AI-selected Stocks Favorites by Morningstar, Currently Under-rated in Value
Undervalued AI Stocks: A Closer Look at Microsoft, Alphabet, TSMC, Adobe, and Baidu
In the dynamic world of artificial intelligence (AI), some of the biggest tech companies are making significant strides in this burgeoning field. According to Morningstar, several AI stocks are currently undervalued, offering potential opportunities for investors.
Microsoft (MSFT) is considered a must-own AI stock, with its partnership with OpenAI and AI integration in cloud services (Azure AI services surpassing $75 billion in annual revenue) driving growth. Despite recent market volatility, Microsoft has shown resilience, maintaining a nearly $4 trillion market cap and solid fundamentals.
Alphabet (GOOGL) is viewed as a long-term AI winner, thanks to its leadership in AI search with Google Search's AI enhancements. The company's stock is slightly undervalued relative to its growth potential, expected to benefit from AI innovation and market dominance.
Taiwan Semiconductor Manufacturing (TSMC), a key player in AI chip production, is widely regarded as undervalued, with Morningstar estimating it to be approximately 22% undervalued versus a $306 fair value price target. TSMC's AI revenue is projected to increase at a 45% CAGR over the next five years, justifying a slightly premium but attractive valuation.
Adobe (ADBE) is included in Morningstar’s top AI stocks, with strong AI integration across creative and document cloud products. Analysts rate Adobe among the leading AI beneficiaries, although specific fair value estimates were not detailed in recent results.
Baidu (BIDU), the largest internet search engine in China, is also in the Morningstar top AI stocks list, benefiting from its position in Chinese AI development. Despite some headwinds from regulatory concerns earlier in the year, Baidu is generally considered undervalued in the context of AI adoption in China.
Other AI enablers, such as Cognizant Technology Solutions, Snowflake, Zscaler, MongoDB, Okta, and UiPath, while not as granularly valued, are typically considered growth-oriented firms incorporating AI capabilities and may attract interest from investors.
In summary, TSMC stands out as notably undervalued relative to its strong AI-driven growth, while Microsoft and Alphabet retain leadership with solid analyst support for continuing AI revenue gains. Adobe and Baidu are also favored Morningstar AI stocks, though less granular valuation detail is provided. The other AI enablers hold promise, though they face more mixed or developing analyst coverage amid market shifts away from overvaluation.
As for Adobe, the introduction of its AI solution Firefly in 2023 is expected to attract new users to Adobe solutions.
This article does not discuss oil stocks, commodities, or gold.
- Technology stocks like Microsoft, Alphabet, TSMC, Adobe, and Baidu, being undervalued in the AI sector, present appealing investment opportunities for those seeking growth in the realm of artificial intelligence.
- In addition to these top AI stocks, growth-oriented firms such as Cognizant Technology Solutions, Snowflake, Zscaler, MongoDB, Okta, and UiPath, while less granularly valued, also incorporate AI capabilities and may attract investors interested in the burgeoning field of artificial intelligence.
