Artificial intelligence technology, for all the people talking about it, is still in its early stages. While a handful of technology names seem to dominate the space currently, investors looking to invest in AI may be wondering which companies are likely to do better as the field evolves.

Other investors are clearly eager to jump in despite uncertainty. AI stocks took a hit on news about Chinese AI lab DeepSeek in late January and are slowly rebounding. The Morningstar Global Next Generation Artificial Intelligence Index has returned negative 3.30% this year to date as of March 21, 2025, versus negative 3.57% for the broad-based Morningstar US Market Index.

Best AI stocks to buy now

To find the best AI stocks, we look to the Morningstar Global Next Generation Artificial Intelligence Index. The AI stocks on this list are among the index’s top constituents, earned Morningstar Ratings of 4 or 5 stars, and are at least 20% undervalued as of March 21, 2025.

  • Microsoft MSFT
  • Meta Platforms META
  • Taiwan Semiconductor Manufacturing TSM
  • Tencent Holdings TCEHY
  • Alphabet GOOGL
  • Adobe ADBE
  • Advanced Micro Devices AMD
  • Marvell Technology MRVL
  • Baidu BIDU

Here’s a little more about each of the best AI stocks to buy, including commentary from the Morningstar analyst who covers the stock. All data is as of March 21, 2025.

Microsoft

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Medium
  • Industry: Software—Infrastructure

Microsoft starts our list of the best AI stocks to buy now. The software and cloud provider has established a leading AI portfolio with offerings like OpenAI, which is home to ChatGPT. Last year, we raised our revenue growth estimates and profitability assumptions for Microsoft based on consistent performance and a solid outlook. This AI stock is priced at a 20% discount to our fair value estimate of $490 per share.

Microsoft is one of two public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI. Microsoft has also enjoyed great success in upselling users on higher priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers.

We believe that Azure is the centerpiece of the new Microsoft. Even though we estimate it is already an approximately $75 billion business, it grew at an impressive 30% rate in fiscal 2024. Azure has several distinct advantages, including that it offers customers a painless way to experiment and move select workloads to the cloud, creating seamless hybrid cloud environments. Since existing customers remain in the same Microsoft environment, applications and data are easily moved from on-premises to the cloud. Microsoft can also leverage its massive installed base of all Microsoft solutions as a touchpoint for an Azure move. Azure also is an excellent launching point for secular trends in AI, business intelligence, and the Internet of Things, as it continues to launch new services centered around these broad themes.

Microsoft is also shifting its traditional on-premises products to become cloud-based SaaS solutions. Critical applications include LinkedIn, Office 365, Dynamics 365, and the Power platform, with these moves now beyond the halfway point and no longer a financial drag. Office 365 retains its virtual monopoly in office productivity software, which we do not expect to change in the foreseeable future. Lastly, the company is also pushing its gaming business increasingly toward recurring revenues and residing in the cloud. We believe that customers will continue to drive the transition from on-premises to cloud solutions, and revenue growth will remain robust, with margins continuing to improve for the next several years.

Dan Romanoff, Morningstar senior analyst

Meta Platforms

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: High
  • Industry: Internet Content & Information

Top social-media provider Meta Platforms looks 23% undervalued compared with our $770 fair value estimate. The largest social-media company in the world, Meta boasts close to 4 billion monthly active users worldwide. The firm can drive more ad inventory growth, leveraging new products such as Threads, while improving its monetization of ads.

We view Meta as the clear leader in social media. The firm’s application lineup, which includes Facebook, Instagram, WhatsApp, and Messenger, has close to 4 billion monthly active users, giving Meta unmatched scale in the sector.

The firm’s strategy is dual-pronged. On the user side, Meta has leveraged its scale and social-media savvy to iteratively improve its product lineup, adding attractive features such as Stories, Reels, and even new products such as Threads. Such improvements/additions not only improve user engagement but also allow Meta to monetize these features/products by layering advertisements onto them.

