In this article, we will take a detailed look at the 11 Trending AI Stocks On Latest News and Analyst Ratings.
Investors remain cautious following a major global selloff that shook the markets last week on recession fears. Analyst warnings around sky-high CapEx of tech companies and lack of visibility over returns are also expected to keep tech valuations in check in the coming weeks.
Last month, Roger McNamee of Elevation Partners, while talking to CNBC, highlighted a report from Goldman Sachs that said returns of AI investments might fail to meet investors’ expectations.
“The amount of capital investment in this sector, which is billions of dollars now, is so large that it’s almost unimaginable that we are going to get a rate of return over the next few years that justifies the amount of investment,” McNamee said.
Talking to Bloomberg, JPMorgan Asset Management’s Aisa Ogoshi said that there is some “adjustment” coming for tech stocks as she expects the AI-centric rally to diversify to other sectors.
“The key is to keep an eye on the earnings trends. It’s easy to panic in these times but really, just sit down and look at the numbers and reassess our positioning.”
Asked whether she plans to reduce exposure to AI stocks in the coming days, the analyst said she’d be more “selective” when it comes to AI plays and will increase the quality of stocks in the portfolio.
For this article, we chose 11 trending AI stocks based on the latest news, earnings and analyst ratings. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Source:Pixabay
11. SoundHound AI Inc (NASDAQ:SOUN)
Number of Hedge Fund Investors: 15
SoundHound AI Inc (NASDAQ:SOUN) recently announced it will buy AI startup Amelia AI for $80 million. Amelia makes an AI agent that businesses that customize according to their needs. The company’s customers include BNP Paribas, the pharma company Teva and Fujitsu. With 2024 revenue projected at $80M, SoundHound AI Inc (NASDAQ:SOUN) now expects 2025 revenue to surpass $150M, with Amelia contributing $45M in recurring AI software revenue and related fees.
SoundHound AI Inc (NASDAQ:SOUN) is expanding its solutions arsenal to increase its business footprint. In June the company bought Allset, an ordering platform for restaurants. Last year, it bought SYNQ3, which provides conversational AI-ordering solutions for restaurants, for $25 million.
Cantor Fitzgerald upgraded SoundHound AI to Overweight from Neutral on the Amelia deal news. Analyst Brett Knoblauch called the deal potentially transformative and increased his price target for SoundHound to $7 from $5.
SoundHound AI Inc (NASDAQ:SOUN) AI has strong secular growth catalysts because businesses all over the world are deploying voice AI solutions to cut costs and improve efficiency. During an earnings call in May SoundHound AI Inc (NASDAQ:SOUN) talked about the potential of its AI solutions business potential for customer service:
Last year, we expanded our AI customer service offering beyond restaurants with Smart Answering, a product that handles multiple calls at once 24/7, conveniently filtering out spam calls, providing verbal and SMS responses, taking configurable actions, capturing leads with intelligent messaging and answering questions about policies, hours, products, services, pricing and more. Smart Answering is showing rapid growth within pillar two and already has hundreds of locations signed up from single-location small businesses to brands such as Planet Fitness. We estimate our pillar two (AI customer solutions service business) total addressable market to be over $100 billion with over 1 million restaurants and approximately 30 million businesses in North America alone that we can offer our solutions to. And with dozens of languages we already provide to our pillar one customers, we plan to also go international in pillartwo. We believe with large language models and generative AI and most importantly,the data science and machine learning behind our proprietary software, the time is now.
10. Palantir Technologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 45
Palantir Technologies Inc (NYSE:PLTR) recently announced a partnership with Microsoft after which the company will launch its key projects such as Gotham, Foundry, Apollo and AIP on Microsoft’s cloud products for government agencies. Wall Street which was already stunned by Palantir Technologies Inc (NYSE:PLTR) strong growth posted in the second quarter is welcoming the news.
Wedbush analyst Dan Ives thinks the partnership could be “game-changing” especially within the federal sector. Ives expects a significant acceleration in AI adoption across the Department of Defense and beyond over the next 12 to 18 months. Ives reiterated his Outperform rating and $38 price target for Palantir.
Palantir Technologies Inc’s (NYSE:PLTR) stunning growth posted in the second-quarter results and long-term trends show it’s a promising AI software stock. During the June quarter, overall revenue rose 27% year over year while US commercial revenue grew by a whopping 55%.
