In this article, we will be taking a look at 10 cheap AI stocks to buy in 2023.
The artificial intelligence sector has long been a prized area in the technology industry which has transformed the global economy. The sector has wide-reaching applications in a diverse range of industries, such as interactive media and entertainment and even cybersecurity. The AI market is thus highly diverse and immensely large, valued at about $119.78 billion in 2022, as we mentioned in a previous article. This market size can perhaps be best attributed to the importance of AI and machine learning (ML) in the operations of various businesses.
The Rise of AI and ML
According to a report by Rackspace Technology published in February, a survey revealed that AI and ML were second only to cybersecurity when it came to the most important technologies for businesses today. The survey polled about 1420 IT professionals across the globe in several industries, including financial services, manufacturing, retail, hospitality, government, and healthcare. Of all the respondents, 69% of them ranked AI and ML as a high priority in their organizations in 2023. The survey further showed that companies today are using AI and ML to improve processes, predict business performance and industry trends, and reduce business risks.
The report also showed a focus on sustainability when it comes to these technologies. About 60% of the organizations surveyed noted that AI and ML helped them meet sustainability targets by improving worker safety and security. Another 54% of respondents stated that these technologies aided them in monitoring energy consumption, while 47% of respondents noted that AI and ML enabled predictive analytics for these businesses as well.
Investing in AI and ML
With the wide application of AI and ML in a variety of industries and businesses, it is no surprise that investment in these technologies has also been on the rise in recent years. Mega tech companies such as Amazon.com, Inc. (NASDAQ:AMZN), Microsoft Corporation (NASDAQ:MSFT), and Alphabet Inc. (NASDAQ:GOOG) are among the biggest investors in AI as they try to ensure they are not left behind in the wake of this rapidly transforming sector. However, the report published by Rackspace Technology also illustrated how these technologies are not exclusively invested in by wealthy global multinational companies anymore. Of the organizations surveyed, the annual investment in AI and ML for these companies is as follows: 22% of the businesses invested up to $100,000, 28% invested between $100,000 to $500,000, 27% of the respondents invested $500,000 to $1 million, and 20% invested about $1 million to $5 million in these technologies. The global average annual investment in AI and ML came up to over $1 million between these organizations alone.
Because of this rising investment in AI and ML, IT leaders continue to see great potential in these technologies today. They believe that AI and ML will help improve innovation, reduce business costs, and enhance business performance. Most businesses today have been using these technologies to meet these goals while also attempting to increase their productivity and revenue streams through AI and ML as well. As such, we have compiled a list of some of the cheapest AI stocks to invest in today.
Let’s now take a look at 10 cheap AI stocks to buy in 2023.
Photo by Ruben Sukatendel on Unsplash
Our Methodology
To select the stocks for our list below, we first shortlisted 20 of the best artificial intelligence stocks on the market today by looking at analyst price targets and ratings on them. We then narrowed down the list to 10 stocks by looking at their upside potential based on the average price targets placed on these stocks by Wall Street analysts in comparison with their share prices on March 31. This data was collected from TipRanks. We then ranked these stocks based on their upside potential, from the lowest to the highest number.
Cheap AI Stocks to Buy in 2023
10. Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 28
Upside Potential as of March 31: 5.4%
Average Analyst Price Estimate: $8.59
Palantir Technologies Inc. (NYSE:PLTR) is an application software company based in Denver, Colorado. The company builds and deploys software platforms for the intelligence community to assist in counterterrorism investigations.
On March 1, DA Davidson’s Gil Luria initiated coverage of Palantir Technologies Inc. shares with a Neutral rating.
The average price target placed on Palantir Technologies Inc. shares on Wall Street is $8.59, with a high forecast of $15. Considering the fact that the shares were trading at $8.15 on March 31, this gives the stock an upside potential of 5.4%. In the fourth quarter, Palantir Technologies Inc. closed 55 deals of at least $1 million each, while 11 of these deals were worth over $5 million. With the promise of increased profitability in 2023, the stock is trading at a discount, according to analysts.
