The juggernaut of artificial intelligence (AI) has been impossible to ignore for market participants. Having contributing immensely to the overall upside in markets over the better part of two years now, the AI megatrend is rippling out through multiple industries. Estimated to reach a market size of $2.58 trillion by 2032, investors have been pouring in huge sums of capital to benefit from the upside in AI stocks.
But which AI stocks are worth adding to your portfolio at this phase in the cycle? With established giants like Nvidia (NVDA), Microsoft (MSFT), and Amazon (AMZN) already sharply higher on AI enthusiasm, here are 6 relatively overlooked stocks that brokerage firm Morgan Stanley (MS) considers high conviction picks with opportunities for productivity and efficiency gains, thanks to AI.
1. Recursion Pharmaceuticals
We start with Recursion Pharmaceuticals (RXRX), a holding of maverick investor Cathie Wood. Utah-based Recursion Pharma is a clinical-stage biotechnology company. They use a combination of automation, AI and machine learning to discover new drugs. Their ultimate goal is to use this technology to develop new treatments for various diseases. Its market cap currently stands at $2.1 billion.
Recursion Pharma stock is down 11.4% on a YTD basis, though it's up 34% over the last year.
Overall, analysts have a consensus rating of “Moderate Buy” for RXRX stock, with a mean target price of $13. This indicates an upside potential of about 43% from current levels. Out of 7 analysts covering the stock, 1 has a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 5 have a “Hold” rating.
2. Schrodinger
Founded in 2002 and based out of New York City, Schrodinger (SDGR) is a healthcare technology company that provides chemical simulation software solutions, primarily to the pharmaceutical industry. Their software helps companies in drug discovery by simulating and analyzing molecules to understand their properties and potential effectiveness as drugs. Their market cap is currently at $2.06 billion.
Schrodinger stock is down 23.5% on a YTD basis, and nearly flat over the past year.
Meanwhile, analysts have an overall rating of “Moderate Buy” for SDGR stock, with a mean target price of $40.80 - which denotes an upside potential of about 43.2% from current levels. Out of 10 analysts covering the stock, 7 have a “Strong Buy” rating and 3 have a “Hold” rating.
3. Definitive Healthcare
Founded in 2011, Definitive Healthcare (DH) is a healthcare data analytics company. They provide various data products and services that give insights into the healthcare provider market. Their products help companies in the healthcare ecosystem find potential customers, and understand healthcare trends. DH's market cap is currently at $925 million.
DH stock is down 20.9% on a YTD basis.
Overall, analysts have deemed Definitive Healthcare stock a “Moderate Buy,” with a mean target price of $10.45. This indicates an upside potential of roughly 32.9% from current levels. Out of 13 analysts covering the stock, 4 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 8 have a “Hold” rating.
4. Roblox
Founded in 2004 and based out of Redwood City, Calif., Roblox (RBLX) is a user-generated online entertainment platform. They provide a software platform where users can create online games and share them with others. Users can then play these games and socialize within the platform. RBLX currently commands a market cap of $22 billion.
Roblox stock is down 12.2% on a YTD basis, though the shares have gained 29.5% over the last 6 months.
Overall, analysts have a rating of “Moderate Buy” for RBLX stock, with a mean target price of $48.55. This denotes an upside potential of about 24.2% from current levels. Out of 23 analysts covering the stock, 14 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 6 have a “Hold” rating, and 2 have a “Strong Sell” rating.
5. Sportradar Group
Swiss company Sportradar Group (SRAD) is a leading global technology company focusing on enabling next-generation engagement in sports. They provide a variety of services in the sports data and entertainment industry, including betting and gaming solutions, sports entertainment solutions, and live streaming solutions. Its market cap is currently at $12.9 billion.
SRAD stock is up 5% on a YTD basis.
Analysts have deemed the stock a “Moderate Buy” overall, with a mean target price of $14.82 - which indicates an upside potential of roughly 27.6% from current levels. Out of 11 analysts covering the stock, 6 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 3 have a “Hold” rating, and 1 has a “Moderate Sell” rating.
6. S&P Global
We wrap up our list with a Dividend Aristocrat in S&P Global (SPGI), the New York City-based market ratings giant which was founded in 1860. It is also a leading provider of financial information and analytics services. Its three core divisions are S&P Dow Jones Indices (which creates, maintains, and licenses a wide range of financial market indices, including the iconic S&P 500); Ratings; and Market & Commodities Intelligence. Its market cap is currently at $139.3 billion.
SPGI stock is down 2.7% on a YTD basis, and up 26.5% over the past 52 weeks. The stock also offers a dividend yield of 0.84%, backed by 50 consecutive years of growth.
Overall, analysts have a consensus rating of “Strong Buy” for SPGI stock, with the mean target price of $485.29 indicating expected upside potential of about 11.6% from current levels. Out of 19 analysts covering the stock, 16 have a “Strong Buy” rating and 3 have a “Moderate Buy” rating.
