pwshub.com

Surprise! These 3 High-Growth Artificial Intelligence (AI) Players Are Looking More and More Like Value Stocks

Artificial intelligence (AI) stocks offer investors great potential for gains thanks to the promise of the technology to revolutionize many areas -- from making companies more efficient to developing the next game-changing medicine, AI could make a huge mark on history. That's why many AI stocks have roared higher, boasting lofty valuations, and many investors had the feeling that if they wanted to score an AI win, they would have to pay a high price.

But I have a surprise for you: Some very promising AI players actually are looking more and more like value stocks, as their valuations have reached bargain levels, considering their track records and future potential. They may not exactly have crossed the line into value-stock territory, but they're close enough to prompt growth and value investors to take notice. Let's check out three AI stocks that look dirt cheap right now and might offer you an excellent buying opportunity.

Two investors look at something on a laptop in an office.

Image source: Getty Images.

1. Super Micro Computer

Super Micro Computer's (NASDAQ: SMCI) earnings and stock soared earlier this year as customers flocked to the company for its AI data center equipment -- products such as workstations and servers. In fact, Supermicro's quarterly revenue, climbing into the billions, even surpassed its annual revenue as recently as in 2021.

Earnings remain strong, and the company even offered investors fantastic news this past week when it said it's been shipping 100,000 graphics processing units (GPUs) for AI on a quarterly basis. The company works with top chip designers like Nvidia to integrate their chips into its equipment.

But recent headwinds have stopped the stock in its tracks. These include a report from a firm shorting the stock, alleging troubles at Supermicro, and a Wall Street Journal report of a possible Justice Department probe. At the same time, Supermicro has delayed its annual 10-K report. All of these elements have weighed on investor confidence.

I don't recommend Supermicro right now for cautious investors until these uncertainties are resolved, but aggressive investors may consider a small position in this top AI player, as it's trading for a bargain-basement price, at only 14x forward earnings estimates.

2. Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), trading for 21x forward earnings estimates, is the cheapest of the high-growth tech stocks known as the "Magnificent Seven." Yet, the company has a track record and future prospects that are just as exciting as those of these peers.

You probably know Alphabet best thanks to Google Search, the world's most popular search engine, and advertising on Google generates the lion's share of Alphabet's revenue. But the company also has another very promising business that's reached big milestones recently thanks to the company's investment in AI. I'm talking about Google Cloud.

The cloud business reported a double-digit gain in revenue and a triple-digit increase in operating income in the recent quarter, and these metrics also reached important milestones. Google Cloud revenue advanced beyond $10 billion for the first time, and the business' operating income rose past $1 billion. The company says its AI infrastructure and solutions for cloud customers have brought in billions of dollars in revenue this year -- and more than 2 million developers are using these tools.

Alphabet is offering customers AI solutions for all of their needs, and also has applied AI to its Google Search business -- so Alphabet could become an AI powerhouse over the long run.

3. Meta Platforms

Meta Platforms (NASDAQ: META) is another Magnificent Seven player trading for a very reasonable price, at 27x forward earnings estimates. The company is a leader in the world of social media, as it owns Facebook, Messenger, Threads, WhatsApp, and Instagram -- and its investment in AI could reinforce its position here.

Meta pledged to make AI its biggest investment theme of this year, aiming to have on board the equivalent of 600,000 graphics processing units of compute by year end. The tech giant is working to develop AIs that all of its users could apply to their needs -- from leisure to business. This should prompt us to spend more time on Meta's apps, and in turn, advertisers may increase their already hefty advertising presence there in order to reach us.

Advertising represents most of Meta's billion-dollar revenue today, so investing in an area that could secure advertising spending is wise. On top of this, Meta is going all-in on AI, so other products or services may be on the horizon. At today's price, Meta is a great addition to the portfolios of investors with a focus on both growth and value.

Should you invest $1,000 in Super Micro Computer right now?

Before you buy stock in Super Micro Computer, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Super Micro Computer wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,130!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of October 7, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.

Surprise! These 3 High-Growth Artificial Intelligence (AI) Players Are Looking More and More Like Value Stocks was originally published by The Motley Fool

Source: finance.yahoo.com

Related stories
1 month ago - Eli Lilly has been a big-time winner for investors over the last several decades, and there are many reasons to believe the company is at the forefront of many new growth stories.
1 month ago - When digging through financial statements, it's important to look at the trends for metrics rather than just a single quarter of results. This can...
1 month ago - Investing in fundamentally strong growth companies with sustainable competitive advantages can be a smart long-term strategy for astute investors....
4 days ago - The billionaire philanthropist has two dozen stocks in his holdings, but just four account for the vast majority of his portfolio.
1 month ago - (Bloomberg) -- Wall Street traders revived prospects for a half-point Federal Reserve rate cut next week, spurring a rotation into stocks that would benefit the most from policy easing.Most Read from BloombergHousing’s Worst Crisis in...
Other stories
23 minutes ago - Warren Buffett's turn to cash indicates that now is not the best time for high equity exposure, David Einhorn wrote.
23 minutes ago - Do withdrawals from my pre-tax IRA and/or 401(k) accounts made before I turn 73 count toward my RMDs? Or do RMDs start at 73 without regard to prior withdrawals? I'm 70 now and still working and collecting Social Security, but plan to...
1 hour ago - The Federal Trade Commission today announced its new “click to cancel” rule, which will make it as easy to cancel a subscription as it was to sign up. Getting out of subscriptions is notoriously annoying, usually taking much more effort...
2 hours ago - Google LLC is bringing its most powerful artificial intelligence models to public-sector institutions with the upcoming launch of Gemini in Google Distributed Cloud for Secret and Top Secret Workloads early next year. The announcement was...
2 hours ago - The S&P 500 looks like it's in another "mania," according to a Stifel analysis examining 139 years of market history.