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Earlier this year at an event with customers, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers are being able to reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
With Palantir’s solutions, Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
9. Western Digital Corp (NASDAQ:WDC)
Number of Hedge Fund Investors: 65
BofA Securities said in a fresh note that Western Digital Corp (NASDAQ:WDC) is one of the best beaten-down tech stocks presenting an attractive entry point following the latest selloff.
Western Digital Corp (NASDAQ:WDC) is one of the top semiconductor picks of Cantor Fitzgerald. The company recently reported quarterly results. Cloud segment revenue jumped 20% on a sequential basis. Overall, the company is seeing a rise in profits amid higher pricing and a shift to premium high-performance products. The cloud business, particularly in high-capacity HDDs for data centers, remains strong.
What are AI-related growth catalysts for Western Digital? How can an SSD and storage devices company be called an AI stock?
The rise of artificial intelligence and its data demands positively impact both HDD and flash demand. Generative AI apps and machine learning require substantial data storage, a tailwind for Western Digital. The company is well-positioned to capitalize on this trend, which is still in its early stages.
During the fiscal Q3 earnings call the company’s management talked about AI-related business trends:
“I would say about the AI demand as it’s coming into focus. I don’t think it’s so much in the results just yet, but we’re seeing where it’s going to impact both businesses. And clearly, one of them you just outlined, which is we’re seeing enterprise SSD demand return, we saw some increase in the last quarter. We expect some increase in this quarter. But really, as we look to the second half, we have customers coming to us wanting the kind of SSDs we built and qualified before the downturn. They just want them in much bigger capacity points, 30 and 60 terabyte capacity points. So it’s the same product just taking it and increasing capacity and going through a qualification on that so we’re in that process with customers.
We also introduced a new SSD that’s more compute focused, which is PCIe Gen 5 product based on BiCS 6, very high performance that plays a little bit different role in the AI training stack and we’re getting very good feedback on that product. It’s being qualified by our starting qualification, we samples. We’re kind of getting rid of the qualification of the hyperscaler and we’re seeing good demand in the enterprise market as well. So we feel like the portfolio set up well as we go into the second half, and we’re seeing a lot of demand show up for people that are very building large amount of infrastructure for model training.”
read the full earnings call transcript here.
8. Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 74
BofA Securities believes Tesla Inc (NASDAQ:TSLA) is one of the best beaten-down tech stocks presenting an attractive entry point following the latest selloff.
During the second quarter, Tesla Inc (NASDAQ:TSLA) automotive gross margin fell to 18.47% from 19.22% the previous year. Non-automotive revenue, now 22% of total sales compared to 14.67% in Q2 2023, has a lower gross margin, negatively impacting overall profitability. Tesla Inc (NASDAQ:TSLA) is still heavily reliant on EVs where demand is falling. Tesla energy business is not strong enough to offset declines in the core business.
Cathie Wood recently set a $2600 price target on Tesla Inc (NASDAQ:TSLA) for 2029, which presents a whopping 1300% upside potential from the current levels. Wood thinks the robo taxi project has the potential to deliver $8 to $10 trillion in revenue by 2030.
However, many believe Tesla Inc (NASDAQ:TSLA) won’t be able to live up to the hype around its robo taxi plans. Each robo taxi is expected to have a price target of around $150K to $200K, with some estimates suggesting Tesla Inc (NASDAQ:TSLA) would need about $35 billion to develop a global fleet of such cars. Amid inflation and lack of preference for electric cars, American families will probably stay away from spending a fortune on robo taxis, which could cause a blow to Tesla Inc’s (NASDAQ:TSLA) plans in the future.
Alger Focus Equity Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q1 2024 investor letter:
“Tesla, Inc. (NASDAQ:TSLA) is an electric vehicle manufacturer with a technological lead in its large and rapidly growing addressable market. In our view, Tesla is a transportation company that is setting the pace for industry innovation. During the quarter, shares detracted from performance after the company reported fiscal fourth quarter results, where revenues and earnings missed analysts’ estimates. Weaker-than-expected automotive revenues were partly driven by a reduced average selling price, which was down 15% year-over-year. Moreover, management decided to forgo providing volume guidance, though they did acknowledge they are in a lower growth phase given the uncertain consumer environment particularly as it relates to high ticket purchases.”
