There are many ways to get involved in the artificial intelligence (AI) craze. Many investors are looking to an AI hardware designer NvidiaWhich makes the former video game accelerator company one of the most valuable companies in the world.
Nvidia is a great company, but the stock price may have risen too high, too quickly. There are more plausible ideas for artificial intelligence at the moment. Let me tell you why IBM (NYSE: IBM), Micron technology (NASDAQ: MU)and Fiver International (NYSE: FFR) It looks to me like stronger investments in AI in the fall of 2024.
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This trio may not be the most obvious AI investments on the market. But they have deep connections to the growing AI market, just from slightly unusual angles:
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IBM allows other companies to focus on consumer-friendly AI tools and services while doubling down on enterprise-level variants instead. Features like auditable data flows and integration with business intelligence tools don’t write headlines, but they inspire long-term service contracts with deep-pocketed companies. as a result of, Big Blue’s generative AI platform already has $3 billion worth of service contractsThis was less than two years after its launch.
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Micron does not make AI accelerators. It designs and manufactures high-speed memory chips instead. The massive systems that train generative AI platforms and then run them require huge amounts of memory, as do the next generation of smartphones being launched with their own AI features. Micron chips are in high demand thanks to these AI-based communications.
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Fiverr doesn’t work on the infrastructure side of the AI boom, but it does leverage generative AI in two different ways. The company’s platform for matching freelancers with independent service buyers makes extensive use of various artificial intelligence technologies. The company also sells standalone AI-related services to a wide range of clients — these AI systems won’t build or run themselves, and it takes a human touch to extract business value from generative AI tools. AI-related services have become a major growth driver for Fiverr.
|
Artificial Intelligence Stocks |
Two-year total return |
Price to free cash flow |
Forward price to earnings |
|---|---|---|---|
|
Nvidia |
848% |
76.5 |
33.9 |
|
IBM |
58% |
15.8 |
20.0 |
|
Micron |
70% |
901.4 |
7.7 |
|
Fiver |
(18%) |
13.9 |
11.6 |
Data collected from YCharts and Finviz on November 21, 2024.
Nvidia has crushed the rest of the stock market since introducing its flagship client OpenAI ChatGPT Almost exactly two years ago. That’s great for long-time Nvidia owners, but the rapid gains have left the stock hanging at uncomfortably high valuations. No matter how you slice it, Nvidia stock is perfectly priced. The chart may still point higher from here, but there is a real risk of painful price corrections if Nvidia doesn’t hold on to its early lead in AI accelerators.
By contrast, IBM’s AI-driven bull run is just beginning. Fiverr stock has actually fallen in the era of ChatGPT, as pessimistic investors see generative AI as a threat to the company’s freelancers. And someday soon, I expect Wall Street will start seeing these deals for what they are. Fiverr and IBM have been quietly building huge AI revenue streams. Their stocks should eventually follow suit.
Micron seems to stick out like a sore thumb in the above rating table. How can I call a stock “cheap” when it trades at 900 times free cash flow and 146 times trailing earnings?
The trick is to look forward instead of back. The memory chip market suffered a deep decline when the ChatGPT boom began. Micron’s sales growth is back on track and its cash earnings recently returned to positive territory after a deep decline in red ink:
Micron’s nosebleed valuation ratios are based on earnings just above the break-even line, but the future trend will change the calculations.
“We enter fiscal 2025 with the strongest competitive position in Micron’s history,” CEO Sanjay Mehrotra said on a fourth-quarter earnings call in October. “We look forward to achieving a significant revenue record with significantly improved profitability in fiscal 2025.”
As a result, Micron’s forward-looking valuation is an absolute bargain. The company saw net earnings of $1.30 per share in fiscal 2024. The average analyst expects full-year earnings to be around $8.93 per share in the just-started fiscal year 2025, expanding to $12.86 per share in 2026. So, if you focus on the forward P/E ratio, Micron stands out as an amazing value right now.
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Nvidia: If you invested $1,000 when we doubled your money in 2009, You will have $380,291!*
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apple: If you invested $1,000 when we doubled your money in 2008, You will have $43,278!*
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We are currently issuing “double” alerts for three amazing companies, and there may not be another opportunity like this anytime soon.
*Stock Advisor returns as of November 18, 2024
Anders Billund He has positions at Fiverr International, International Business Machines, Micron Technology, and Nvidia. The Motley Fool has positions at and recommends Fiverr International and Nvidia. The Motley Fool recommends International Business Machines. The Motley Fool has Disclosure policy.
Here are the top artificial intelligence (AI) stocks to buy now (hint: not Nvidia) Originally published by The Motley Fool