In this article, we will be taking a look at 15 AI stocks that are on sale.
Big Tech: The Best Performing Sector of Q2?
Big tech, specifically artificial intelligence, is the sector that many are starting to consider as the best-performing sector of the market in the second quarter of 2024. The concentration of the major players in this space has been in the large-cap companies since your ability to fully develop AI and benefit from its profitability really depends on the scale of your business. Basically, the bigger a company is, the better it will be positioned within the AI-led market this year. Because of this phenomenon, big tech companies, with all the money in the world to invest in AI development, are ensuring that this revolutionary tech drives the overall tech sector to record highs in 2024.
According to Alex Kantrowitz, Founder of Big Technology, these trends can be expected to lift up other sectors in the market that have a strong relationship with AI. One such sector is energy, which, according to Kantrowitz, is going to be seeing a lot more demand from customers that are developing AI and creating and training Large Language Models. While many players in the AI space today are also working on finding ways to use energy for AI development more efficiently, the general consensus seems to be that there’s a need to tap into more existing sources of energy until such methods are found. Because of this, the markets may see demand for nuclear energy rise to unprecedented levels as well.
AI in Digital Advertising
Another sector that might catch the AI draft and be propelled higher is digital advertising. With the rise of AI-powered marketing clouds, many advertisement-focused businesses are beginning to see immense increases in their return on investment. According to David Steinberg, the CEO of Zeta Global, AI is leading to immense growth within the advertising ecosystem, with Steinberg expecting growth in low double-digits this year. He noted that the launch of ChatGPT was the “big renaissance moment” for AI, which changed our perception of this technology from being a figment of science fiction to something serious enough to be discussed in company board rooms. Because of this, Steinberg believes that every company out there in advertisement and retail is pivoting its business to incorporate high-quality enterprise AI usages in its operations.
Part of the reason why AI is taking over the market in this manner is the promise it makes – efficiency coupled with revenue growth. By focusing on AI development and integration, businesses across the globe can increase their efficiency while also generating higher profits for themselves and their shareholders. Considering this, and the fact that AI stocks have been performing exceptionally well in the second quarter, we have compiled a list of some AI stocks on sale that investors may wish to consider for their portfolios this year.
A scientist at a computer station, surrounded by a neural network of artificial intelligence code.
Our Methodology
We first compiled a list of 40 AI stocks by sifting through ETFs and online rankings, including our own rankings. We then selected the 15 stocks with P/E ratios lower than the S&P 500’s P/E of 24.1 as of September 27 (according to data from WSJ) and with expected EPS growth for this year. The stocks are ranked based on their P/E ratios, from the highest to the lowest. We also mentioned the number of hedge funds holding stakes in each stock, as of the second quarter.
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).
AI Stocks That Are On Sale
15. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 77
Expected Earnings Growth: 6%
P/E Ratio: 23
Applied Materials, Inc. (NASDAQ:AMAT) is a semiconductor materials and equipment company based in Santa Clara, California. It provides manufacturing equipment, services, and software to the semiconductor, display, and related industries.
This semiconductor company has been reaping the profits generated from the race for AI leadership since this has led to Applied Materials, Inc. (NASDAQ:AMAT) seeing higher demand for its unique and connected portfolio of products and services. This positions Applied Materials, Inc. (NASDAQ:AMAT) uniquely in a way that will ensure its outperformance in the market.
Seeing as the company generated revenue of $6.8 billion, up 5% year-over-year, with operating margin coming in at 28.7% in the third quarter, some of the positive effects of this position have already started to show. While Applied Materials, Inc.’s (NASDAQ:AMAT) management is optimistic about its prospects, some challenges that may deserve attention include potential risks related to customer concentration and geopolitical tensions, especially with Applied Materials, Inc. (NASDAQ:AMAT) having significant revenue exposure to China.
While semiconductor players like Applied Materials, Inc. (NASDAQ:AMAT) are generating positive results, investors can’t expect extraordinary results at least until 2025, which is when most of these companies will begin to really shoot up after absorbing all leftover inventory from 2023. Still, Applied Materials, Inc. (NASDAQ:AMAT) seems to be trading at quite a bargain, considering its current performance and valuation.
