The Rise of AI Stocks: Unveiling 5 Hidden Gems for Savvy Investors

By: Alex Freidmen

For decades, investors have eagerly anticipated a breakthrough that could rival the transformative impact of the internet on the business landscape. The emergence of artificial intelligence (AI) seems to be the innovation that many have long awaited. AI harnesses the power of software and systems to perform tasks autonomously, continuously learning and adapting without human intervention.

A hologram of a rapidly rising candlestick stock chart emerging from the right palm of a humanoid robot.

Image source: Getty Images.

The Lucrative $15.7 Trillion Venture in AI by 2030

Estimates suggest that AI could contribute as much as $15.7 trillion to the global economy by 2030. This revelation by PwC analysts underscores the vast potential AI holds for various industries. However, not all companies dabbling in AI will emerge as winners, as the market dynamics are complex and multifaceted.

Nvidia’s meteoric rise stands out prominently as it rides the AI wave, propelling its market value to new heights. With its AI-driven GPUs becoming indispensable in high-compute data centers, Nvidia has reaped massive benefits from the soaring demand for its chips, enabling it to hike prices and reap substantial rewards.

Historically, every groundbreaking innovation has experienced its share of early-stage tumult, akin to an anticipated bubble burst. The road ahead for AI’s maturity may not be smooth sailing, echoing the history of previous paradigm-shifting technologies. This potential trajectory does not bode well for Nvidia’s stock, as past cycles suggest a period of adjustment and recalibration.

Despite the looming uncertainties, a select group of AI stocks presents a compelling investment opportunity owing to their solid operational foundations. Let’s delve into these five hidden gems that offer a favorable risk-reward proposition for discerning investors.

The Meta Platforms Marvel

A standout contender in the AI stock realm is the social media behemoth, Meta Platforms (NASDAQ: META). With an advertising-centric revenue model that garners 98% of its income, Meta Platforms remains a powerhouse in the digital landscape. Mark Zuckerberg’s strategic forays into AI data centers, the metaverse, and augmented/virtual reality devices, coupled with a robust user base of 3.24 billion daily, underscore its enduring allure for advertisers.

Despite its impressive rally from the 2022 bear market lows, Meta Platforms’ shares are currently trading at less than 14 times estimated cash flow for 2025. This valuation marks a 6% discount relative to its historical forward-year cash flow multiples, positioning it as an attractive proposition for astute investors.

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Image source: Getty Images.

The Alibaba Enigma

Another undiscovered gem in the AI landscape is China’s e-commerce titan, Alibaba (NYSE: BABA). As China’s reigning champion in online retail sales, Alibaba’s platforms Taobao and Tmall command over half of the country’s e-commerce market share. Despite economic headwinds post-COVID-19, Alibaba’s strategic pivot to cater to China’s burgeoning middle class paints a promising long-term growth narrative.

Moreover, Alibaba Cloud stands tall as China’s premier cloud infrastructure services platform by revenue. Its offering of generative AI solutions to clientele underscores its potential to drive business enhancement and growth in the evolving digital ecosystem.

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Historically Cheap AI Stocks Primed for Growth

Historically Cheap AI Stocks Primed for Growth

Enterprise spending on cloud services is still in its very early stages of ramping up.

The Undervalued Potential of Alibaba and Intel

Shares of Alibaba are currently valued at less than 8 times forward-year earnings, making it a steal given its substantial cash reserves. Intel, a semiconductor stalwart, is gearing up for a strong performance in the latter half of 2024 and beyond.

Intel’s upcoming Gaudi 3 AI-accelerator chip release is poised to seize market share from competitors like Nvidia. Additionally, Intel’s diverse revenue streams, including legacy CPU operations and high-growth initiatives, position the company as a valuable investment for the future.

Diving into Intel’s Future and Baidu’s Promise

Looking past Nvidia’s recent success, Intel’s strategic moves and product offerings hint at a bright future. With plans to become a major player in chip fabrication, Intel presents a compelling case for investors.

Meanwhile, Baidu’s dominance in China’s internet search market solidifies its position as a stable investment choice. Leveraging AI for its cloud services and autonomous ride-hailing business, Baidu demonstrates substantial growth potential.

The Resilience of Amazon in the AI Landscape

Amazon, a key player in e-commerce, showcases its strength in ancillary operations such as Amazon Web Services (AWS). As AWS surpasses $100 billion in annual revenue, Amazon’s foray into AI solutions provides a pathway for sustained growth and innovation.








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