Stocks to buy

While artificial intelligence is all the rage these days, investors may want to consider the best niche AI stocks to buy now. On the surface, Grand View Research reports that the global AI market size reached a valuation of $136.55 billion last year. Further, analysts project that the segment will expand at a compound annual growth rate (CAGR) of 37.3% from 2023 to 2030, culminating in sector revenue of $1.81 trillion.

However, AI comes in various forms. And it’s only the rare enterprise that can dominate every single face of machine-learning protocols. Therefore, investors should narrow down their research to consider the AI stocks with competitive advantage list. Stated differently, these AI leaders in niche markets can dominate their chosen specialties, thus potentially facilitating excellent rewards for stakeholders.

Of course, the arena is both competitive and constantly evolving. Therefore, investors must conduct their own due diligence. Nevertheless, these AI disruptors in niche markets may help you on the way to market success.

MSFT Microsoft $307.00
META Meta Platforms $233.37
AMBA Ambarella $65.72

Microsoft (MSFT)

Source: shutterstock.com/YAKOBCHUK V

Needing no introduction, Microsoft (NASDAQ:MSFT) generates considerable relevancies across the consumer technology field. However, MSFT legitimately ranks among the best niche AI stocks to buy now thanks to its leadership in the generative AI space. Specifically, its partnership with OpenAI – the maker of the chatbot ChatGPT – may dramatically boost demand for Microsoft Bing, which utilizes the powerful protocol.

Better yet, MSFT isn’t just making up the AI stocks with competitive advantage list purely on its fundamental prowess. Instead, it carries one of the top financial profiles in the tech ecosystem. For example, the company’s three-year revenue growth rate pings at 17.4%, ranked better than 72.04% of companies listed in the software industry.

Also, on the bottom line, Microsoft impresses with a trailing-year net margin of 33.25%. This stat outflanks 96.84% of sector players. Finally, Wall Street analysts peg MSFT as a consensus strong buy. Overall, their average price target lands at $325.10, implying almost 5% upside potential.

Meta Platforms (META)

Source: shutterstock.com/everything possible

A heavily risky idea among best niche AI stocks to buy now due to prior losses, Meta Platforms (NASDAQ:META) will nevertheless intrigue at least some speculators. Also, its performance in the charts is impressive now, having gained nearly 87% of equity value since the January opener. Fundamentally, Meta carries significant relevancies in the immersive AI space – especially with its virtual reality initiatives.

If you’re willing to overlook some flaws, META is one of the AI innovators in niche markets. Financially, it’s not doing too poorly considering last year’s troubles with the digital advertising drop off. For example, Meta’s three-year revenue growth rate still comes in at 20.6%. This stat ranks above 73.22% of enterprises listed in the interactive media industry.

Also, Meta remains a consistently profitable business. Its trailing-year net margin comes in at 18.27%, above nearly 81% of its rivals. Plus, it’s a high-quality enterprise as evidenced by its return on equity of 17.19%. Lastly, covering analysts peg META as a consensus strong buy. Their average price target hits $278.97, implying nearly 20% upside potential.

Ambarella (AMBA)

Source: Shutterstock

While an enticing idea among the best niche AI stocks to buy now, Ambarella (NASDAQ:AMBA) suffers from the highest risk. Since the start of this year, AMBA dropped nearly 17% of equity value. Over the past one-year period, AMBA is looking at a loss of almost 4%. Nevertheless, investors appreciate the name because of its optical solutions for the autonomous driving ecosystem. If the company makes a breakthrough, AMBA could seriously fly.

Therefore, Ambarella easily makes a case for AI disruptors in niche markets. Financially, though, the company’s numbers leave much to be desired. Most glaringly, the tech specialist’s net margin sits at 19.37% below breakeven. This stat ranks worse than 87% of entities in the semiconductor industry. Also, its three-year EBITDA growth rate is 7.2% below breakeven.

On the other hand, Ambarella enjoys a very strong cash-to-debt ratio of nearly 24 times. As well, it benefits from high fiscal stability. Thus, it’s more than just a name among AI leaders in niche markets. In closing, analysts peg AMBA a strong buy. Their average price target stands at $99.02, implying nearly 50% upside potential.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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