We saw 77 hedge funds long Applied Materials, Inc. (NASDAQ:AMAT) in the second quarter, with a total stake value of $5.5 billion. Cantillon Capital Management was the largest shareholder, holding 3,242,570 shares.
Parnassus Investments mentioned Applied Materials, Inc. (NASDAQ:AMAT) in its second-quarter 2024 investor letter:
“Applied Materials, Inc. (NASDAQ:AMAT) is the world’s largest supplier of wafer fabrication technologies used in semiconductor manufacturing. The company reported solid earnings for the quarter, and investors believe Applied Materials should continue to benefit from accelerated industry spend due to AI and share gains.”
14. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 165
Expected Earnings Growth: 31.9%
P/E Ratio: 21.6
Alphabet Inc. (NASDAQ:GOOG) is a big tech company offering interactive media and communication services. It is based in Mountain View, California. The company is an active player and pioneer in the AI space is also behind Gemini, a major Large Language Model. Moreover, its Google Cloud Platform is among the top choices for enterprises and developers for building AI and ML applications.
Alphabet Inc. (NASDAQ:GOOG) is a company with immense financial fortitude since it has managed to generate significant profits since its IPO 20 years ago. The company reported $23.5 billion in net income in the second quarter alone, which translated to a net profit margin of 28%. With this much financial stability, the company’s involvement in the AI space has made many investors consider it among the top AI stocks to buy.
Today, almost all of Alphabet Inc.’s (NASDAQ:GOOG) products and services have AI integrated into them. A few examples of its existing AI-enhanced offerings include Google Maps, YouTube, Gmail, and the Google Cloud. With plans to invest at least $12 billion per quarter on capital expenditures, Alphabet Inc. (NASDAQ:GOOG) is expected to take its AI integration even further to its own and its shareholders’ benefit.
Considering these factors, the company’s current valuation and P/E ratio of merely 23.5 points makes Alphabet Inc. (NASDAQ:GOOG) quite a steal in the AI market today.
There were 165 hedge funds long Alphabet Inc. (NASDAQ:GOOG) in the second quarter, with a total stake value of $22.01 billion.
Diamond Hill Capital mentioned Alphabet Inc. (NASDAQ:GOOG) in its second-quarter 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon, Texas Instruments and Alphabet Inc. (NASDAQ:GOOG). Media and technology company Alphabet also continued delivering strong results in its search, YouTube advertising, YouTube subscription and cloud businesses. Shares rose amid an environment that continues favoring mega-cap technology companies.”
13. Rambus, Inc. (NASDAQ:RMBS)
Number of Hedge Fund Holders: 21
Expected Earnings Growth: 10.1%
P/E Ratio: 21.2
Rambus, Inc. (NASDAQ:RMBS) is a semiconductor company based in San Jose, California. It offers DDR memory interface chips, silicon IP and interface IP solutions, and more.
This company offers industry-leading products aimed at moving data faster and more safely to address the growing need for data centers and AI. In the second quarter, Rambus, Inc. (NASDAQ:RMBS) saw product growth fueled by its leadership in DDR memory interface chips, resulting in outstanding cash generation from operations of $70 million which has strengthened the company’s balance sheet.
Rambus, Inc. (NASDAQ:RMBS) is presently confident in the long-term outlook for the data center market, which is benefitting from an uplift in traditional servers and the ongoing growth of AI. Because of this, the company’s memory interface chips-led revenue grew 13% sequentially in the second quarter, delivering product revenue of $57 million at the high end of expectations.
While total revenue for the company, coming in at $132 million, was also up 10% year-over-year, investors were more concerned with Rambus, Inc.’s (NASDAQ:RMBS) net income for the quarter, which fell drastically from $169 million in the second quarter of 2023 to only slightly over $36 million in the second quarter of 2024. Because of this, many investors are actually disappointed by the company’s performance so far, and this has definitely taken a hit on the stock.
