Bank of America is bullish on these 4 under-the-radar AI stocks
Bank of America sees additional AI investing opportunities in small and mid-cap stocks.
AI mentions on earnings calls have increased, especially among Russell 2000 companies.
The bank shared four buy-rated AI stock picks that go beyond the Magnificent Seven.
The Magnificent Seven and the AI trade have become synonymous, but there are opportunities for investors to get exposure to the AI mega-trend outside of the biggest names in the market.
Small and mid-cap companies are adopting AI technology to drive earnings growth, according to Bank of America analysts. As the AI trade progresses, the next wave of beneficiaries will be companies that adopt AI into their product offerings and revenue models.
While AI infrastructure companies like Nvidia benefit from size and scale, more small-cap companies are participating in the next leg of the AI trade.
Jill Carey Hall, equity and quant strategist at Bank of America, wrote in a recent report that earnings calls of Russell 2000 companies have mentioned AI more frequently over the last few quarters.
Software companies are particularly well-positioned to take advantage of the nascent trend of agentic AI, or AI systems that operate autonomously with limited human supervision, according to the bank.
Senior technology research analyst Brad Sills reported increased signs of "green shoots" in the development of agentic application adoption at the bank's Global Technology Conference earlier this month. Examples include increased database activity to handle running AI applications and more AI-focused code.
Small-cap companies in particular present AI opportunity for active stock pickers. While the overall category has lagged behind its large-cap counterpart, the current backdrop allows investors to buy up promising high-growth companies at a discounted price. Additionally, Hall sees the potential for easing inflation and a pick-up in M&A transaction volume to provide a boost to small-cap technology valuations.
Below are Bank of America's four top buy-rated small and mid-cap AI picks, along with their 12-month price targets and relevant analyst commentary.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
3 hours ago
- Yahoo
Caterpillar's E&T segment is likely a core driver to the next EPS cycle: BofA
-- Bank of America analysts say Caterpillar's Energy & Transportation (E&T) division is set to become the company's key growth engine, citing strong multi-year tailwinds from data centers, power generation, and gas pipelines. In a new note, BofA reiterated its Buy rating on Caterpillar (NYSE:CAT) with a price target of $385 a share, calling the E&T segment—roughly 40% of CAT's sales—'the least understood yet... the likely core driver to the next EPS cycle.' According to the analysts, 'E&T growth is outpacing core CAT,' and could add 'incremental $3-3.50 of EPS power' as new infrastructure trends take hold. The segment is said to support diversification and 'a higher through-cycle EPS profile,' they added. In the Oil & Gas sector, which accounts for 29% of E&T revenue, Caterpillar is expected to benefit from renewed pipeline expansion, according to the bank. 'Gas more pipeline capex is on the way,' BofA said, citing policy tailwinds from the Trump administration, rising LNG export interest, and expected utility demand for gas infrastructure into the 2030s. Power Generation (HM:PGV), which accounts for 32% of E&T, is reportedly the fastest-growing vertical. With data centers driving soaring power needs, backup generation demand is surging. 'New, bigger data centers can have ~60 large CAT engine generators at a site,' BofA noted. In addition, they said the company's largest turbine, the Titan-350, offers 'prime' power potential by generating 38MW—enough to support grid stability. BofA also highlighted upcoming catalysts, including a tour of CAT's engine facility and meetings with its largest dealer, which could offer further insight into the segment's upside. 'We look for clues to quantify the engine opportunity... and growth opportunity into 2026,' the analysts said. Related articles Caterpillar's E&T segment is likely a core driver to the next EPS cycle: BofA Riot Platforms: Needham sees 'major opportunity' in Corsicana Trump claims 'we' have control over Iranian airspace, calls for surrender Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 hours ago
- Yahoo
How major US stock indexes fared Tuesday, 6/17/2025