On the advertising side, Meta allows advertisers of all shapes and sizes to place ads in front of engaged users. The company has benefited greatly from a general shift toward digital advertising within the broader advertising market, with social-media advertising gaining substantial share, especially since the covid-19 pandemic. To bolster its advertising business, Meta has invested heavily to improve its ad-targeting algorithms, allowing it to improve its advertisers’ return on ad spending and increasing its average revenue per user over time.

While the firm’s core business remains advertising, Meta has shown a proclivity to expand beyond its ad-based revenue model by investing heavily in hardware, via Reality Labs, and AI, by investing in its own Llama large language model. While the firm’s investments in Reality Labs have been demonstrably unprofitable, we are more optimistic about Meta’s investments in AI. We believe Meta’s AI investments, especially those aimed at improving the firm’s ad-targeting algorithms, are value-accretive.

Beyond ad-targeting, Meta is also investing in consumer-facing AI, via its Llama chatbot, which is accessible to users across its applications. While a monetization strategy for this chatbot remains elusive in the near term, we believe the firm could drive increased user engagement/time spent by allowing its users access to a chatbot assistant within Meta’s applications.

Malik Ahmed Khan, Morningstar analyst

Taiwan Semiconductor Manufacturing

  • Morningstar Rating: 5 Stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Medium
  • Industry: Semiconductors

Taiwan Semiconductor Manufacturing is the first of three semiconductor companies on our list of the best AI stocks and the only 5-star stock. We believe demand from the US and other Western countries is enough to support TSM’s AI revenue growth for the next five years. TSM currently looks 35% undervalued relative to our $273 fair value estimate.

Taiwan Semiconductor Manufacturing Co. is the world’s largest dedicated contract chip manufacturer, or foundry, with over 60% market share. It makes integrated circuits for customers based on their proprietary IC designs. TSMC has long benefited from semiconductor firms around the globe transitioning from integrated device manufacturers to fabless designers. Like all foundries, it assumes the costs and capital expenditures of running factories amid a highly cyclical market for its customers. Foundries tend to add excessive capacity during times of burgeoning demand, which can result in underutilization during downturns that hampers profitability.

The rise of fabless semiconductor firms has been maintaining the growth of foundries, which has in turn encouraged increased competition. However, most of these newer competitors are confined to low-end manufacturing due to prohibitive costs and engineering know-how associated with leading-edge technology. To prolong the excess returns enabled by leading-edge process technology, or nodes, TSMC initially focuses on logic products, mostly used on central processing units and mobile chips, then focuses on more cost-conscious applications. This strategy has been successful, illustrated by the fact that the firm is one of the two foundries still possessing leading-edge nodes when dozens of peers lagged.

We note two long-term growth factors for TSMC. First, the consolidation of semiconductor firms is expected to create demand for integrated systems made with the most advanced nodes. Second, the organic growth of artificial intelligence, the Internet of Things, and high-performance computing applications may last for decades. AI and HPC play a central role in quickly processing human and machine inputs to solve complex problems like autonomous driving and language processing, which accentuates the need for more energy-efficient chips. Cheaper semiconductors have made integrating sensors, controllers, and motors to improve home, office, and factory efficiency possible.

Phelix Lee, Morningstar analyst

Tencent Holdings

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: High
  • Industry: Internet Content and Information

Among our best AI stocks, Tencent looks 28% undervalued compared with our $91 fair value estimate. Tencent holds a prominent position in China’s internet sector, with a diverse portfolio of products and services used daily by a significant portion of the population. The most immediate and measurable impact of Tencent’s AI investments will come from improved advertising technology, which enhances content recommendations and lowers ad creation costs.

Over the past decade, Tencent has capitalized on the mobile gaming boom, owning hugely popular titles such as Honor of Kings and PUBG Mobile. Games remain its primary monetization engine, generating an estimated 60% of operating income. Leveraging unparalleled user data access and substantial financial resources, Tencent is well-positioned to continue developing innovative, high-quality, and enduring franchises.