However, seeing as Rambus, Inc. (NASDAQ:RMBS) has immense potential for growth because of its essential role in the semiconductor space, some may consider this a prime opportunity to buy a good stock at a great discount.
Rambus, Inc. (NASDAQ:RMBS) had 21 hedge funds long its stock in the second quarter, with a total stake value of $110.4 million.
12. Amkor Technology, Inc. (NASDAQ:AMKR)
Number of Hedge Fund Holders: 39
Expected Earnings Growth: 7.5%
P/E Ratio: 19.5
Amkor Technology, Inc. (NASDAQ:AMKR) is a provider of outsourced semiconductor packaging and test services. It is based in Tempe, Arizona.
Being a top outsourced semiconductor assembly and test (OSAT) company, Amkor Technology, Inc. (NASDAQ:AMKR) is an important part of the semiconductor supply chain. The company has been tirelessly working to provide its essential services through greater collaborations with bodies such as the US Department of Commerce, through which it has been working to secure $400 million in grants under the CHIPS and Science Act for building a new facility in Arizona. The new facility is expected to enable advanced packaging and testing for the high-performance computing, AI, communications, and automotive markets.
Amkor Technology, Inc.’s (NASDAQ:AMKR) strong presence in the OSAT space has resulted in the company generating higher revenues in the second quarter. From the computing end market alone, the company’s revenue increased 20% sequentially in the second quarter, primarily driven by strength in AI devices and new product introductions for ARM-based PCs. Overall revenue for the quarter was $1.46 billion, up 7% sequentially.
The company is guided for the remainder of 2024 by three principles. First, to provide leadership in tech through offering expanded capacity for supporting the growing demand for AI. Second, to expand Amkor Technology, Inc.’s (NASDAQ:AMKR) geographic footprint with its US manufacturing plans and government funding. And third, to focus on industry mega trends. Amkor Technology, Inc. (NASDAQ:AMKR) expects immense profitability in the third quarter on the touchstone of its current operations and these principles, with net income for the next quarter expected to rise by over 80% quarter-over-quarter.
In the second quarter, 39 hedge funds were long Amkor Technology, Inc. (NASDAQ:AMKR), with a total stake value of $404.3 million.
11. Veeco Instruments Inc. (NASDAQ:VECO)
Number of Hedge Fund Holders: 24
Expected Earnings Growth: 4.7%
P/E Ratio: 18.8
Veeco Instruments Inc. (NASDAQ:VECO) is a semiconductor materials and equipment company based in Plainview, New York. It manufactures and supports semiconductor and thin film process equipment to make electronic devices globally.
In the second quarter, Veeco Instruments Inc. (NASDAQ:VECO) management noted that the company’s semiconductor business has remained strong so far this year, particularly because of record laser annealing revenue. Revenue for the quarter overall came in at $176 million, up 9% year-over-year, with non-GAAP operating income coming in at $28 million.
Veeco Instruments Inc. (NASDAQ:VECO) is currently investing in core technologies to expand its served available market. In laser annealing, the company has the opportunity to grow its SAM from $600 million to over a billion dollars. This represents significant growth potential for this lesser-known company in the semiconductor space.
Artificial intelligence is also expected to significantly improve Veeco Instruments Inc.’s (NASDAQ:VECO) profitability. The company’s systems used in transistor formation are currently used for GPU and CPU production, and its systems support advanced packaging for AI by enabling flux clean of micro bumps at leading foundry and memory customers. Veeco Instruments Inc. (NASDAQ:VECO) also has a significant international presence, with operations in the Asia Pacific and China alongside the US and Europe. All these factors combined are helping the company gain a unique position to benefit from the AI boom, and yet the stock is still trading at a relatively cheap valuation.
Veeco Instruments Inc. (NASDAQ:VECO) was seen in the 13F holdings of 24 hedge funds in the second quarter, with a total stake value of $220.3 million.
