Bank of America Identifies Stocks and ETFs Poised to Benefit From AI Boom
Bank of America has identified a group of stocks and exchange-traded funds (ETFs) that are expected to benefit from the rapid growth of artificial intelligence (AI). The Wall Street bank surveyed its fundamental equity team of 130 analysts, covering approximately 3,400 companies, to identify the companies best positioned to capitalize on AI’s transformative potential across industries. The bank views AI’s development as the third major tech cycle in the past five decades, following the rise of the internet and mobile phones.
Key Takeaways:
- AI is poised to be the next major tech boom, with potential long-term impact on the global economy.
- Bank of America anticipates significant investment in AI, potentially reaching over $1 trillion in the near term.
- Enterprise AI strategies are expected to see accelerating adoption in 2025, as businesses move beyond consumer-facing applications.
- Specific stocks and ETFs have been identified as potential beneficiaries of the AI boom.
The Rise of AI: More Than Just Chatbots
While generative AI applications like chatbots, writing tools, and coding assistants have captivated the public’s imagination, Bank of America analysts believe the true potential lies in enterprise AI strategies. These applications are more nuanced and complex than consumer-facing tools, but they hold the key to unlocking significant productivity gains and efficiency improvements for businesses.
“Despite AI capital expenditure potentially reaching [$1 trillion plus] in the near term, we’re only in 1996 relative to the internet,” said Bank of America analysts led by Alkesh Shah, who compiled the stock picks, on Aug 5. “GenAI apps and the foundation models that power them have advanced rapidly in just the past 18 months, but over the next 5-10 years, we expect GenAI to transform the global economy, as well as our lives."
The analysts predict that the adoption of enterprise AI will accelerate in 2025, as companies move beyond pilot projects and begin integrating AI into their core operations. This is supported by the fact that 44% of S&P 500 companies mentioned "AI" in their second-quarter 2024 earnings calls, indicating growing interest and investment in the technology.
Investing in the AI Boom: Stocks and ETFs
For investors looking to capitalize on the AI revolution, Bank of America suggests three ETFs with broad exposure to the AI theme:
- iShares Semiconductor ETF (SOXX): This ETF provides exposure to the semiconductor sector, which is crucial for the development and deployment of AI technologies.
- Global X Robotics & Artificial Intelligence ETF (BOTZ): This ETF tracks the performance of companies involved in the development, production, and use of robotics and AI technologies.
- VanEck Vectors Digital Transformation ETF (DAPP): This ETF invests in companies that are leveraging digital technologies, including AI, to improve their operations and customer experiences.
Beyond ETFs, Bank of America also identified several individual stocks poised to benefit from AI adoption, including:
- Anheuser-Busch InBev (BUD): The brewing giant is utilizing AI to optimize production processes and enhance customer engagement.
- ASM International (ASMI) and ASML (ASML): These companies are leading suppliers of semiconductor manufacturing equipment, critical for the development of AI chips.
- Orange (ORAN): The telecom company is leveraging AI to improve network performance and customer service.
- Relx (RELX): This analytics company provides AI-powered solutions to help businesses make better data-driven decisions.
- SAP (SAP): The German software developer offers enterprise resource planning (ERP) solutions that are increasingly incorporating AI capabilities.
Navigating the AI Landscape: Considerations for Investors
While the AI boom presents significant investment opportunities, several key considerations for investors:
- Long-Term Focus: It’s important to recognize that AI’s impact on the market will be gradual and long-term, similar to the internet and mobile phone revolutions. Short-term fluctuations are likely, and investors must adopt a long-term investment mindset.
- Diverse Portfolio: Investing in a basket of AI-related stocks and ETFs can mitigate risk and provide wider market exposure.
- Thorough Research: Investors should carefully research individual companies and their specific AI strategies before making investment decisions.
- Technology Advancement: Rapid advancements in AI technology are constantly reshaping the landscape. Investors need to stay informed about emerging trends and their implications for specific companies and sectors.
The AI revolution is still in its early stages, but its transformative potential is undeniable. By understanding the key trends, identifying potential investment opportunities, and adopting a long-term perspective, investors can position themselves to capitalize on this historic technological shift.