Here are analysts' 20 favorite AI stocks — and they still see upside for Nvidia

By Philip van Doorn

A deep look at hundreds of AI companies highlights stocks expected to soar as much as 59% over the next year.

So far, 2023 has been the year of artificial intelligence in the stock market. Nvidia Corp. has been the poster child, with shares returning 178% this year with dividends reinvested. Believe it or not, analysts working for brokerage firms as a group still believe it is a good time to buy the stock, as you can see in the results of the screen below.

On Monday we took a hard look at valuations for Nvidia's (NVDA) shares, while comparing returns on invested capital for 60 semiconductor manufacturers. This is now an expensive stock, based on price-to-earnings and price-to-sales ratios, however, the company has been a solid financial operator for years.

Today we're surveying the broader artificial-intelligence landscape to screen a large list of stocks. Investors can argue about how to define an "AI company," and these five exchange-traded funds take different approaches to defining the term, selecting stocks to hold and how to weight them in their portfolios:

Altogether, the five ETFs hold 269 stocks listed around the world. Narrowing down the list, there are 199 companies with market capitalizations of at least $2 billion that are covered by at least five analysts working for brokerage firms polled by FactSet.

Read more: Alibaba's stock is 'still very cheap,' but Bernstein now wonders if it's a value trap

Among the 199 remaining companies, 79 are held by at least two of the five ETFs.

Here are the 20 remaining companies rate "buy" or the equivalent by at least 80% of the analysts, sorted by 12-month upside potential based on consensus price targets:

Company                                           Ticker    Country      Share "buy" ratings  June 26 price  Consensus price target  Implied 12-month upside potential  Held by 
Alibaba Group Holding Limited ADR                  BABA     China                        87%          85.47                  135.53                                59%  ROBT, THNQ 
JD.com Inc. ADR Class A                             JD      China                        84%          34.97                   54.15                                55%  ROBT, THNQ 
Tencent Holdings Ltd.                             HK:700    China                        91%         332.80                  435.03                                31%  IRBO, ROBT 
Mobileye Global Inc. Class A                       MBLY     Israel                       90%          36.00                   46.95                                30%  ROBT, WTAI 
Nice Ltd. ADR                                      NICE     Israel                       92%         202.48                  260.64                                29%  ROBT, THNQ 
Cargotec Oyj Class B                             FI:CGCBV   Finland                      83%          49.90                   63.60                                27%  BOTZ, ROBT 
CrowdStrike Holdings Inc. Class A                  CRWD     U.S.                         85%         141.81                  175.73                                24%  THNQ, WTAI 
Sony Group Corp.                                  JP:6758   Japan                        85%      12,990.00               16,053.41                                24%  IRBO, ROBT 
Samsung Electronics Co. Ltd.                     KR:005930  South Korea                  95%      72,400.00               84,764.70                                17%  IRBO, ROBT, WTAI 
ATS Corp.                                         CA:ATS    Canada                      100%          59.36                   68.77                                16%  BOTS, IRBO, ROBT 
Alphabet Inc. Class A                              GOOGL    U.S.                         85%         118.34                  131.60                                11%  IRBO, ROBT, THNQ, WTAI 
Nvidia Corp.                                       NVDA     U.S.                         84%         406.32                  451.53                                11%  BOTZ, IRBO, ROBT, THNQ, WTAI 
Taiwan Semiconductor Manufacturing Co. Ltd. ADR     TSM     Taiwan                       92%         100.11                  109.99                                10%  ROBT, WTAI 
Synopsys Inc.                                      SNPS     U.S.                         93%         417.21                  458.15                                10%  ROBT, WTAI 
Denso Corp.                                       JP:6902   Japan                        89%       9,264.00               10,158.82                                10%  ROBT, WTAI 
Keyence Corp.                                     JP:6861   Japan                        83%      67,860.00               74,106.25                                 9%  BOTZ, ROBT 
Amazon.com Inc.                                    AMZN     U.S.                         91%         127.33                  138.89                                 9%  IRBO, ROBT, THNQ, WTAI 
Microsoft Corp.                                    MSFT     U.S.                         84%         328.60                  345.84                                 5%  IRBO, ROBT, THNQ, WTAI 
ServiceNow Inc.                                     NOW     U.S.                         92%         537.97                  551.12                                 2%  ROBT, THNQ, WTAI 
Palo Alto Networks Inc.                            PANW     U.S.                         88%         243.80                  248.00                                 2%  ROBT, THNQ 
                                                                                                                                                                                     Source: FactSet 

Click on the tickers for more about each company, ETF or index.

Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page

Stock prices and price targets are in local currencies where the stocks or American depositary receipts are listed.

Alibaba Group Holding Ltd. (9988.HK) tops the list, with a consensus price target 59% higher than the closing price on Monday. But the stock was downgraded on Tuesday by Bernstein analyst Robin Zhu, who sees a "value trap."

Nvidia is one of only two of our starting list of 269 stocks held by all five ETFs. The other is Cognex Corp. (CGNX) which didn't pass the screen because only 21% of analysts rate the shares a "buy" or the equivalent.

Keep in mind that stock analysts working for brokerage firms are fixated on 12-month targets. One year can be a short period for a serious, committed investor, especially when looking at a budding industry. That said, any stock screen can only serve as a starting point for your own research. Before investing in any individual stock, you should do your own research to form your own opinion about how competitive the company is likely to be when providing goods and services over the next decade or longer.

Don't miss:Another way to play AI stocks: These companies, including Nvidia, have been the most efficient chip makers

-Philip van Doorn

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06-28-23 1023ET

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