Wasatch Global Investors mentioned Veeco Instruments Inc. (NASDAQ:VECO) in its second-quarter 2024 investor letter:
“Veeco Instruments Inc. (NASDAQ:VECO) was the top contributor to strategy performance during the second quarter. The company is a global capital-equipment supplier that designs and builds processing systems used to manufacture high-tech microelectronic devices including semiconductors, photonics, display technologies and power supplies. These devices are integral to applications like advanced computing, machine learning and AI. Veeco has exhibited solid fundamentals and a reasonable valuation for a few years. Going forward, we think the bipartisan CHIPS and Science Act will create an additional tailwind for Veeco, which is one of relatively few U.S. micro-cap companies involved in semiconductor manufacturing and AI.”
10. ASE Technology Holding Co., Ltd. (NYSE:ASX)
Number of Hedge Fund Holders: 8
Expected Earnings Growth: 17.4%
P/E Ratio: 18.6
ASE Technology Holding Co., Ltd. (NYSE:ASX) is a Taiwan-based semiconductor company. It offers semiconductor packaging and testing services alongside electronic manufacturing services.
ASE Technology Holding Co., Ltd. (NYSE:ASX) has been garnering investor attention because of the crucial role it plays in the semiconductor industry since it provides front-end outsourced packaging, testing, and electronic services to semiconductor manufacturers. The company has a reassuring growth trajectory since it has grown revenue by 4.3% over the past three years and by 7.9% over the past five years.
Seeing as ASE Technology Holding Co., Ltd. (NYSE:ASX) is dedicated to meeting growing AI demand, many investors may benefit from considering this stock as an addition to their portfolios. The company is a less traditional player in the semiconductor space, which is why it is largely ignored in the market and is thus heavily undervalued relative to other players in the semiconductor space.
ASE Technology Holding Co., Ltd. (NYSE:ASX) has also recently launched a new testing facility in San Jose to expand advanced chip testing capacity. The new facility is expected to be essential for satisfying customers’ rising engineering needs for emerging semiconductor applications such as AI. Through such initiatives, ASE Technology Holding Co., Ltd. (NYSE:ASX) is slowly emerging as an attractive AI investment for many investors.
Eight hedge funds were long ASE Technology Holding Co., Ltd. (NYSE:ASX) in the second quarter, with a total stake value of $184.8 million.
9. Cirrus Logic, Inc. (NASDAQ:CRUS)
Number of Hedge Fund Holders: 24
Expected Earnings Growth: 3%
P/E Ratio: 17.9
Cirrus Logic, Inc. (NASDAQ:CRUS) is a semiconductor company that develops low-power, high-precision, mixed-signal processing solutions internationally. It is based in Austin, Texas.
A major plus point for Cirrus Logic, Inc. (NASDAQ:CRUS) is its close collaboration with Apple since this company is a key chip supplier to the iPhone maker. With analyst expectations for the iPhone 16 improving in light of the launch of Apple Intelligence, some analysts like Keybanc’s John Vinh expect Cirrus Logic, Inc. (NASDAQ:CRUS) to benefit from its continuing provision of the iPhone’s audio chips.
There is also the possibility for greater collaboration between the two companies since Vinh noted that there is a possibility that Cirrus Logic, Inc. (NASDAQ:CRUS) will also be providing the haptics driver for the iPhone 16’s new camera button. Additionally, increasing demand for AI is expected to aid Cirrus Logic, Inc. (NASDAQ:CRUS) indirectly. Since Apple Intelligence is only available on the newest iPhone models, there’s a general expectation that more people will upgrade their models in the coming months, meaning Cirrus Logic, Inc. (NASDAQ:CRUS) will reap the profits from higher sales of the new models as well.
Since Cirrus Logic, Inc. (NASDAQ:CRUS) generated about 87% of its revenue from its relationship with Apple in 2023, many expect the current developments to be in favor of this chip maker. However, some also consider this heavy reliance on the big tech giant to be a red flag for Cirrus Logic, Inc. (NASDAQ:CRUS). Despite these concerns, as long as the AI boom continues, the current pricing of Cirrus Logic, Inc. (NASDAQ:CRUS) makes the stock seem like a steal.
In total, 24 hedge funds were long Cirrus Logic, Inc. (NASDAQ:CRUS) in the second quarter, with a total stake value of $290.7 million.
