12 Best Cloud Computing Stocks to Buy According to Analysts

1) Kingsoft Cloud Holdings Limited (NASDAQ:KC)

Number of Hedge Fund Holders: 5

Average Upside Potential: ~467%

Kingsoft Cloud Holdings Limited (NASDAQ:KC) offers cloud services to businesses and organizations primarily in China. Healthy demand for AI and cloud-based solutions inside the solid ecosystem continues to fuel Kingsoft Cloud Holdings Limited (NASDAQ:KC)’s expansion. As a strong contender in China’s cloud computing market, it benefits from the integration with Xiaomi’s IoT, cellphones, and electric cars. Xiaomi’s strategic plan to integrate AI into its ecosystem favorably placed Kingsoft Cloud Holdings Limited (NASDAQ:KC) as a critical partner. This integration is expected to fuel significant demand for computing power, aiding its business growth.

Analysts at UBS remain optimistic about Kingsoft Cloud Holdings Limited (NASDAQ:KC)’s capacity to capitalize on growth opportunities in the cloud service sector, primarily in China, where demand continues to rise. It upgraded the company’s shares from “Neutral” to “Buy,” citing an optimistic revenue growth outlook and margin recovery as reasons. In Q3 2024, Kingsoft Cloud Holdings Limited (NASDAQ:KC)’s revenues were aided by accelerated growth of its high-quality business, such as AI. This growth has offset the decline in the low-margin CDN business.

The company’s AI business accounted for ~31% of public cloud revenue in Q3 2024. Partnering with Xiaomi and other ecosystem players enables Kingsoft Cloud Holdings Limited (NASDAQ:KC) to cater to advanced AI use cases and tap into significant computational power demands. With Xiaomi leading in the IoT space, Kingsoft Cloud Holdings Limited (NASDAQ:KC) should benefit from elevated demand for cloud services aiding connected devices.

While we acknowledge the potential of KC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than KC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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