Unlocking the Power of Artificial Intelligence: Why Verizon May Be the Sleeper Stock of the Future
As the world becomes increasingly reliant on artificial intelligence (AI), companies are scrambling to capitalize on this burgeoning market. Amidst the hype, one telecom giant stands out as a potential dark horse: Verizon Communications. While its shares have languished, hitting a 52-week low of $37.59, the company’s contributions to the AI sector make it an attractive investment opportunity.
Verizon’s Role in AI Expansion
Verizon’s 5G wireless network is a crucial component in the growth of AI, providing the fast speeds and security necessary to deliver AI to devices on the edge of a computer network. The company’s partnership with Nvidia to bring AI to private networks is a prime example of its commitment to this space. With private networks dedicated to specific organizations, such as FIFA’s 2026 World Cup, Verizon is poised to reap the benefits of this expanding market.
The AI Edge Computing Opportunity
The AI edge computing sector is expected to balloon from $27 billion in 2024 to $270 billion by 2032, driven by the need for fast and secure data processing in applications like self-driving cars, robotics, and the Internet of Things. As Verizon continues to expand its 5G Ultra Wideband network and scale its private networks business, it’s well-positioned to capitalize on this trend.
Revenue Growth and Challenges
While Verizon’s wireless service revenue grew 3% year-over-year to $19.8 billion in Q3, overall revenue remained flat due to declining equipment sales. The company’s large debt burden, currently over $150 billion, also poses a challenge. However, the acquisition of Frontier Communications Parent will strengthen Verizon’s rapidly growing broadband business, which is essential for delivering AI to the edge.
Free Cash Flow and Dividend Yield
Verizon’s ability to generate strong free cash flow (FCF) provides a cushion to invest in the business, pay down debt, and fund dividends. With a Q3 FCF of $6 billion and a year-to-date total of $14.5 billion, the company can comfortably cover its dividend payments. The dividend yield of 7% and 18-year streak of increases make Verizon an attractive option for income investors.
A Compelling Valuation
Verizon’s forward price-to-earnings (P/E) ratio of eight is lower than its main rivals, AT&T and T-Mobile US, suggesting its stock is undervalued. With a growing wireless service business, robust FCF, and a strong dividend, Verizon presents a compelling investment opportunity.
A Long-Term Play
As the AI edge computing market continues to expand, Verizon is well-positioned to benefit from its investments in this space. With a low forward earnings multiple, strong FCF, and a growing wireless service business, Verizon stock is a buy for those looking to hold onto shares as a long-term investment.
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