For approximately three decades, the investing realm has been a stage for the next revolutionary invention, akin to the game-changing impact of the internet on the corporate landscape. The emergence of artificial intelligence (AI) seems poised to take up this mantle.
AI, a realm where software and systems assume responsibilities traditionally held by humans, shines brightest in its capacity for autonomous learning, void of human interference. This characteristic fuels AI-driven software and systems to excel in tasks, and perhaps even acquire new skills over time.
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The Lucrative $15.7 Trillion AI Opportunity by 2030
Although predictions span a wide range, PwC analysts forecast in a recent report that AI could inject up to $15.7 trillion into the global economy by the end of this decade.
With such a vast potential market, numerous companies stand to gain. Yet, blindly cherry-picking from a list of AI stocks doesn’t guarantee returns. At this juncture, no company epitomizes the AI wave more than Nvidia (NASDAQ: NVDA). Since the onset of 2023, Nvidia has accumulated a market value surge of up to $3 trillion, recently greenlighting a 10-for-1 stock split.
Nvidia’s astronomical ascension and impeccable operational expansion stem from its AI-powered graphics processing units (GPUs), now standard in high-compute data centers. Faced with stratospheric chip demand outpacing supply, Nvidia flexed its pricing prowess, reaping significant benefits.
However, every major innovation in the last thirty years, including the internet, weathered an early-phase bubble pop. The saga repeats: investors habitually overstate the acceptance and/or efficacy of new technologies, trends, or innovations. AI, akin to its predecessors, necessitates maturation time, a trend that does not bode well for Nvidia’s shares.
Meta Platforms: the First Gem
Your premier stop for a bargain AI stock in the latter half of 2024 (and potentially beyond) is social media giant Meta Platforms (NASDAQ: META).
Meta’s linchpin revenue stream of nearly 98% from advertising, complemented by CEO Mark Zuckerberg’s aggressive AI data center investments, underscores the sustenance of its operational cash flow and profits, buoyed by thriving economies globally and domestically.
By March’s closure, Meta enticed a staggering 3.24 billion users daily to its social media platforms. Advertisers recognize no superior avenue to reach users than through Meta.
Even post a more than quintuple surge from its 2022 bear market trough, Meta’s shares remain accessible, currently fetching less than 14 times the estimated 2025 cash flow. For perspective, this showcases a 6% discount to the five-year average forward-year cash flow multiple and marks its lowest cash flow multiple in each year over the past decade, save 2022.
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Alibaba: The Subsequent Jewel
The following exceedingly affordable AI stock for your secure acquisition in the latter half of 2024 is China’s e-commerce powerhouse Alibaba (NYSE: BABA).
Per the International Trade Administration, Alibaba clinches China’s top grosser in online retail sales, with Taobao and Tmall securing around 50.8% of China’s e-commerce sales. Even amid China’s muted economy post-COVID-19, an eventual elevation of the country’s budding middle class will uplift the prospects of this domain.
Moreover, Alibaba Cloud stands as China’s top-ranking cloud infrastructure service platform by revenue. Here, generative AI solutions cater to customers, augmenting and fortifying their enterprises.
Unlocking the Goldmine: Unearthing Historically Cheap AI Stocks
Enterprise spending on cloud services is still in its nascent stage of ramping up.
Intel: The Sleeping Giant Awakens
A third AI stock poised to glitter in the second half of 2024, and likely beyond, is semiconductor stalwart Intel (NASDAQ: INTC).
There’s no denying that Nvidia has sprinted far ahead of Intel in the past 18 months. However, Intel is set to unleash its Gaudi 3 AI-accelerator chip on a broad scale in the latter part of this year. With Nvidia struggling to meet soaring demand, Intel and its counterparts stand poised to snatch market share effortlessly.
Intel’s appeal extends beyond AI. Its legacy central processing unit (CPU) business for personal computers and traditional data centers continues to be a cash cow, funding various high-growth ventures like the foundry services segment. By 2030, Intel aims to claim the title of the world’s second-largest chip fabrication company.
