Unlocking Hidden Gems in the AI Revolution
The artificial intelligence (AI) boom has sent top tech stocks soaring, leaving many investors wondering if they’ve missed the boat. However, beneath the surface, there are still undervalued AI stocks waiting to be discovered.
Beyond the Hype: Finding Value in AI
While Nvidia and Palantir Technologies have stolen the spotlight, the AI rally has not been universally felt. This presents an opportunity for savvy investors to snap up promising AI stocks at discounted prices. As growth begins to materialize, these underappreciated gems may finally get the recognition they deserve.
Alphabet: The Overlooked AI Pioneer
Google parent Alphabet may seem like an unlikely bargain, given its past success and early adoption of AI. However, concerns about OpenAI’s ChatGPT and Google’s initial struggles in the generative AI market have led to a perceived undervaluation. Despite this, Alphabet has made significant strides in AI, including the release of Google Gemini and its groundbreaking quantum computing chip, Willow. With revenue growth of 15% in the first nine months of 2024 and a commitment to innovation, Alphabet’s stock price rise of over 40% in the last year may be just the beginning.
A Quantum Leap in Valuation
Trading at just 26 times earnings, Alphabet is the cheapest of the “Magnificent Seven” tech stocks. As the company continues to push the boundaries of AI and quantum computing, its relatively low valuation may not last for long.
Qualcomm: The AI Chipmaker with Room to Grow
Smartphone chipset maker Qualcomm has faced challenges, including the loss of a key customer in China and Apple’s plans to release an in-house-designed chipset. However, Qualcomm has diversified its revenue streams into Internet-of-Things, automotive, and PC chips, with a focus on AI beginning with its Snapdragon 8 Gen 3 chipset. Despite a 30% decline from its highs, Qualcomm’s stock trades at a P/E ratio of 18, making it an attractive bargain.
A New Era of Growth
With revenue growth of 9% in fiscal 2024 and a 55% yearly increase in auto-related revenue, Qualcomm’s transformation is underway. While analysts expect 9% consensus growth for fiscal 2025, AI could spark another upgrade cycle in the smartphone market, driving higher investor returns.
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