D E Shaw was the largest shareholder in Palantir Technologies Inc. at the end of the fourth quarter, holding 12.6 million shares. In total, 28 funds were long the stock, with a total stake value of $463 million.
Palantir Technologies Inc., like Amazon.com, Inc., Microsoft Corporation, and Alphabet Inc., is a tech stock that is highly popular among hedge funds today.
9. Micron (NASDAQ:MU)
Number of Hedge Fund Holders: 74
Upside Potential as of March 31: 8.75%
Average Analyst Price Estimate: $68.61
Micron (NASDAQ:MU) is an information technology company making high-performance memory storage hardware. This hardware powers AI solutions, making the company a vital part of the AI sector.
Mehdi Hosseini at Susquehanna holds a Positive rating on Micron shares as of March 29, alongside a price target of $90.
Micron is currently the third-largest supplier of Dynamic Random Access Memory (DRAM), which is essential for data centers and PCs. The shares are trading at a P/E ratio of 10.6 as of March 29, making them 23% cheaper than their five-year average. Analysts on Wall Street have placed an average price target of $68.61 on Micron shares, with a high forecast of $100.
Our hedge fund data for the fourth quarter shows 74 funds long Micron. Their total stake value was $2.1 billion.
8. Oracle Corporation (NASDAQ:ORCL)
Number of Hedge Fund Holders: 65
Upside Potential as of March 31: 9.25%
Average Analyst Price Estimate: $98.88
Oracle Corporation (NASDAQ:ORCL) is a systems software company based in Austin, Texas. It offers cloud software applications and cloud-based industry solutions, among more.
JPMorgan’s Mark Murphy holds an Overweight rating on Oracle Corporation shares as of March 24, alongside a price target of $93.
In the third quarter of fiscal 2023, Oracle Corporation generated revenues of $12.4 billion, which increased by 17.93% year-over-year. This March, the shares were trading at a price-to-sales ratio of 4.77, making the shares 6% cheaper than their five-year average. Wall Street analysts have placed an average price target of $98.88 on Oracle Corporation shares, with a high forecast of $120.
First Eagle Investment Management was the largest shareholder in Oracle Corporation at the end of the fourth quarter, holding 20.7 million shares, while 65 hedge funds in total were long the stock. The total stake value in the company was $4.3 billion.
7. Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 63
Upside Potential as of March 31: 10.56%
Average Analyst Price Estimate: $312.5
Accenture plc (NYSE:ACN) is an information technology company providing application services such as data management, intelligent automation, and robotic process automation. It is based in Dublin, Ireland.
Tien-tsin Huang, an analyst at JPMorgan, holds an Overweight rating on Accenture plc (NYSE:ACN) shares as of March 24, alongside a price target of $314.
The average price target placed on Accenture plc (NYSE:ACN) shares by Wall Street analysts is $312.5, with a high forecast of $360. In the first quarter of fiscal 2023, the company’s revenue was $15.75 billion, rising 5% year-over-year. Shares of Accenture plc (NYSE:ACN) were trading at a P/E ratio of 22 on March 17, which is 19% cheaper than their five-year average.
Accenture plc (NYSE:ACN) was found among the 13F holdings of 63 hedge funds in the fourth quarter, with a total stake value of $2.8 billion.
ClearBridge Investments, an investment management company, mentioned Accenture plc (NYSE:ACN) in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Accenture plc (NYSE:ACN) is a leading global professional services company that helps clients build their digital infrastructure and optimize their operations. We view Accenture as a resilient, high-quality business with consistent earnings and cash flow, a strong balance sheet and very attractive returns on capital. Secular drivers like cloud migration and digital transformation, as well as new, innovative technology deployments like data security, block chain, AI and machine learning position Accenture well for continued growth. It is also currently rolling out a suite of sustainability tools that offers a comprehensive view of a company’s goals, progress and performance across financial and ESG measures, so it is an enabler of ESG for its clients. We exited our position in software-as-a-service company Workday to fund the position, largely on better relative risk/reward, in our view.”
6. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 18
Upside Potential as of March 31: 10.6%
Average Analyst Price Estimate: $139.43
SAP SE (NYSE:SAP) is an application software company based in Walldorf, Germany. The company provides enterprise application software products.
An Outperform rating was reiterated on SAP SE shares on March 21 by Bernstein’s Mark Moerdler. The analyst also placed a price target of $154 on the shares.
SAP SE has an EV/Sales (TTM) ratio of 4.6, meaning that the stock is trading cheaper than its intrinsic value today. Analysts on Wall Street have an average price target of $139.43 on the shares. Since SAP SE was trading at $126.07 on March 31, this represents an upside potential of 10.6%.
SAP SE had 18 hedge funds long its stock in the fourth quarter, of which Windacre Partnership was the largest shareholder, holding 2.1 million shares in the company. The total stake value in the company was $957 million.
5. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 43
Upside Potential as of March 31: 11.1%
Average Analyst Price Estimate: $143.5
International Business Machines Corporation (NYSE:IBM) is an information technology company based in Armonk, New York. The company provides integrated solutions and services, including hybrid cloud platform and software solutions.
David Grossman at Stifel holds a Buy rating on International Business Machines Corporation shares as of January 23, alongside a $158 price target.
Wall Street analysts have placed an average price target of $143.5 on International Business Machines Corporation shares, with a high forecast of $160. In the fourth quarter, the company’s revenue was $16.6 billion, of which 43.6% came from its software operations. Its software revenues also increased by 2.8% year-over-year in that quarter to $7.3 billion.
Out of the 943 hedge funds tracked by Insider Monkey in the fourth quarter, 43 funds were long International Business Machines Corporation, with a total stake value of $1.2 billion.
4. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 59
Upside Potential as of March 31: 19.66%
Average Analyst Price Estimate: $809.73
ASML Holding N.V. (NASDAQ:ASML) is an information technology company selling advanced semiconductor equipment systems comprising lithography, among more. Lithography tools are an integral part of AI chip production, making this company a vital part of the AI sector.
On January 26, Credit Suisse’s Adithya Metuku reiterated an Outperform rating on ASML Holding N.V. shares.
ASML Holding N.V. currently dominates the lithography market, claiming over 80% of the market share in the industry. Analysts have placed an average price target of $809.73 on the shares, which were trading at $676.68 on March 31. This gives the stock an upside potential of 19.66%.
In total, 59 hedge funds were long ASML Holding N.V. in the fourth quarter, with a total stake value of $5.1 billion.
ClearBridge Investments, an investment management company, mentioned ASML Holding N.V. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“ASML Holding N.V. (NASDAQ:ASML) makes semiconductor chip manufacturing equipment and is a leading supplier of lithography systems to the semiconductor industry. We expect ASML to grow above expectations as its innovative EUV technology is deployed and industry capacity expands. This in turn should lead to margin expansion and earnings leverage. In addition to more visible growth and profitability drivers relative to Intel, ASML also has a stronger balance sheet and higher returns on capital. As a semiconductor capital equipment provider, ASML directly improves the energy efficiency of semiconductor manufacturing, and governance and diversity initiatives at ASML are best in class.”
3. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 40
Upside Potential as of March 31: 21.1%
Average Analyst Price Estimate: $186.27
Baidu, Inc. (NASDAQ:BIDU) is a Chinese company specializing in internet-related services, products, and AI. It is planning on launching an AI-based chatbox in 2023.
Analysts at Loop Capital hold a Buy rating on Baidu, Inc. shares as of March 28, alongside a price target of $215.
The search engine offered by Baidu, Inc. holds a market share of 84% in the country. The stock was trading at a P/E ratio of 15 on March 22, which was 32% cheaper than its five-year average. Analysts on Wall Street hold an average price target of $186.27 on the shares, with a high forecast of $234.
Our hedge fund data shows 40 funds long Baidu, Inc. in the fourth quarter. Their total stake value was $1.7 billion.