Beyond gaming, Tencent’s empire encompasses advertising, payments, cloud computing, music streaming, and various other ventures. We see significant untapped value within the WeChat network as monetization increases through advertising.

WeChat’s dominance as China’s largest app makes it a prime marketing channel. Ample advertising revenue opportunities lie ahead, driven by increased user engagement on Tencent platforms, which leads to greater ad inventory, higher ad loads, and improved ad-targeting efficiency.

While games and advertising will remain Tencent’s core revenue drivers, its leading position in financial technology, cloud computing, and enterprise software offers significant long-term value creation potential. Given China’s economic scale and widespread digital adoption, Tencent is poised to benefit from these opportunities by transforming its services into substantial revenue streams.

Tencent’s prowess as an investment powerhouse has fueled its expansion through strategic equity investments. By integrating investees' services into WeChat and other platforms, Tencent reduces customer acquisition costs and accelerates growth. This strategy has proved highly successful, transforming many small, loss-making companies into profitable listed entities. However, as Tencent matures and the Chinese economy evolves, we anticipate fewer material investment opportunities of this scale in the future.

Ivan Su, Morningstar senior analyst

Alphabet

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: Medium
  • Industry: Internet Content and Information

Alphabet is a holding company that wholly owns internet giant Google, and Google services account for nearly 90% of Alphabet’s revenue. We consider Google an AI front-runner, and its investments in AI are a continuation of the effort to safeguard its core product, Google Search. This cheap AI stock trades 31% below our fair value estimate of $237 per share.

We view Alphabet as a conglomerate of stellar businesses. With solutions ranging from advertising to cloud computing and self-driving cars, Alphabet has built itself into a true technology behemoth, generating tens of billions of dollars in free cash flow annually. While antitrust concerns around Alphabet’s core search business have made headlines, we retain our confidence in Alphabet’s overall strength and foresee the firm remaining at the forefront of a variety of verticals including search, artificial intelligence, video, and cloud computing.

Alphabet’s core strategy is to preserve its strong advertising business, with the majority of advertising revenue coming from Google Search. To that end, the firm has invested considerably over the years to improve its search capabilities, ensuring that its search engine remains deeply embedded in how hundreds of millions of users access information on the web.

We see the firm’s investments in AI as a continuation of this effort to safeguard its core product, Google Search. We believe that by leveraging generative AI, Google can not only improve its own search quality via features such as AI overviews but also improve its advertising business by augmenting its ability to target customers with relevant ads.

On the antitrust front, we don’t foresee a material deterioration in Google’s search business resulting from governmental or judicial intervention. While there is a range of possible outcomes depending on what remedial steps are imposed, we think it is likely that Google will maintain its leadership position in search and text-based advertising in the long term.

Beyond search, we have a positive outlook on Alphabet’s cloud computing platform, Google Cloud Platform. We believe increased migration of workloads to the public cloud and an uptick in the deployment and usage of AI are key growth drivers for GCP over the next five years. At the same time, we believe that as GCP scales, it will become a more important part of Alphabet’s overall business, both from a top-line and profitability perspective.

Malik Ahmed Khan, Morningstar analyst

Adobe

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: High
  • Industry: Software—Application

Next on our list of the best AI stocks to buy now, Adobe trades 34% below our fair value estimate of $590 per share. Adobe lays claim to the go-to software products that creative professionals rely on, such as Photoshop, Illustrator, and InDesign, and we think it has carved out a wide economic moat around its business.

Adobe has come to dominate in content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. The firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The December 2021 launch of Adobe Express helps further broaden the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower-cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.

