Evercore: Buy these 26 stocks positioned for outperformance as they unlock the power of AI
- AI stocks are still a hot topic, but there’s plenty of companies that are all talk.
- Evercore’s Julian Emanuel searched out the stocks best utilizing generative AI.
- Financials and consumer-facing companies led the bunch as they cut costs and increased brand loyalty.
What were you doing on May 25, 2023?
It may appear to be an insignificant date, but according to Evercore managing director Julian Emanuel, everything changed on that day.
That was the day after Nvidia announced its first-quarter earnings, in which the company predicted sales would skyrocket to $11 billion in the coming quarter due to demand for the chips powering the artificial intelligence revolution.
Investors, unsurprisingly, took notice. Nvidia stock rose from $305 to a high of $385 on May 25, and it is still up 40% since then.
While it was a significant day for Nvidia and its shareholders, what really happened on that date was that the market realized that AI was here to stay — and that investing in companies that enable and use AI could be extremely profitable.
But which AI firms are the best bets? After all, AI has been on everyone’s lips in the months since Nvidia’s blockbuster announcement. According to a recent FactSet report, the term “AI” was used in more earnings calls than ever before last quarter.
Evercore’s Emanuel delved into AI-related companies to distinguish between those who are merely paying lip service to the new technology and those who can use it to boost their businesses.
According to his analysis, while the “magnificent seven” are ahead of the game, many other companies are catching up, and generative AI is already permeating several industries.
“These include financial firms, which, with 43% exposure to Generative AI as a result of an information-driven, office-oriented workforce, have Adopted AI because they understand the cost side of the equation, as Ed Hyman’s forecast indicates.” “Recession remains in the foreground for 2024,” Emanuel wrote. “It also includes Consumer companies, with below economy wide average Generative AI exposure (around 28% vs. 32%) yet who are Adapting Generative AI to improve the client experience and build (repeat) loyalty through superior service.”
Emanuel is optimistic about these “AI Enablers, Adopters, and Adapters,” as he refers to them. To find the best of the best, he combed the Russell 3000 for companies with market capitalizations of more than $10 billion that have mentioned AI in earnings calls since May 24. He then narrowed the list to companies that experienced positive share price movement following earnings calls since May 24, as well as stocks with next 12-month EPS revisions among the top 75% of the Russell 3000 since May 24.
Emanuel’s top AI stock picks are represented by the 26 stocks listed below. Each company is accompanied by its ticker, sector, market capitalization, estimated AI exposure, and, where applicable, Evercore analyst rating.
1. Alphabet
Ticker: GOOGL
Sector: Communication Services
Market Cap: $1.67 trillion
Estimated AI Exposure: 44%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
2. Amazon
Ticker: AMZN
Sector: Consumer Discretionary
Market Cap: $1.3 trillion
Estimated AI Exposure: 28%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
3. Nvidia
Ticker: NVDA
Sector: Information Technology
Market Cap: $1.04 trillion
Estimated AI Exposure: 34%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
4. Meta Platforms
Ticker: META
Sector: Consumer Services
Market Cap: $773.96 billion
Estimated AI Exposure: 43%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
Advertisement
5. JPMorgan Chase & Co.
Ticker: JPM
Sector: Financials
Market Cap: $423.75 billion
Estimated AI Exposure: 42%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
6. Intel
Ticker: INTC
Sector: Information Technology
Market Cap: $142.54 billion
Estimated AI Exposure: 34%
Evercore Analyst Rating: In Line
Source: Evercore ISI
7. Booking Holdings
Ticker: BKNG
Sector: Consumer Discretionary
Market Cap: $109.91 billion
Estimated AI Exposure: 40%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
8. Lam Research Corporation
Ticker: LRCX
Sector: Information Technology
Market Cap: $80.79 billion
Estimated AI Exposure: 30%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
9. Eaton Corporation
Ticker: ETN
Sector: Industrials
Market Cap: $84.73 billion
Estimated AI Exposure: 29%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
10. KLA Corp.
Ticker: KLAC
Sector: Information Technology
Market Cap: $61.23 billion
Estimated AI Exposure: 37%
Evercore Analyst Rating: In Line
Source: Evercore ISI
11. Marriott International
Ticker: MAR
Sector: Consumer Discretionary
Market Cap: $57.54 billion
Estimated AI Exposure: 27%
Evercore Analyst Rating: In Line
Source: Evercore ISI
12. Emerson Electric
Ticker: EMR
Sector: Industrials
Market Cap: $54.97 billion
Estimated AI Exposure: 37%
Evercore Analyst Rating: N/A
Source: Evercore ISI
13. Arista Networks
Ticker: ANET
Sector: Information Technology
Market Cap: $55.42 billion
Estimated AI Exposure: 39%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
14. Trane Technologies
Ticker: TT
Sector: Industrials
Market Cap: $45.34 billion
Estimated AI Exposure: 30%
Evercore Analyst Rating: N/A
Source: Evercore ISI
15. Lennar Corp.
Ticker: LEN
Sector: Consumer Discretionary
Market Cap: $32.37 billion
Estimated AI Exposure: 29%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
16. Veeva Systems
Ticker: VEEV
Sector: Healthcare
Market Cap: $32.23 billion
Estimated AI Exposure: 44%
Evercore Analyst Rating: In Line
Source: Evercore ISI
17. Align Technology
Ticker: ALGN
Sector: Healthcare
Market Cap: $23.02 billion
Estimated AI Exposure: 31%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
18. T. Rowe Price Group
Ticker: TROW
Sector: Financials
Market Cap: $23.31 billion
Estimated AI Exposure: 45%
Evercore Analyst Rating: In Line
Source: Evercore ISI
19. MongoDB
Ticker: MDB
Sector: Information Technology
Market Cap: $23.35 billion
Estimated AI Exposure: 44%
Evercore Analyst Rating: N/A
Source: Evercore ISI
20. Fair Isaac Corp.
Ticker: FICO
Sector: Information Technology
Market Cap: $21.79 billion
Estimated AI Exposure: 44%
Evercore Analyst Rating: N/A
Source: Evercore ISI
21. Zscaler
Ticker: ZS
Sector: Information Technology
Market Cap: $21.73 billion
Estimated AI Exposure: 44%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
22. Domino’s Pizza
Ticker: DPZ
Sector: Consumer Discretionary
Market Cap: $13.39 billion
Estimated AI Exposure: 26%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
23. CarMax
Ticker: KMX
Sector: Consumer Discretionary
Market Cap: $12.46 billion
Estimated AI Exposure: 29%
Evercore Analyst Rating: In Line
Source: Evercore ISI
24. Vertiv Holdings
Ticker: VRT
Sector: Industrials
Market Cap: $13.60 billion
Estimated AI Exposure:
Evercore Analyst Rating:
Source: Evercore ISI
25. Pure Storage
Ticker: PSTG
Sector: Information Technology
Market Cap: $10.36 billion
Estimated AI Exposure: 39%
Evercore Analyst Rating: Outperform
Source: Evercore ISI
26. Emcor Group
Ticker: EME
Sector: Industrials
Market Cap: $9.87 billion
Estimated AI Exposure: 27%
Evercore Analyst Rating: N/A
Source: Evercore ISI
