In this article, we present 35 non-tech stocks with long-term investment potential.
Investors have been desperately searching for a safer way to play the AI boom that has swept the US stock market over the past few months. Prominent investment bank Goldman Sachs recently released an investor note detailing which sectors of the economy would benefit from the AI craze, replacing obvious bull cases in the technology domain by thoughtful insights on the long-term impact of AI on utilities, industrials, retail, and healthcare. According to analysts at Goldman, AI tools looked set to help companies outside of the technology sector improve productivity and reduce labor costs. The investment titan detailed the insatiable appetite for AI, evidenced by NVIDIA becoming one of the valuable firms in the world over the past year, and noted that the market was yet to reward companies that have downstream AI exposure.
Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and AI News You Should Not Have Missed.
David Kostin, the chief US equity strategist at Goldman, wrote in the investor note that the AI boom was likely to play out in four key phases. The first phase, per the analyst, had been focused on NVIDIA, the chipmaker that is at the forefront of AI data center build. Kostin detailed that the second phase was likely to be about companies building AI infrastructure. Some examples of this include semiconductor, data center, networking, cloud, and security industries, as well as utilities. So far this year, the returns of stocks working in these industries have dwarfed the returns of the benchmark indexes. The third phase, continued the analyst, would be about companies able to put AI in their products and boost sales in the process. Kostin cautioned that these firms had lost ground against AI stocks in recent months.
The analyst claimed that firms falling in the fourth phase of the AI boom, ones who would enjoy productivity gains after adopting AI, had been ignored by the majority of the market so far. Kostin maintained that it was unclear when these downstream AI stocks, some of which are discussed in detail below, would rally and expand their earnings multiples, but stressed that this would happen eventually. The industrial sector highlights the Goldman theory in action. Since the start of 2023, industrial stocks have jumped close to 30% in value. Of these, the firms that are directly exposed to AI verticals have more than doubled in value. In the fourth quarter of 2023, over 30% of industrial firms mentioned AI in their earnings reports, up from just 10% in the same period the preceding year.
Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.
Our Methodology
For this article, we selected non-tech AI stocks by consulting an investor note from prominent investment firm Goldman Sachs. These stocks are also popular among hedge funds. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A scientist at a computer station, surrounded by a neural network of artificial intelligence code.
Non-Tech AI Stocks For Long Term
35. Hawaiian Electric Industries, Inc. (NYSE:HE)
Number of Hedge Fund Holders: 21
Hawaiian Electric Industries, Inc. (NYSE:HE) engages in the electric utility businesses in the United States. The company is likely to benefit from the projected increase in power prices as AI data center demand leads to shortage of supplies. The renewable energy portfolio of the firm will attract lots of investor interest in the coming months as tech firms look for sustainable power for their AI data centers. Hawaiian Electric generates electricity through wind, solar, photovoltaic, geothermal, wave, hydroelectric, municipal waste, and other biofuels. The company serves suburban communities, resorts, the United States Armed Forces installations, and agricultural operations.
Hawaiian Electric Industries, Inc. (NYSE:HE) is attracting the attention of Wall Street analysts already. Wells Fargo recently upgraded the stock to Equal Weight from Underweight with an unchanged price target of $14. In an investor note, the advisory noted that there was a high probability that a wildfire settlement moves forward for the company, but added that Hawaiian Electric may need to contribute more for that to happen.
34. Jones Lang LaSalle Incorporated (NYSE:JLL)
Number of Hedge Fund Holders: 21
Jones Lang LaSalle Incorporated (NYSE:JLL) operates as a commercial real estate and investment management company. Christian Ulbrich, the CEO of the firm, outlined during the second quarter earnings call how the AI data center prospects were a tailwind for the stock in the long-term. The CEO underlined that the communications and technology sector had performed better than expected in the second quarter, largely because average lease prices had more than doubled as large tech companies took place to support data center operations. The CEO noted that despite a slower start to 2024 across many markets, demand for high-quality space with sustainable solutions and automated technology was expected to drive long-term growth.
Market experts are bullish about the long-term prospects for Jones Lang LaSalle Incorporated (NYSE:JLL). Raymond James analyst Patrick O’Shaughnessy recently raised the price target on the stock to $268 from $246 and kept a Strong Buy rating, underlining that US capital markets activity was up modestly in Q2, growing 2% year over year, according to MSCI Real Capital Analytics, a meaningful improvement from a 12% decline last quarter and snapped a streak of seven consecutive quarters of y/y declines in capital markets activity.