CEO Shantanu Narayen provided Adobe with another growth leg in 2009 with the acquisition of Omniture, a leading web analytics solution that serves as the foundation of the digital experience segment that Adobe has used as a platform to layer in a variety of other marketing and advertising solutions. Adobe benefits from the natural cross-selling opportunity from Creative Cloud to the business and operational aspects of marketing and advertising. On the heels of the Magento, Marketo, and Workfront acquisitions, we expect Adobe to continue to focus its M&A efforts on the digital experience segment and other emerging areas.

The Document Cloud is driven by one of Adobe’s first products, Acrobat, and the ubiquitous PDF file format created by the company; it is now racing to become a $4 billion business. The rise of smartphones and tablets, coupled with bring-your-own-device and a mobile workforce, has made a file format that is usable on any screen more relevant than ever.

Adobe believes it is attacking an addressable market well in excess of $200 billion. The company is introducing and leveraging features across its various cloud offerings (like Sensei artificial intelligence) to drive a more cohesive experience, win new clients, upsell users to higher-price-point solutions, and cross-sell digital media offerings.

Dan Romanoff, Morningstar senior analyst

Advanced Micro Devices

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: High
  • Industry: Semiconductors

Advanced Micro Devices is the second of three semiconductor producers on our list of the best AI stocks. By partnering with chip manufacturing leader Taiwan Semiconductor Manufacturing, and adopting a chiplet manufacturing strategy, AMD has been able to come to market with more formidable products and greater flexibility to bring new products to market quickly. This affordable AI stock trades 24% below our fair value estimate of $140 per share.

Advanced Micro Devices has a wealth of digital semiconductor expertise and is well positioned to prosper from favorable trends in data centers and artificial intelligence. We consider AMD to be one of two notable firms in graphics processing units, which are especially well suited for AI. The company may play second fiddle to Nvidia in AI GPUs, but its GPU expertise should become increasingly valuable, and lucrative, in the years ahead.

AMD’s primary products include processors and GPUs tailored to PCs, game consoles, and servers. In our view, AMD’s PC and server success stems from the rare x86 architecture license that it possesses from Intel, which allows AMD and Intel to build x86 CPUs for Microsoft Windows PCs. We view it as a heavy lift for Windows to rewrite its x86 software to work with other processors, but Apple made this move in recent years to support its internal ARM-based processors. ARM will likely gain share in the PC market, but we still expect x86-based chips from AMD and Intel to retain leadership in the Windows PC market for quite some time.

AMD has benefited from its outsourced manufacturing model, as its tight relationship with industry leader Taiwan Semiconductor enabled AMD to grab a technological lead as its rival, Intel, stumbled with its internal manufacturing roadmap. We anticipate that AMD will continue to gain market share over the next few years as Intel strives to turn it around, but AMD’s gains could be longer lasting if Intel were to stumble further.

We think AMD’s data center business should boom over the next few years. Its server CPUs should be in high demand, as should its GPUs suited for AI workloads. AMD pegs the total addressable market for AI accelerators, such as GPUs, at $500 billion by 2028. While we foresee Nvidia capturing the bulk of this value over the next several years, we think that all AI vendors and customers will seek alternatives to keep Nvidia’s dominance at bay, and AMD might be the best positioned to emerge as a second source in AI.

Brian Colello, Morningstar strategist

Marvell Technology

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Narrow
  • Morningstar Uncertainty Rating: High
  • Industry: Internet Content and Information

The third semiconductor name on our list of affordable AI stock buys is Marvell Technology. Marvell holds a strong position in optical chips, and its burgeoning custom chip business offer a solid foothold into generative AI infrastructure, which should fuel high growth. Shares of Marvell are 22% undervalued relative to our fair value estimate of $90 per share.

We view Marvell Technology as a strong competitor in networking chips, resulting from a multiyear business pivot using acquisitions, divestitures, and organic development to focus on the cloud data center market. In our view, Marvell offers strong growth potential, impressive profitability, and a healthy competitive position. Between switching, processing, and optical chips, Marvell has one of the broadest networking silicon portfolios in the world, and we believe it is primed to expand faster than its underlying markets as future networking setups utilize greater content and we anticipate Marvell will continue to win share even in an expanding market. In particular, we believe Marvell will be a significant beneficiary of investment in generative artificial intelligence with its strong position in optical chips and a burgeoning custom accelerator business.

