US Markets Loading… H M S
Premium
Many investors have scrambled to get exposure to AI this year. Guillaume/Getty Images This story is available exclusively to Insider subscribers. Become an Insider and start reading now. Artificial intelligence has near limitless potential, but it’s unclear how big its impact will be. Investing in companies using AI on the margins of their businesses could be a safe bet. Here are 10 AI stocks that may be unexpected winners, according to Bank of America. The arrival of the artificial intelligence (AI) revolution has led many investors to wonder how much of an impact the technology will have — and how to best profit from it.
Innovation has boosted productivity throughout history, and AI will be no exception, according to Bank of America. What’s unclear, in the firm’s view, is whether AI’s impact on business will be truly transformative, like computers, or more marginal, like 5G cellular networks.
Bank of America Bank of America recently released projections about the possible productivity gains from AI through 2025, after which it sees productivity growth retreating to its post-2004 average of 1.4%. Earlier this year, the firm predicted that the global AI market would grow to $900 billion by 2026.
Bank of America Those who are big believers in AI might be eager to invest in the technology providers with exposure to it, which includes both hardware and software companies, wrote Jared Woodard, the head of Bank of America’s research investment committee, in a July 11 note.
However, there’s a real chance that AI’s impact won’t live up to the immense expectations for it, Woodard warned. Although the AI wave is inevitable, it may not necessarily be a tsunami.
“In the case of AI, we see reasons to be careful,” Woodard wrote. “AI stocks are priced for a bygone world of 2% bond yields, low costs of capital, easy globalization, and friendly inflation.”
Challenges for AI stocks include expensive valuations, low rates of profitability relative to other technology stocks, and other threats like regulation, according to Bank of America. Plenty of optimism is currently priced into AI stocks, so they could pull back regardless of how much of an impact the technology has on individual firms and the economy broadly.
10 stocks that can be sleeper winners as AI steadily growsIn the note, Woodard shared a list of 10 stocks with AI exposure outside of the hardware and software industries that will thrive if the technology has a more moderate impact on productivity. All of these companies have kept up with the S&P 500’s growth in the past decade, and have either a buy or neutral rating from the BofA analyst covering it.
“Investors skeptical that AI will be as transformative as indoor plumbing should prioritize companies that are effectively employing AI tech to improve their business models,” Woodard wrote.
Below are those 10 names, along with the ticker, market capitalization, sector, industry, 10-year compound annual growth rate (CAGR), and Bank of America’s investment thesis for each.
1. UnitedHealth Group
Markets Insider Ticker: UNH
Market cap: $418.8B
Sector and industry: Healthcare; Managed Healthcare
10-year CAGR: 24%
Thesis: “UNH uses its AI-enhance virtual assistance platform to collect patient data and offer customized solutions. Optim is a UNH tech-focused subsidiary that [uses] data analytics, natural language processing, machine and deep learning models to predict conditions and decrease cost of care.”
Source: Bank of America
2. Evotec
Markets Insider Ticker: EVO
Market cap: $291.8B
Sector and industry: Healthcare; Healthcare Technology & Distribution
10-year CAGR: 21%
Thesis: “Evotec has a minority stake in Exscientia. Exscientia focuses on using AI for drug discovery and design.”
Source: Bank of America
3. LPL Financial
Markets Insider Ticker: LPLA
Market cap: $17.1B
Sector and industry: Financials; Asset Management
10-year CAGR: 21%
Thesis: “LPL offers an ‘Advisor Sleeve’ AI/ML technology that allows advisors to stress test model portfolios.”
Source: Bank of America
4. Deere
Markets Insider Ticker: DE
Market cap: $120B
Sector and industry: Industrials; Agricultural & Farm Machinery
10-year CAGR: 20%
Thesis: “DE is using AI to track plants across different weather, soil types, and sun exposure to create a highly accurate data model. This can help farmers know when and where plants need to be tended to.”
Source: Bank of America
5. Interactive Brokers
Markets Insider Ticker: IBKR
Market cap: $36.4B
Sector and industry: Financials; Asset Management
10-year CAGR: 19%
Thesis: “IBKR offers Capitalise.ai where traders can automate trading strategies using ‘everyday English’ with zero coding needed.”
Source: Bank of America
6. Humana
Markets Insider Ticker: HUM
Market cap: $53.1B
Sector and industry: Healthcare; Managed Healthcare
10-year CAGR: 19%
Thesis: “Humana leverages IBM’s conversational AI to provide greater clarity on benefits for Humana Employer Group members.”
Source: Bank of America
7. Equinix
Markets Insider Ticker: EQIX
Market cap: $74.4B
Sector and industry: Real Estate; Telecom Infrastructure ServicesÂ
10-year CAGR: 18%
Thesis: “Equinix has a large portfolio of global data centers, creating an advantage as AI applications expand.”
Source: Bank of America
8. Teledyne Technologies
Markets Insider Ticker: TDY
Market cap: $19.6B
Sector and industry: Technology; Aerospace
10-year CAGR: 18%
Thesis: “Teledyne’s Sapera Vision Software provides image processing and AI functions to deploy machine vision applications.”
Source: Bank of America
9. Rockwell Industrials
Markets Insider Ticker: ROK
Market cap: $39.4B
Sector and industry: Industrials; Multi-Industry
10-year CAGR: 16%
Thesis: “Rockwell’s Fiix Foresight, a suite of AI powered tools, analyzes maintenance data and makes recommendations. Teams can use analysis to predict breakdowns, delays, and stockouts.”
Source: Bank of America
10. Omnicell
Markets Insider Ticker: OMCL
Market cap: $3.3B
Sector and industry: Healthcare; Healthcare Technology & Distribution
10-year CAGR: 13%
Thesis: “Omnicell One is a cloud technology service that optimizes medication spend, reduces medication waste, and improves pharmacy labor productivity.”
Source: Bank of America
Read next
Receive a selection of our best stories daily based on your reading preferences.
Features Investing More…
Read next