Key Takeaways
- The majority of stocks that are likely to generate their revenue from AI in the next five years are screening as undervalued.
- Some of the names that Morningstar analysts are flagging as having high future potential are less well known to investors.
- Many consulting companies involved in the IT space will have meaningful exposure to AI in the coming years.
Artificial intelligence companies have been on an amazing run since the launch of ChatGPT 3.5 in late 2022, but there is still some confusion about what makes an AI stock, and whether investors are focusing on the likely future winners of this theme.
Morningstar has pulled together a bottom-up analysis showing which stocks are the most exposed to the AI theme—not just now, but in five years’ time.
Analysts were required to put hard numbers to their projections and clarify exactly what the firm’s role is in the supply chain and if the company will derive 50% or more of revenue from AI after five years. Fewer than 20 stocks scored highly enough to be deemed pure-play AI names.
The picture gets even more intriguing when these AI scores are tallied alongside valuation estimates. This shows that the higher the AI score, the more attractive the valuation: Of the companies that will generate more than half their future revenue from AI, between 80-100% are undervalued.
Why Are Many AI Stocks Still Undervalued?
Most of the high scoring companies uncovered in this analysis are already involved in the technology sector. AI is changing business models, with companies in industries such as management consulting, and even fast food, claiming over the last few years that it would revolutionize their business models. When it comes to the firms that will actually generate revenue directly from AI however, it’s many of the names that are already known to investors such as Nvidia NVDA and Microsoft MSFT.
Top of the list are IT giants like Oracle ORCL and Snowflake SNOW, both actual producers of AI technology and 4-star stocks. These names are followed closely by the likes of AMD AMD and Broadcom AVGO, suppliers of AI, and also 4-star stocks.
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Which AI Stocks Are Best Positioned for Future Growth?
Investors are aware of the potential of AI and they’ve seen thematic AI funds massively outperform the general market. But they’re also aware of the risks. There was a material selloff in AI infrastructure shares in late 2025, and many of them have yet to fully recover. Investors are uncomfortable with the size of the bet these companies are taking on AI, despite the potential rewards, and are hence discounting the share prices.
Some of the names that analysts are flagging as having high future potential are less well known to investors and even to thematic fund managers investing in AI: Consulting companies involved in the IT space—think Globant GLOB, CGI GIB.A or Tata TCS—will have meaningful exposure to AI in the coming years. Yet less than 2% of AI fund managers are currently holding these stocks. Moreover, these three companies all have attractive valuations right now. Hidden gems like these are ripe for wily investors to take advantage of.
This article is taken from the report “Opportunities in Artificial Intelligence,” published in May and written by Michael Field and Kenneth Lamont.