Horos Asset Management, an investment management firm, mentioned Baidu, Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“As I mentioned at the beginning of this quarterly letter, we took advantage of the meltdown in technology platforms to initiate new positions in companies in which we had already been shareholders in the past and whose valuation did not, until now, provide a sufficiently high margin of safety. Such is the case of PayPal and Baidu, Inc. (NASDAQ:BIDU).
In the case of Baidu, as many will know, it is known as the “Chinese Google”. The company has been the leading Internet search engine in the Asian country for years, which has given it a historically privileged position to monetize, through online advertising, a huge user base. However, the rise of two types of applications has called into question the sustainability of its business model. On the one hand, mobile social apps, such as ByteDance’s well-known TikTok, have emerged as a new model of online consumption, generating a new platform through which to monetize Internet users. On the other hand, even more disruptive in the long term, is the emergence of the so-called super apps: a sort of virtual Swiss Army knives that allow users to access many products and services without having to leave their interface at any time, making Baidu’s traditional search engine less attractive. In this field, Tencent (with its super app Weixin/WeChat), Alibaba (Alipay) and Meituan certainly stand out. These two factors have caused Baidu’s online advertising market share to drop from 17% in 2017 to less than 7% estimated for 2022.34 To this deterioration, we should add the collapse in market value of its stake in iQiyi (video platform controlled by Baidu) and its equity holdings such as Trip.com (hotel and flight platform) …” (Click here to read the full text)
2. SentinelOne, Inc. (NYSE:S)
Number of Hedge Fund Holders: 38
Upside Potential as of March 31: 25.43%
Average Analyst Price Estimate: $19.14
SentinelOne, Inc. (NYSE:S) is a systems software company based in Mountain View, California. It provides AI-powered autonomous threat prevention, detection, and response capabilities through its Singularity Extended Detection and Response Platform.
Rob Owens, an analyst at Piper Sandler, holds a Neutral rating on SentinelOne, Inc. shares as of March 15.
The average price target placed on SentinelOne, Inc. shares by Wall Street analysts is $19.14, while the shares were trading at $15.26 on March 31. This gives the stock an upside potential of 25.43%.
SentinelOne, Inc. was found among the 13F holdings of 38 hedge funds in the fourth quarter, with a total stake value of $731 million.
1. EPAM Systems, Inc. (NYSE:EPAM)
Number of Hedge Fund Holders: 35
Upside Potential as of March 31: 38.58%
Average Analyst Price Estimate: $407
EPAM Systems, Inc. (NYSE:EPAM) is a provider of digital platform engineering and software development services. The company is based in Newtown, Pennsylvania.
James Friedman at Susquehanna holds a Positive rating on EPAM Systems, Inc. shares as of March 27, alongside a $410 price target.
EPAM Systems, Inc. has an EV/Sales (TTM) ratio of 3.19, showing how the shares at trading below their intrinsic value. Wall Street analysts also placed an average price target of $407 on the shares, which were trading at $293.69 on March 31. This gives the shares an upside potential of 38.58%.
There were 35 hedge funds long EPAM Systems, Inc. in the fourth quarter. Their total stake value was $432 million.
Harding Loevner, an asset management company, mentioned EPAM Systems, Inc. in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“As was the case in the fourth quarter, IT investments detracted most. Eastern European IT servicing firm EPAM Systems, Inc. (NYSE:EPAM) plunged in the first quarter as a general sell-off of expensive, high-growth stocks was compounded by its specific business continuity risk: nearly 60% of the company’s workforce was based in Ukraine, Belarus, and Russia at the start of the Russia-Ukraine conflict. The company navigated the crisis well, relocating many of its engineers out of the impacted region, while retaining most of its existing customers and winning new ones. Shares have rebounded modestly over the course of the year, although not sufficiently to offset the initial sharp decline.”
See also 15 Best Artificial Intelligence (AI) Stocks to Buy and The Future of Artificial Intelligence
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originally published by Insider Monkey.