Currently trading at a 25% premium to its book value of $24.89 per share, Intel’s stock hasn’t been this attractively priced relative to its book value since the mid-1980s, barring a blip in September 2022-March 2023.
Baidu: China’s AI Forerunner
The fourth irresistible AI stock to enrich investor portfolios in the latter half of 2024 is China’s internet behemoth, Baidu (NASDAQ: BIDU).
Similar to Meta, Alibaba, and Intel, Baidu won’t falter in the face of an AI market downturn due to its status as China’s premier internet search engine. Baidu has maintained a lion’s share of the internet search market in the globe’s second-largest economy, securing predictable cash flow and robust ad-pricing power.
AI is central to Baidu’s future trajectory. Baidu’s AI Cloud ranks as China’s fourth-largest cloud service platform, while Apollo Go, its autonomous ride-hailing wing, leads globally with over 6 million rides to date. Notably, these non-online marketing sectors have outpaced Baidu’s core internet search business in growth.
With a meager forward price-to-earnings (P/E) ratio of 7 and a war chest boasting roughly $26 billion in liquid assets, Baidu is a steal.
Amazon: Defying Gravity with AI
The fifth enticingly cheap AI gem beckoning investors in the latter half of 2024 is Amazon (NASDAQ: AMZN), the e-commerce titan that rules the roost.
In 2023, Amazon commanded nearly 38% of U.S. online retail sales. While this sector contributes immensely to revenues, Amazon’s cash flow and operating income largely derive from ancillary businesses. Foremost among these is Amazon Web Services (AWS), the globe’s premier cloud infrastructure platform, which recently exceeded $100 billion in annual revenue. AWS stands prepared to offer diverse AI solutions to assist businesses in training expansive language models and running virtual assistants.
Advertising and subscription services are also burgeoning segments for Amazon. As its e-commerce bazaar and content library expand, Amazon has the leverage to demand premium subscription charges for Prime.
Though Amazon doesn’t look economically attractive based on the traditional P/E metric, it is historically inexpensive in terms of future cash flow. Shares are currently available for around 13 times the anticipated cash flow in 2025, significantly lower than the median multiple of 30 throughout the 2010s.
Consider Your Investment in Meta Platforms
Before delving into Meta Platforms stock, remember this:
The Motley Fool Stock Advisor team has pinpointed 10 top-notch stocks they anticipate could yield monumental returns in the forthcoming years, with Meta Platforms not making the cut.
Unleashing the Power of Stock Investments: A Journey Through Historical Success
Reviving the Glory of Nvidia’s Success
Reflecting back to April 15, 2005, a date etched in the annals of financial history as Nvidia carved its name on the list of promising investments. Imagine the sheer audacity of turning a modest $1,000 into a staggering $751,670, an ascent that bewilders even the most seasoned investors.
The Stock Advisor Marvel
Embarking on a voyage guided by the Stock Advisor unleashes an easy-to-follow blueprint for success. Laden with insights on crafting a compelling portfolio, enriched with constant updates from seasoned analysts, and graced with two fresh stock recommendations each month, the Stock Advisor service emerges as a beacon of financial acumen.
The service’s prowess extends beyond mere statistics, having outpaced the S&P 500 return by more than fourfold since its inception in 2002. Such a feat does not merely further investor confidence; it epitomizes a symphony of insightful predictions culminating in breathtaking results.
Unraveling the Time Capsule
As the financial clock rewinds to yesteryears, basking in the glory of past recommendations becomes more than a mere exercise — it opens a window to unparalleled success. Nvidia’s meteoric rise stands as a testament to the potent foresight ingrained in the firm’s investment strategies.
The historical context enriches the narrative, underscoring the importance of prudent decisions based on research, analysis, and expert advice. Each stock pick, a humble seed sown amid the uncertainties of the market, blossoms into a mighty oak of prosperity over time.
Concluding Remarks
As investors navigate the tempestuous waters of the financial realm, the allure of past successes serves as a lighthouse, guiding shipwrecked vessels toward the shores of prosperity. The journey is fraught with risks, pitfalls, and uncertainties; yet, armed with the right tools and insights, the Stock Advisor illuminates the path toward financial triumph.
