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.
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?
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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