8. QUALCOMM, Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 100
Expected Earnings Growth: 19.6%
P/E Ratio: 16.9
QUALCOMM, Incorporated (NASDAQ:QCOM) is another semiconductor company on our list. It develops and commercializes foundational tech for the wireless industry worldwide.
These days, the most exciting news surrounding QUALCOMM, Incorporated (NASDAQ:QCOM) is the company’s intention to buy certain parts of Intel Corporation, particularly Intel’s PC chip design business. This news does not surprise many investors since QUALCOMM, Incorporated (NASDAQ:QCOM) has recently launched its Snapdragon X series in the PC space.
Another reason for QUALCOMM, Incorporated’s (NASDAQ:QCOM) popularity is its work in driving innovation in the move to smartphones. The company’s chips have been of such a quality that even companies like Apple have been unable to replace QUALCOMM, Incorporated (NASDAQ:QCOM) chips with their own, despite repeated attempts to do so. The company is also actively involved in the AI space, driving greater innovation and growth to push more consumers and businesses to upgrade their smartphones with the latest technology.
Since QUALCOMM, Incorporated (NASDAQ:QCOM) is one of the companies most dependent on smartphone sales, recent news surrounding expected growth in smartphone shipments is also something that has been working in QUALCOMM, Incorporated’s (NASDAQ:QCOM) favor. In fact, in the third quarter of fiscal 2024, QUALCOMM, Incorporated (NASDAQ:QCOM) generated $5.9 billion in sales in its handsets segment, up 12% year-over-year.
A total of 100 hedge funds were long QUALCOMM, Incorporated (NASDAQ:QCOM) in the second quarter, with a total stake value of $8.8 billion.
7. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 88
Expected Earnings Growth: 10.2%
P/E Ratio: 15.2
Dell Technologies Inc. (NYSE:DELL) is an information technology company based in Round Rock, Texas. It offers AI-optimized servers and PCs, among more.
Being one of the world’s largest producers of computers and servers, Dell Technologies Inc. (NYSE:DELL) is a company that has retained investor attention for decades. At present, the company operates two main businesses – client solutions and infrastructure solutions. In fiscal 2024, the former generated 55% of Dell Technologies Inc.’s (NYSE:DELL) revenue, whereas the latter generated 38%.
While some are discouraged by Dell Technologies Inc.’s (NYSE:DELL) recent performance in the PC market, other investors are more focused on the potential of its AI-optimized servers and their growing demand within the data center market in light of the AI boom. This is especially important considering the fact that several big tech players like Amazon and Microsoft are currently making large investments in AI data centers, a development that is expected to be advantageous for companies like Dell Technologies Inc. (NYSE:DELL).
Dell Technologies Inc. (NYSE:DELL) does seem to be facing some challenges this year, including stagnating PC sales and lower profit margins from its servers and data centers. However, the company’s CFO continues to expect solid top-line growth, which is reassuring for many investors, especially in light of the company’s cheap valuation.
Dell Technologies Inc. (NYSE:DELL) was spotted in the portfolios of 88 hedge funds in the second quarter, with a total stake value of $2.9 billion. Coatue Management was the most prominent shareholder, holding 7,311,852 shares.
6. Celestica Inc. (NYSE:CLS)
Number of Hedge Fund Holders: 38
Expected Earnings Growth: 49.8%
P/E Ratio: 14.02
Celestica Inc. (NYSE:CLS) is an information technology company that offers supply chain solutions to tech firms. It is based in Toronto, Canada.
Celestica Inc. (NYSE:CLS) is a company that has been benefitting from growing AI demand particularly with respect to AI-related hardware. This is because the company provides connectivity products for data centers and is particularly known for its 400G and 800G switches.
Many investors are also interested in Celestica Inc. (NYSE:CLS) because of its second-quarter earnings report, which highlighted a 10% increase in revenue year-over-year. Revenue for the quarter came in at $2.8 billion. Net income also jumped by 12% year-over-year. These figures have led many analysts to develop more optimistic opinions about Celestica Inc.’s (NYSE:CLS) growth potential.