33. Science Applications International Corporation (NASDAQ:SAIC)
Number of Hedge Fund Holders: 24
Science Applications International Corporation (NASDAQ:SAIC) provides technical, engineering, and enterprise information technology (IT) services primarily in the United States. The company recently posted earnings for the second quarter of 2024, reporting earnings per share of $2.05, beating market expectations by $0.20. The revenue over the period was $1.8 billion, up more than 2% compared to the revenue over the same period last year and beating analyst expectations by $30 million. The IT firm increased adjusted diluted EPS fiscal year 2025 guidance to $8.10 – $8.30, and reaffirmed all other financial guidance for the 2025 fiscal year.
Science Applications International Corporation (NASDAQ:SAIC) regularly does business with the US Army, specially in the IT domain. Recent news coming out from defense circles indicates that the US Army is planning to ask contractors to assist with the integration of artificial intelligence technology into its operations. As one of the biggest business partners of the US army, SAIC is in pole position to take advantage of such AI-related business contracts.
32. Kemper Corporation (NYSE:KMPR)
Number of Hedge Fund Holders: 25
Kemper Corporation (NYSE:KMPR) is a diversified insurance holding company that engages in the provision of insurance products to individuals and businesses in the United States. The company has embedded AI tools into the business in a bid to enhance underwriting efficiency, improve claims processing, and bolster fraud detection efforts. One key area where Kemper is using AI is in predictive analytics, which allows the firm to assess risks more accurately by analyzing both historical and real-time data. This helps the company proactively manage potential risks, reducing the likelihood of large claims. AI is also used to personalize customer engagement, enabling Kemper to tailor insurance products and services based on individual customer preferences and behaviors.
Kemper Corporation (NYSE:KMPR) has invited bull calls from Wall Street in recent weeks. Raymond James analyst Gregory Peters has a Strong Buy rating on the stock with a price target of $75. In a recent investor note, the analyst highlighted that Kemper was poised to report strong EPS growth through 2026 due in part to the firm’s outlook for increasing policies in force and the company achieving management’s 96% combined ratio target.
31. First American Financial Corporation (NASDAQ:FAF)
Number of Hedge Fund Holders: 26
First American Financial Corporation (NASDAQ:FAF) provides financial services. The company makes use of AI to enhance title production and real estate transaction services. It is one of the first fintech firms to be awarded multiple patents for AI-driven systems that automate the analysis of property description data, allowing for faster and more accurate title production. The AI tech used by the firm includes natural language processing (NLP) and machine learning techniques to extract and classify data from a variety of sources, significantly streamlining their processes in title insurance and risk management. Their patented AI systems also employ optical character recognition (OCR) to unlock data from millions of public records.
Wall Street analysts view First American Financial Corporation (NASDAQ:FAF) stock with bullish sentiments. Keefe Bruyette recently raised the price target on the shares to $72 from $66 and kept an Outperform rating, noting that the increased estimates for the title insurers were due to expectations that lower interest and mortgage rates will lead to higher volumes in 2025 and 2026. The advisory noted that First American was the best way to play the recovery in volumes within the title industry.
30. Brown & Brown, Inc. (NYSE:BRO)
Number of Hedge Fund Holders: 26
Brown & Brown, Inc. (NYSE:BRO) markets and sells insurance products and services in the United States, Canada, Ireland, the United Kingdom, and internationally. The company is primarily using AI tools to enhance customer and operational outcomes. As part of this plan, it has integrated AI-driven solutions through partnerships with platforms like Gryphon AI to improve their sales performance and compliance management. One example of this is that the insurance firm uses conversation intelligence and real-time coaching tools of Gryphon to help sales teams meet revenue targets more effectively. This system uses AI to analyze and guide sales conversations, improving overall engagement and outcomes.
Brown & Brown, Inc. (NYSE:BRO) is the typical under the radar AI stock. Wells Fargo recently upgraded the shares to Overweight from Equal Weight with a price target of $112, up from $94. In an investor note, the advisory noted that dealing with a potential recession, combined with potential lower interest rates, and the prospects for an extremely active wind season, the best sectors within insurance included personal lines plus insurance brokers, and Brown & Brown provided exposure to the middle-market, where pricing was holding up better than large account space.