U.S. stocks slumped under the weight of a jump for the price of oil. The S&P 500 fell 0.8% Tuesday following signals that Israel's conflict with Iran may be worsening and that one of the U.S. economy's main engines is weakening. That nearly erased the S&P 500's gain for the week. The Dow Jones Industrial Average dropped 0.7%, and the Nasdaq composite sank 0.9%. Treasury yields also fell following a weaker-than-expected report on sales at U.S. retailers. Crude oil prices rose more than 4% on worries about damage to the flow of oil because of fighting between Israel and Iran. On Tuesday: The S&P 500 fell 50.39 points, or 0.8%, to 5,982.72. The Dow Jones Industrial Average fell 299.29 points, or 0.7%, to 42,215.80. The Nasdaq composite fell 180.12 points, or 0.9%, to 19,521.09. The Russell 2000 index of smaller companies fell 22.17 points, or 1%, to 2,101.96. For the week: The S&P 500 is up 5.75 points, or 0.1%. The Dow is up 18.01 points, or less than 0.1%. The Nasdaq is up 114.27 points, or 0.6%. The Russell 2000 is up 1.46 points, or 0.1%. For the year: The S&P 500 is up 101.09 points, or 1.7%. The Dow is down 328.42 points, or 0.8%. The Nasdaq is up 210.30 points, or 1.1%. The Russell 2000 is down 128.20 points, or 5.7%. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 hours ago
- Yahoo
CoreWeave stock surge brings post-IPO rally to 340% after unusually positive analyst downgrade
CoreWeave (CRWV) stock jumped over 8% on Tuesday, bringing the AI cloud company's post-IPO rally to a whopping 340% after Bank of America analyst Brad Sills downgraded the stock but set his price target on shares to a new Street high. On Monday, Sills downgraded CoreWeave stock to Neutral from his previous Buy rating, citing its high valuation. He noted that CoreWeave is trading at 27 times its 2027 earnings and highlighted its significant debt. "Historically, CoreWeave has funded 85% of capex with debt," Sills wrote in a note to clients on Monday. CoreWeave is set to spend up to $23 billion in 2025, a figure that surprised Wall Street analysts and sent the stock down in May immediately following its first-ever earnings report as a public company. Despite the downgrade, Sills raised his price outlook on the stock to $185 from $76, the highest among Wall Street analysts tracked by Bloomberg. Sills cited capital expenditures on AI, which he said are "still very healthy" while arguing that the "growth rate is peaking." "[W]e see solid sustained demand in CoreWeave's AI infrastructure market," Sills wrote. He said AI capital expenditures are set to grow 4% in 2027 to $206 billion, but that growth is much less than the 65% jump in AI capex in 2025. "The top-line momentum is strong, though access to debt is critical to support the business," he wrote. Sills cited CoreWeave's expanded deal with OpenAI ( CoreWeave in May secured a $4 billion deal with the ChatGPT maker in addition to its previously reported $11.9 billion commitment from the AI startup. CoreWeave is one of the largest holders of Nvidia's (NVDA) graphics processing units and rents its data-center capacity to Big Tech firms such as Microsoft (MSFT) and Meta (META), as their own stores of GPUs haven't been sufficient to power their AI ambitions. CoreWeave uses its debt, borrowed at high interest rates against its store of Nvidia GPUs as collateral, to buy more Nvidia chips. Nvidia is also a major investor in and customer of the AI cloud firm. The company has added more than $64 billion to its market cap — which stood at $82.7 billion on Tuesday afternoon — since its March IPO. In a note to clients on Monday, Jefferies analyst Brent Thill also gave a nod of approval to CoreWeave, listing the company among the investing firm's top AI stocks and reiterating his $180 price target on shares. "CRWV is the fastest growing vendor in our AI coverage ... and we believe their infrastructure has more durability than most think," Thill wrote. Other analysts remain skeptical. "I believe that even in an optimistic scenario, all the cash flow from their [CoreWeave's] contract[s] goes to pay down debt, and none of it reaches the shareholders," DA Davidson analyst Gil Luria told Yahoo Finance in an interview Tuesday. Luria reiterated his Underperform rating on CoreWeave stock and $36 price target in a note to clients last week. Luria noted that there is somewhat of a "concern" around CoreWeave's massive deal with OpenAI because "while it's [OpenAI is] an incredibly impressive company ... it's also losing a tremendous amount of money." "So OpenAI will have to do a lot more capital raising in order to afford what it's committed to CoreWeave," he added. Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @ Email her at