7. Crowdstrike Holdings Inc (NASDAQ:CRWD)
Number of Hedge Fund Investors: 76
BofA Securities recently highlighted several tech stocks that are presenting attractive entry points amid their latest declines. Crowdstrike Holdings Inc (NASDAQ:CRWD) was among these stocks.
Crowdstrike Holdings Inc (NASDAQ:CRWD) shares have been battered after a system update caused the massive global tech outage in July.
However, analysts believe the fundamental story of Crowdstrike Holdings Inc (NASDAQ:CRWD) remains unchanged, despite short-term damages. Wedbush Securities estimates that less than 5% of CrowdStrike’s customers might switch providers, potentially impacting revenue by $150 million out of the projected $3 billion in sales for fiscal year 2024. This would lower the company’s forward revenue growth from 30.6% to 25.6%, but even at this adjusted rate, Crowdstrike Holdings Inc (NASDAQ:CRWD) would remain well above the IT sector median.
Oppenheimer recently gave an Outperform rating to Crowdstrike Holdings Inc (NASDAQ:CRWD) shares based on technical analysis. CRWD’s generative AI security platform Charlotte AI is seeing a lot of traction. In the June quarter, the platform saw a whopping 90% POV close rate. During the quarter, Crowdstrike Holdings Inc (NASDAQ:CRWD) saw a dramatic surge in deals involving cloud, identity, or Falcon Next-Gen SIEM, more than doubling year-over-year. Management emphasized that customers are reaping substantial cost savings by adopting more modules, a development that bodes very well for Crowdstrike Holdings Inc’s (NASDAQ:CRWD) top-line growth. The strategic expansion of its modules has also tapped into the burgeoning AI-related demand, driving higher adoption rates. The stock’s forward P/E is 60, much higher than the industry average of 24, but 76% lower than the company’s five-year average. Wall Street expects revenue of Crowdstrike Holdings Inc (NASDAQ:CRWD) to grow 26% next year and earnings by 23%.
The company has $3.7 billion of cash versus $793 million of debt and its FCF margins exceed the IT median by a hefty 250%.
TimesSquare Capital U.S. Focus Growth Strategy stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its first quarter 2024 investor letter:
“The high demand for cybersecurity systems is unlikely to abate, which benefited CrowdStrike Holdings, Inc. (NASDAQ:CRWD). The company’s expansion beyond endpoint security to offering security on all cloud workloads, along with its growing product suite in areas such as identity and security information & event management, is driving strong demand for its platform among customers amidst a very active cyberthreat environment. That lifted its shares by 25% this quarter, and we trimmed our position.”
6. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Investors: 79
BofA Securities believes Applied Materials, Inc. (NASDAQ:AMAT) is one of the best beaten-down tech stocks presenting an attractive entry point following the latest selloff.
Analysts at Stifel kept a bullish on on Applied Materials, Inc. (NASDAQ:AMAT) after attending Semicon West 2024 in San Francisco. Brian Chin and Denis Pyatchanin believe Taiwan Semiconductor’s continued spending will benefit the stock. They increased the stock’s price target to $275 from $240.
“Ultimately, we see Applied Materials, Inc. (NASDAQ:AMAT) as well on track to establish higher peak revenue/profitability through the ensuing upcycle, and warranting a higher multiple as it demonstrates improved financial performance across the cycle, and in particular during the downturn,” they said.
Applied Materials, Inc. (NASDAQ:AMAT) is one of those non-fancy AI stocks that don’t get much limelight from Wall Street. The stock, up 23% this year so far, received an upgrade from Barclays. The investment firm expects the stock to benefit from higher spending in the semiconductor equipment industry. Barclays expects wafer fab equipment spending to hit $96.3 billion in 2024 and $106.4 billion in 2025, up from its previous estimate of $80.6 billion and $89.1 billion, respectively.
In May, Applied Materials, Inc. (NASDAQ:AMAT) posted solid Q2 results. Mizuho Securities analyst Vijay Rakesh upped his price target on the stock to $245 from $225 and kept his Buy rating. Citi analyst Atif Malik also increased his price target on the stock to $250 from $170. The analyst sees “further upside” to Applied Materials, Inc.’s (NASDAQ:AMAT) 2025 estimates.
