Artificial intelligence has been the driving force behind the current development. bull market Strong demand for AI hardware, software, development tools, and services has led to a significant increase in revenue and profits for many prominent technology companies. But the trend may have only just begun.
Generative Artificial Intelligence Spending will rise from $67 billion last year to $1.3 trillion by 2032, according to Bloomberg Intelligence estimates. This huge and rapidly growing market leaves plenty of opportunity for companies to continue to expand rapidly. There are many different ways to invest in the continued growth of AI, but it’s important to avoid stocks that may be priced ahead of their financial reality.
The following three companies offer great opportunities to buy AI stocks at an attractive price, and you can invest in any of them for as little as $200.
1. Semiconductor manufacturing in Taiwan
Taiwan Semiconductor Manufacturing Company (NYSE: TSM)TSMC is also known as the world’s leading chipmaker. It captures the majority of orders for advanced chip designs thanks to its advanced technology. It can then use this revenue to reinvest in R&D and develop better processes for the next generation of chips, creating a vicious cycle. Some of its biggest customers include Nvidia And apple.
The company just reported strong second-quarter earnings and a better-than-expected outlook for the third quarter. Not surprisingly, CFO Wendell Huang said the factors contributing to the forecast were “strong smartphone demand and AI for our advanced process technologies.”
TSMC is a secular way to capitalize on the growing demand for AI chips. While Nvidia currently makes the bulk of the graphics processing units that power AI training data centers, several other companies are working on designs to replace Nvidia’s chips or reduce their reliance on a single company. Regardless of which company designs the chips, TSMC is likely to win business thanks to its advanced technology capabilities and the virtuous cycle that protects its leadership.
Geopolitical factors add some additional risk to investing in the Taiwanese company, but at its current price, the shares look attractive. The stock is currently trading at a forward price-to-earnings ratio of 27.2. With AI driving demand, TSMC could quickly increase prices, expand its margins and boost its bottom line over the next few years. That would lead to earnings growth that more than justifies the current valuation and the additional risk involved.
2. Snowflake
Cloud infrastructure is one of the cornerstones of AI development, snowflake (NYSE: SNOW) Amazon is playing a pivotal role for many large companies looking to leverage its cloud data for AI. The company helps companies that use multiple public cloud services and their own servers aggregate data into a “data lake,” creating a “single source of truth.”
Last year, Snowflake launched Cortex AI, a platform that enables companies to apply large language models to their own data to easily create unique generative AI applications. Cortex allows companies to fine-tune models for their specific use cases, easily mine unstructured data, and use AI to generate valuable insights. Snowflake also offers some of its own tools built with Cortex, including Snowflake Copilot.
Snowflake reported its first-quarter earnings in May. Its 34% revenue increase was a significant slowdown from the 50% revenue growth it saw in the same period last year, but an acceleration from the 33% rise it saw in the fourth quarter. Management is now forecasting better full-year revenue than it originally forecast at the start of the year, but it’s still a slowdown from its impressive growth over the past few years.
As a result, investors punished the stock, but the price has fallen to the point where it looks attractive. The stock is trading at a price-to-sales ratio of less than 14. With a long runway for AI-fueled growth ahead, investors should expect strong revenues for years to come, albeit at lower levels than we’ve seen in recent years.
Net profit is expected to grow significantly over time while maintaining a high gross profit margin and benefiting from operating leverage. This is expected to lead to impressive year-on-year earnings growth for years to come.
3. Iopath
UiPath (NYSE: PATH) Amazon is the market leader in robotic process automation (RPA) software. Its software automates repetitive tasks, so workers can be more efficient and focus on making good decisions and creative outputs. It also integrates AI capabilities into its tools that can, for example, understand contracts and automate tasks based on documents.
UiPath disappointed investors when it reported its first-quarter results in late May. Management cut its full-year recurring revenue forecast by about 4% to a range of $1.66 billion to $1.665 billion. That led to a 50% cut in operating income, to $145 million. Additionally, CEO Rob Enslin announced his resignation from the company after just a few months on the job, with founder Daniel Dennis taking over.
Understandably, these results led to a huge sell-off. But UiPath’s long-term outlook remains promising. Its dollar-based net retention rate remains well above 100%, indicating that it is delivering a solid product and that its expansion strategy is working. It is actively helping existing customers find more opportunities to use RPA, especially with the help of AI. According to Grand View Research, the global RPA market is expected to grow from $3 billion in 2023 to over $30 billion by 2030. So there is likely to be more opportunities on the horizon for UiPath.
The sell-off appears to be overdone. The stock is now trading at a value-to-sales ratio of less than 4. With strong potential for double-digit revenue growth (which is easily achievable in a market expanding at 40% annually) and operating leverage, UiPath looks like a solid investment at this price.
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Adam Levy The Motley Fool has positions in Apple and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Apple, Nvidia, Snowflake, Taiwan Semiconductor Manufacturing, and UiPath. The Motley Fool has positions in and recommends Apple, Nvidia, Snowflake, Taiwan Semiconductor Manufacturing, and UiPath. Disclosure Policy.
3 AI Stocks You Can Buy Right Now for $200 Originally posted by The Motley Fool