We expect Marvell to continue competing at the cutting edge of networking silicon with chip heavyweights like Broadcom, Nvidia, and Intel. Marvell’s billions in cumulative R&D investment, both organically and via acquisitions, has generated design prowess, and we see its strong customer relationships with cloud providers and networking equipment vendors alike as sticky. Marvell wins designs using its broad portfolio of intellectual property to create tailored or customized solutions, and earns impressive profits while doing so. In our view, Marvell merits a narrow economic moat rating.

Marvell’s recent financial history has been choppy through the firm’s transformation and pivot toward the cloud. We think reorganization and transformative acquisitions are squarely in the firm’s rearview mirror. We anticipate smaller, bolt-on acquisitions going forward but see Marvell’s focus now turning to organic growth and share gains. We believe the firm has a growing addressable market as next-generation and AI networks use heavier processing and optical content, and Marvell’s cross-selling into existing customers is in its early innings. We expect Marvell to continue investing heavily into R&D to defend its moat against the likes of Nvidia, Intel, Broadcom, and Cisco’s chip business.

Baidu

  • Morningstar Rating: 4 Stars
  • Morningstar Economic Moat Rating: Wide
  • Morningstar Uncertainty Rating: High
  • Industry: Internet Content and Information

Our list of best AI stocks wraps with Baidu, the largest internet search engine in China and the third internet content company on our list. Baidu is pursuing major growth initiatives in AI, video streaming, voice recognition technology, and autonomous driving. This cheap AI stock is 40% undervalued relative to our fair value estimate of $157 per share.

Baidu’s online advertising business accounted for 72% of core revenue in 2023 and will be the main source of revenue in the medium term given its dominant market share for search engines, but we believe unless it can develop another industry-leading business, it could face long-term challenges for advertising dollars from growing competitors such as Tencent and ByteDance. Baidu is increasingly shifting its focus toward its cloud business and now also artificial intelligence, with its Ernie generative AI model becoming its flagship product. We believe that Baidu is an early mover and should benefit from China’s AI development, but whether Ernie will be the long-term leader will depend on execution as we believe other resource-heavy companies have the potential to catch up to Baidu if there are missteps in its generative AI development.

While Baidu is transforming its identity by investing in generative AI, cloud, and autonomous driving, commercialized success remains to be seen. There are encouraging signs of its AI cloud monetization growing to 18% of core revenue in 2023 from 12% in 2020. However, despite sharp growth, we expect Baidu to face competition in the cloud from industry leaders Alibaba, Huawei, and Tencent, which all have greater market share than Baidu. Despite a potential total addressable market for autonomous driving that is 9 times its online advertising per management, commercial success is highly uncertain as revenue remains immaterial, and mass-scale adoption or time-to-market are unclear.

Its streaming video service, iQiyi, continues to be a margin drag on Baidu’s business due to a high content cost. The business constantly needs to develop or acquire new content to prevent customer churn. We’re less confident of its outlook than the core product due to a low barrier to entry and numerous competitors. Membership has remained stagnant at 100 million subscribers for the last five quarters, and therefore, we believe long-term growth is limited.

Kai Wang, Morningstar senior analyst

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts' independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.

Uncertainty Rating: Morningstar’s Uncertainty Rating is designed to capture the range of potential outcomes for a company. An investor can think of this as the underlying risk of the business. For higher risk businesses with wider ranges of potential outcomes an investor should consider a larger margin of safety or difference between the estimate of what a share is worth and how much an investor pays. This rating is used to assign the margin of safety required before investing, which in turn explicitly drives our stock star rating system. The Uncertainty Rating is aimed at identifying the confidence we should have in assigning a fair value estimate for a stock. Read more about business risk and margin of safety here.