Applied Materials, Inc.’s (NASDAQ:AMAT) moat is strong and wide. The company makes equipment used to make semiconductor chips. It has a diverse equipment portfolio that addresses the high-growth ICAPS industry (IoT, Communications, Automotive, Power, and Sensors). Last year Applied Materials, Inc. (NASDAQ:AMAT) made a breakthrough announcement by launching Centura Sculpta, a machine that dramatically reduces the number of steps required in chips production. Applied Materials, Inc. (NASDAQ:AMAT) said chipmakers can save a whopping $250 million per 100K wafer starts per month of production capacity in costs.
Wall Street expects Applied Materials, Inc.’s (NASDAQ:AMAT)’ revenue to surge 11% in 2025 while earnings growth is forecasted to come in at 15.60% in the year. The stock’s forward P/E is 23.73, not much higher than the industry average of 27, when seen in the context of growth.
5. Micron Technology Inc (NASDAQ:MU)
Number of Hedge Fund Investors: 115
BofA Securities believes Micron Technology Inc (NASDAQ:MU) is one of the best beaten-down tech stocks presenting an attractive entry point following the latest selloff.
Bank of America analyst Vivek Arya recently talked about the latest declines in semiconductor stocks. However, the analyst said most of the declines were due to temporary factors and fundamentals are still “intact.”
“AI still the strongest and most dependable area of capex, driven by domestic US tech companies with solid balance sheets, proven monetization and mission-critical imperatives…” Arya said.
Micron Technology Inc (NASDAQ:MU) posted quarterly results recently which came in better than expected but the market didn’t welcome the in-line guidance and rising expenses. However, this short-term view misses the fact that Micron Technology Inc (NASDAQ:MU) is investing heavily in high bandwidth memory (HBM) production that is expected to generate billions in sales by fiscal 2025 compared with just hundreds of millions in 2024.
After the earnings, Arya reiterated a Buy rating and gave a $170 price target on Micron Technology Inc (NASDAQ:MU).
“Mgmt emphasized both CY24 and CY25 volumes are now fully sold out with pricing generally secured, providing visibility to its healthy sales and margin expansions (HBM is GM accretive),” Arya said.
Here is what Micron Technology Inc (NASDAQ:MU) said about HBM during fiscal Q3 earnings call:
“Our HBM shipment ramp began in fiscal Q3, and we generated over $100 million in HBM3E revenue in the quarter, at margins accretive to DRAM and overall Company margins. We expect to generate several hundred million dollars of revenue from HBM in fiscal 2024 and multiple billions of dollars in revenue from HBM in fiscal 2025. We expect to achieve HBM market share commensurate with our overall DRAM market share sometime in calendar 2025. Our HBM is sold out for calendar 2024 and 2025, with pricing already contracted for the overwhelming majority of our 2025 supply. We are making significant strides toward expanding our HBM customer base in calendar 2025, as we design-in our industry-leading HBM technology with major HBM customers. We have sampled our 12-high HBM3E product and expect to ramp it into high-volume production in calendar 2025 and increase in mix throughout 2025.”
ClearBridge Value Equity Strategy stated the following regarding Micron Technology, Inc. (NASDAQ:MU) in its Q2 2024 investor letter:
“Stock selection in the IT sector proved to be the largest contributor to performance, particularly driven by the strong performance of Micron Technology, Inc. (NASDAQ:MU) The company, which designs, develops, manufactures and sells memory and storage products, continued its strong performance alongside other AI beneficiaries as the anticipated demand for new and additional storage essential for housing and training large language AI models continues to grow.”
4. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 115
BofA Securities believes Broadcom Inc (NASDAQ:AVGO) is one of the best beaten-down tech stocks presenting an attractive entry point following the latest selloff.
TD Cowen in a fresh note named Broadcom Inc (NASDAQ:AVGO) as one of the stocks that can benefit from the rise in AI spending. Analysts at the firm said there are “no signs” of generative AI demand abating and highlighted that Broadcom Inc (NASDAQ:AVGO) recently raised its full-year AI outlook. Broadcom Inc (NASDAQ:AVGO) expects AI-related revenue for 2024 at $11 billion.
Broadcom Inc (NASDAQ:AVGO) recently reported second-quarter results. Revenue in the quarter rose about 43% year over year. AI revenue in the period rose a whopping 280% year over year. Broadcom’s revenue stream is diverse and does not rely on a single source. It includes enterprise, networking, storage, data center/hyperscaler, industrial, and consumer space. For 2024 AVGO has increased its annual revenue guidance to over $51 billion, anticipating growth of over 40%. A significant portion of this growth is expected to come from software, which would also help margins.
