apple impact will prove temporary, and we continue to monitor engagement trends on Facebook and Instagram from competitors like TikTok…” (Click here to see the full text)
3. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders (Q1): 205
Alphabet Inc. (NASDAQ:GOOGL) is the parent company of Google and is one of the largest companies by revenue. The company has embedded itself deeply in AI technology including testing self-driving cars through its subsidiary, Waymo. In addition, the company’s subsidiary DeepMind develops general-purpose AI technology.
Alphabet Inc. (NASDAQ:GOOGL) has one of the strongest balance sheets among the Big Five of IT. It is the only one of the Tech Giants whose cash and short-term investments outweigh all of its liabilities. The company generated $19.5 billion in cash from operating activities in the second quarter of 2022. Moreover, as of Q2, the company’s total cash and cash equivalents, including marketable securities, were $125 billion. In 2012, the company’s cash from operating activities was around $16.7 billion and was over $90 billion by 2021. In the trailing 12-month period the cash from operating activities has reached a staggering $95 billion.
On August 3, Tigress Financial analyst Ivan Feinseth maintained a Strong Buy rating on Alphabet Inc. (NASDAQ:GOOGL)’s shares and boosted the price target to $186 from $183. According to the analyst, the company’s Q2 reports show the resilience of its core business in cloud and research. Feinseth further added that the company’s current investments in AI are guiding towards “increasingly focused and helpful experiences for users and businesses”.
Here is what Wedgewood Partners has to say about Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2022 investor letter:
“Alphabet grew its core search revenues +24% on a +30% year-ago comparison. Despite this stellar top-line performance, shares sold off as the market began to discount fears of a recession. However, the stock has outperformed relative to other holdings as core Google Search has been less affected by disruptions related to Apple’s privacy initiatives. Alphabet’s Cloud segment is generating revenue at a $24 billion run rate but is still running at a loss. We think this business can generate much better margins at some point. In the meantime, the Company has 4% to 5% of shares authorized for repurchase which is an attractive use of capital as the stock trades for about just 18X 2023 consensus estimates.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders (Q1): 271
Amazon.com, Inc. (NASDAQ:AMZN) is an American e-commerce giant. As of August 16, the company stock surged almost 40% from its June lows after its AWS internet business segment saw a 33% sales growth in the recent quarter. AWS offers a vast set of machine learning services and was named a leader in Gartner’s Cloud AI Developer services.
On July 29, BofA analyst Justin Post maintained a Buy rating on Amazon.com, Inc. (NASDAQ:AMZN)’s shares and upgraded the price target to $170 from $168. Post referred to the company’s Q2 results as “some blemishes on otherwise solid” and mentioned the positive guidance to be “better than feared.” The analyst further noted that he sees the company as “one of the few acceleration stories in the Internet in 2022”.
Here is what Oakmark Funds has to say about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2022 investor letter:
“Amazon (NASDAQ:AMZN) is the leading e-commerce and cloud-computing provider in the world. Two-thirds of U.S. households are Amazon Prime subscribers, and over half of all online product searches now start on Amazon. We believe the company’s strong customer loyalty and massive infrastructure are significant barriers to entry in a growing e-commerce market. Separately, Amazon Web Services (“AWS”) controls nearly half of the market in cloud computing. We believe AWS has become utility-like in nature and scale and we expect healthy growth moving forward as IT workloads continue moving to the cloud. More recently, concerns about rising investment spending have weighed on the stock-as they have in times past-providing us another opportunity to purchase shares at a very attractive price. At our purchase price and valuing AWS like its peers, an investor isn’t paying much of anything for the immensely valuable e-commerce franchise.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders (Q1): 259
Microsoft Corporation (NASDAQ:MSFT) is a multinational corporation that produces consumer electronics, computer software, and PCs. The company’s Azure AI platform is a substructure for developing comprehensive solutions for data and AI and has 95% penetration in Fortune 500 companies. Microsoft Corporation (NASDAQ:MSFT) is one of the biggest companies by revenue.
Microsoft Corporation (NASDAQ:MSFT) has increased its dividends for 20 consecutive years and has an FWD payout ratio of 24.39%. As of August 19, the company’s dividend yield is 0.87%, compared to the 1.37% sector average. The most recent quarterly dividend was declared on June 14 at $0.62 per share, payable on September 8 to the shareholders of record on August 18.
Here is what Carillon Tower Advisers had to say about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2022 investor letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Microsoft (NASDAQ:MSFT) reported positive results driven by personal computing strength, but analysts were especially positive on its growth outlook for its Azure cloud-computing services.”
You can also take a look at 10 Stocks To Buy According to William Von Mueffling’s Cantillon Capital Management and 10 Important Energy Stocks Making Moves After Earnings.
