With artificial intelligence quickly becoming a hot topic, investors should consider buying AI stocks. According to Grand View Research, the global AI market was valued at $136.55 billion last year. Experts there forecast that the segment will grow at a compound annual growth rate (CAGR) of 37.3% from 2023 to 2030. At the peak of the forecast period, the industry should reach $1.81 trillion in revenue.
However, like any other sector, investors may choose to choose their risk profile in exchange for the possibility of higher returns. Here’s the deal: All of the following ideas for buying AI stocks should be considered speculative. Nonetheless, you can also enjoy the catalysts to double your investment.
MU Micron Technology $58.56 CRWD CrowdStrike $127.82 DUOT Duos Technologies $3.77 AMBA Ambarella $71.03 BABA Alibaba $102.74 JD JD.com $40.76 BBAI BigBear.AI $2.51 Micron Technology (MU)
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As a specialist in computer memory and data storage systems, Micron Technology (NASDAQ:MU) offers significant relevance as one of the AI stocks to buy. According to its website, the company is driving a new generation of faster, smarter, global infrastructure that enables mainstream AI. Since the beginning of the year, MU has gained over 16% in stock value.
Financially, the company benefits from a decent balance sheet stability. For example, Micron’s equity-to-assets ratio is 0.71x, ahead of the sector median of 0.64x. The Altman Z-Score is also 3.65, indicating a moderately low risk of bankruptcy over the next two years.
Additionally, the market values MU at 1.36 times book value. In contrast, the industry median is a whopping 2.47x. Finally, Wall Street analysts think MU is a consensus moderate buy. On average, their target price is $68.61. At the highest level, an expert sees stocks reaching $100. If so, that would mean nearly 71% upside potential.
Crowd Strike (CRWD)
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CrowdStrike (NASDAQ:CRWD), a cybersecurity technology company, provides cloud workload and endpoint security, threat intelligence, and cyberattack response services. According to the company’s website, CrowdStrike threat hunters use AI-generated alerts, hypothesis tests, and advanced tools to investigate and stop the most sophisticated threats. Since the beginning of the year, CRWD has gained nearly 24% in stock value.
Financially, the company benefits from decent (if not great) balance sheet stability. Notably, the Altman Z-Score is 5.51, reflecting a low risk of bankruptcy. Operationally, CrowdStrike’s three-year revenue growth rate is 43.5%. This stat outperforms 91.6% of competing AI stocks. Also, the company’s gross margin reaches 73.17%, beating 80% of its peers.
Finally, cover analysts view CRWD as a consensus-strong buy. On average, their average price target is $164.33, which represents almost 29% upside potential. However, the most optimistic target is $235, which means almost 84% upside potential.
Duos Technologies (DUOT)
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Duos Technologies (NASDAQ:DUOT), headquartered in Jacksonville, Fla., is an intelligent automation platform that helps clients make trading safer and more efficient. One of the most advanced AI stocks to buy, Duos has game-changing visualization systems that can help underpin greater digitization successes. Since the beginning of the year, DUOT has skyrocketed by almost 80%. In the last year, however, it has fallen by 20%.
While it’s a tempting endeavor, Duos will require incredible patience. One of the few main advantages here is that it could be slightly undervalued. Specifically, the market values DUOT with a trailing sell multiple of 1.7. As a discount on sales, Duos ranks better than 62.76% of the competition.
However, investors should be aware that Duos’ Altman Z-Score is below par on the balance sheet at 4.16. This indicates significant suffering. Still, Ascendiant’s Edward Woo is sticking a Buy on DUOT, with a price target of $5.25, which implies over 39% upside potential. Given the speculative allure, it’s possible the shares could go much higher.
Ambarella (AMBA)
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Headquartered in Santa Clara, California, Ambarella (NASDAQ:AMBA) is a fabless semiconductor design company focused on low-power, high-definition, and ultra-HD video compression, image processing, and computer vision processors. It’s one of the best AI stocks to buy as the company specializes in AI image processing processors for edge applications. Unfortunately, AMBA is down almost 11% since the beginning of the year.
However, Ambarella could be a diamond in the rough. On balance sheet, its cash-to-debt ratio is nearly 24 times, outperforming 78.53% of its peers. Additionally, the equity-to-assets ratio is 0.85x, ahead of the sector median of 0.64x. Finally, as far as financial stability is concerned, Ambarella’s Altman Z-Score is 16.52, indicating extremely low risk of bankruptcy.
Currently, cover analysts view AMBA as a strong buy. On average, their target price is $101.02, which means over 42% upside potential. However, the most optimistic target is $120, which represents a 69% upside potential.
Alibaba (BABA)
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Alibaba (NYSE:BABA), a Chinese multinational technology company, specializes in e-commerce, retail, internet and technology. The Company provides consumer-to-consumer, business-to-consumer and business-to-business sales services through web portals, as well as electronic payment services, shopping search engines and cloud computing services. It’s one of the heralded AI stocks to buy because it uses smart digitization to enable improvements in its businesses.
Overall, Alibaba has strong financial metrics, making it a compelling proposition. For one, the company’s cash-to-debt ratio is 3.25 times, higher than 80.46% of its peers. Operationally, Alibaba’s three-year revenue growth rate is 32.1%, ahead of 90.13% of its peers. It also has an operating margin of 12%, ahead of 84% of the competition.
As a bonus, the market gives BABA a forward rating of 11.37. At a discount to projected earnings, Alibaba ranks better than 69.61% of the field. Finally, analysts unanimously rate BABA as a Strong Buy. On average, their target price is $149.74, which represents almost 46% upside potential. At the highest level, we have a price target of $220, which is 114% growth.
JD.com (JD)
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JD.com (NASDAQ:JD), a Chinese e-commerce company, is one of the other big names in business-to-consumer retail in China. Basically, JD is among the top AI stocks to buy as the platform will feature a ChatGPT-style product. As the AI-powered chatbot grows in popularity, JD.com could benefit from the broader momentum in this space. Unfortunately, JD has slipped more than 29% in stock since opening in January.
Financially, the company benefits from a few key attributes. On the balance sheet, the cash-to-debt ratio is 3.38 times, better than 80.91% of its peers. The debt-to-equity ratio is also 0.31 times, well below the industry median of 0.64.
Operationally, JD.com’s three-year revenue growth rate is 19.4%, over 82.48% of the field. Also, the book growth rate is an impressive 34.3% over the same period. For now, analysts think JD is a strong buy. Their average price target is $70.43, which represents almost 73% upside potential.
BigBear.ai (BBAI)
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Maryland-based BigBear.ai (NYSE:BBAI) provides intelligent analytics and cyber solutions. It’s already seen tremendous growth this year, up almost 244% since it opened in January. At the same time, BBAI represents one of the most speculative buys among AI stocks. To be honest, I wouldn’t mention it here, but analysts might warm to the idea.
However, investors shouldn’t expect a boatload of Wall Street pundits to embrace BBAI. For one, shares have lost more than 78% of their stock value over the past 365 days. Also, it mostly has horrible financials. For example, his record is terrible. His Altman Z-Score is below breakeven at 1.95, indicating serious distress.
It almost goes without saying that the company suffers from negative margins. As a result, it suffers from a credibility crisis. However, cover analysts consider BBAI a moderate buy. Their average price target is $79.28, which means over 79% upside potential.
At the time of publication, Josh Enomoto held no position (neither directly nor indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publicity guidelines.
A former Senior Business Analyst at Sony Electronics, Josh Enomoto helped broker key deals with Fortune Global 500 companies. Over the past several years, he has provided unique, crucial insights for the investment markets as well as various other industries including legal, construction management and healthcare.