The company’s Ethernet business is also strong amid partnerships with Arista Networks (ANET), while the company is also collaborating with Dell (DELL), Juniper (JNPR), and Super Micro (SMCI) in the networking business and other segments. Broadcom has also developed ASIC AI chips in partnership with Google and Meta Platforms.
Based on this strong growth and upcoming catalysts, AVGO’s forward P/E of about 25 makes the stock look undervalued.
Aristotle Atlantic Large Cap Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“Broadcom Inc. (NASDAQ:AVGO) is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
3. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Investors: 124
BofA Securities believes Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the best beaten-down tech stocks presenting an attractive entry point following the latest selloff.
Advanced Micro Devices, Inc (NASDAQ:AMD) impressed Wall Street with solid second-quarter results amid strong data center revenue. Data center revenue in the period grew 49% year over year.
But can Advanced Micro Devices, Inc (NASDAQ:AMD) continue gaining in the coming months? Analysts are hopeful amid the launch of its Instinct™ MI300 Series accelerators that are designed for AI and HPC workloads. The new chip competes with Nvidia’s H100 AI chip. Advanced Micro Devices, Inc (NASDAQ:AMD) now plans to release new AI chips annually, including the MI325X in Q4 this year, the MI350 in 2025, and the MI400 in 2026. Advanced Micro Devices, Inc (NASDAQ:AMD) said MI350 would be a competitor to Nvidia’s Blackwell.
Advanced Micro Devices, Inc (NASDAQ:AMD) data center business doubled its revenue but this growth was not at the cost of profits. The segment’s operating income increased by 405% compared to the year-earlier period. However, Advanced Micro Devices, Inc (NASDAQ:AMD) data center business is still very small compared with NVDA. It generated about $2.8 billion in revenue vs. $22.6 billion in quarterly revenue for NVDA. But Advanced Micro Devices, Inc (NASDAQ:AMD)’s CPU and GPU businesses are also thriving. Ryzen CPU sales increased 49% year over year and slightly quarter over quarter. Although gaming revenue declined 59% due to decreased PlayStation and Xbox sales, Advanced Micro Devices, Inc (NASDAQ:AMD) Radeon 6000 GPUs saw a year-over-year sales increase.
Advanced Micro Devices, Inc (NASDAQ:AMD) is trading 17% below its 3-year average P/E ratio. The company is estimated to grow its EPS by 43% in the long term, compared to 33% for Nvidia. During the third quarter, its revenue growth is expected to come in at 15% on a QoQ basis. Amid growth forecasts based on new chips and an expected increase in AI spending by other companies, Advanced Micro Devices, Inc (NASDAQ:AMD) forward P/E of 38 makes the stock undervalued at the current levels.
Meridian Contrarian Fund stated the following regarding Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth quarter 2023 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor chip maker specializing in central processing units (CPUs), which are considered the core component of most computing devices, and graphics processing units (GPUs), which accelerate operations running on CPUs. We invested in 2018 when it was a mid-cap value stock plagued by many years of underperformance due to lagging technology and lost market hi share versus competitors Intel and Nvidia. Our research identified that changes and investments made by current management under CEO Lisa Su had, over several years, finally resulted in compelling technology that positioned AMD as a stronger competitor to Nvidia and that its latest products were superior to Intel’s. We invested on the the belief that AMD’s valuation at that that time did not reflect the potential for its technology leadership to generate significant market share gains and improved profits. This thesis has been playing out for several years. During the quarter, AMD unveiled more details about its upcoming GPU products for the AI market. The stock reacted positively to expectations that AMD’s GPU servers will be a viable alternative to Nvidia. Although we pared back our exposure to AMD into strength as part of our risk-management practice, we maintained a position in the stock. We believe AMD will continue to gain share in large and growing markets and is reasonably valued relative to the potential for significantly higher earnings.”
2. Salesforce Inc (NYSE:CRM)
Number of Hedge Fund Investors: 154
BofA Securities believes Salesforce Inc (NYSE:CRM) is one of the best beaten-down tech stocks presenting an attractive entry point following the latest selloff.
According to Yahoo Finance data, Salesforce Inc (NYSE:CRM) is expected to see earnings growth of about 16% on a per-annum basis over the next five years. Data also shows the company is expected to deliver double-digit YoY EPS growth in the next ten out of eleven quarters.
While Salesforce Inc (NYSE:CRM) is primarily a customer relationship software company, with notable tools and platforms like Sales Cloud, Service Cloud, Marketing Cloud, Tableau, MuleSoft, and Slack, its most promising platform is Data Cloud when it comes to AI and software. The platform has 90% year-over-year growth and clocking in $400 million in FY2024. What does this platform do? It helps organizations process data from various departments and third-party cloud solutions. Powered by an AI-driven data engine, it analyzes metadata in real time to provide valuable insights, supporting sales, marketing, and customer service workflows.
As of the end of Q1 Salesforce Inc (NYSE:CRM) had $17.7 billion in cash and low financial leverage.
Mizuho Securities analyst Gregg Moskowitz thinks the company is still “well situated” to help customers in digital transformation. However, the analyst thinks Salesforce Inc. (NYSE:CRM) would do so by prioritizing profitable growth. The analyst reiterated his Buy rating on the stock but cut his price target to $300 from $345.
Morgan Stanley analyst Keith Weiss, who has an Overweight rating and a $320 price target on Salesforce Inc. (NYSE:CRM), said that Salesforce’s PEG ratio of 1.2 shows the market is not pricing in operational discipline and earnings growth sustainability.
Polen Focus Growth Strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:
“Salesforce, Inc. (NYSE:CRM) declined nearly 20% due to a slowdown in revenue and bookings growth, part of a wider trend we’ve observed across enterprise software as companies defer spending on large projects given the uncertain macroeconomic environment. As mentioned, there has been an emerging narrative about prioritized spending on AI, cloud, and security over enterprise software spending that could eventually impair seat-based software over the longer term. Though there may be some near-term shifts in dollars toward GenAI, we believe the market for mission-critical enterprise software will remain robust well into the future. We will monitor the position closely, but we continue to believe that Salesforce is well-placed with its mission-critical software and high customer retention rates to weather these headwinds, lean on pricing power, and effectively monetize generative AI in its product suite.”
1. NVIDIA Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 186
BofA said in a latest note that NVIDIA Corp (NASDAQ:NVDA) is one of the tech stocks presenting an attractive buy-the-dip opportunity.
NVIDIA Corp (NASDAQ:NVDA) shares are on the decline amid valuation concerns. However, Morgan Stanley re-added the stock to its top picks list. Analyst Joseph Moore said:
“Visibility will actually increase as demand moves from Hopper to Blackwell, as the constraint will shift back to silicon; H100 lead times are short, but H200 lead times are already long, and Blackwell should be even longer,” the firm said.
However, the latest big tech earnings have raised some concerns on NVIDIA Corp (NASDAQ:NVDA) future growth trajectory. The company’s major customers including Meta Platforms and Alphabet have indicated that they may be overbuilding and overspending on AI chips. NVIDIA Corp (NASDAQ:NVDA) is selling about 2 million of its GPUs on an annual basis based on 2023 data. As demand moderates and competitors up their production, the company won’t be able to sustain its current growth trajectory.
Raymond James analyst Javed Mirza recently said in a report that NVDA has “triggered a mechanical sell signal” based on a moving average convergence/divergence indicator. In a technical analysis report, he stated that the stock is trading below its 50-day moving average and exhibiting early signs of selling pressure. This, according to Mirza, shows there is a looming corrective phase lasting 1-3 months. He added that a sustained break below the 50-day moving average could lead to a decline towards 94.94, representing a further 16.9% drop from current levels.
Patient Capital Opportunity Equity Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“NVIDIA Corporation (NASDAQ:NVDA) continued to lead both the market and the portfolio, remaining a top performer in the period gaining 36.7%. Nvidia is the market leader in designing and selling Graphics Processing Units (GPU), which has recently benefited from the insatiable demand of artificial intelligence (AI) models. The company currently captures 92% market share of data center GPUs and grew revenue, earnings and free cash flow (“FCF”) an astounding 126%, 392%, and 610%, respectively, over the last year. While we expect competition to increase, we think NVDA can continue to maintain top market share. While many are concerned with backlog times shortening, we think the rollout of the B100, which promises 2.5x better performance for only 25% more cost, later this year will create more shortages. With leading edge technology, an increasing innovation cycle and strong cash generation, the company is well positioned for the increased adoption of artificial intelligence (AI).”
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA), our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
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