With its involvement in the AI data center space, Celestica Inc. (NYSE:CLS) is expected to see even greater benefits in the future. The company’s full-year 2024 guidance was raised in the second-quarter report, and Celestica Inc. (NYSE:CLS) now expects revenue of $9.5 billion for the year, up 19% year-over-year. Additionally, the company’s balance sheet is also stellar, with it holding $434 million in cash as of the second quarter.
We saw 38 hedge funds long Celestica Inc. (NYSE:CLS) in the second quarter, with a total stake value of $843.9 million.
5. Super Micro Computer, Inc. (NASDAQ:SMCI)
Number of Hedge Fund Holders: 47
Expected Earnings Growth: 52.9%
P/E Ratio: 12.5
Super Micro Computer, Inc. (NASDAQ:SMCI) is an information technology company that offers high-performance server and storage solutions based on modular and open architecture. It is based in San Jose, California.
Many investors have flocked to Super Micro Computer, Inc. (NASDAQ:SMCI) in the past, considering its essential role in AI since server and storage services are needed to build the infrastructure that supports next-generation technologies and complex AI models. Because of this, Super Micro Computer, Inc. (NASDAQ:SMCI) saw positive second-quarter results, with revenue coming in at $1.27 billion.
Another piece of news of interest to those considering Super Micro Computer, Inc. (NASDAQ:SMCI) these days is that the stock is due for a stock split this October. The initial split announcement resulted in shares rising a fair amount. However, they have since fallen down. The reasons for this decline are multiple, starting with the fact that Hindenburg Research has recently alleged in a short report that Super Micro Computer, Inc. (NASDAQ:SMCI) is plagued by some flawed accounting practices – after which the company responded by delaying its annual filing for fiscal 2024.
This factor primarily has resulted in Super Micro Computer, Inc. (NASDAQ:SMCI) shares losing a significant chunk of their valuation this past month, which may make many consider it to be worth checking out this stock while it’s trading low. However, more prudent investors seem to be waiting for the accounting practices issue to be resolved, and the stock split to occur before they consider buying this AI stock on sale.
There were 47 hedge funds long Super Micro Computer, Inc. (NASDAQ:SMCI) in the second quarter, with a total stake value of $1.5 billion.
4. Himax Technologies, Inc. (NASDAQ:HIMX)
Number of Hedge Fund Holders: 15
Expected Earnings Growth: 41.4%
P/E Ratio: 12.4
Himax Technologies, Inc. (NASDAQ:HIMX) is a fabless semiconductor company that offers display imaging processing technologies. It is based in Taiwan.
In the second quarter, Himax Technologies, Inc. (NASDAQ:HIMX) saw revenues come in at $239.6 million, up 15.5% sequentially and exceeding the guidance range of an 8%-13% increase. Gross margin for the second quarter was 32%, up 21.7% year-over-year. The main reasons for this growth include cost improvements and increased sales in Himax Technologies, Inc.’s (NASDAQ:HIMX) automotive IC and Tcon product lines.
Himax Technologies, Inc. (NASDAQ:HIMX) has also acquired a 5.3% equity stake through private placement in FOCI. Through this, the company aims to integrate its Wafer Level Optics, WLO expertise, and FOCI’s optical fiber know-how to create innovative Linear-drive Pluggable Optics and Co-Packaged Optics for advanced multi-chip modules needed for the cloud AI and high-speed computing markets.
In total, 15 hedge funds were long Himax Technologies, Inc. (NASDAQ:HIMX) in the second quarter, with a total stake value of $34.3 million.
3. Aptiv PLC (NYSE:APTV)
Number of Hedge Fund Holders: 38
Expected Earnings Growth: 28.4%
P/E Ratio: 11.8
Aptiv PLC (NYSE:APTV) is an automotive parts company. It is based in Ireland. The company has been deploying AI and ML in its offerings, and it thus offers critical technologies for vehicle safety and security, such as autonomous driving tech, sensing and perception systems, and vehicle connectivity systems.
With the rise of EVs, connected vehicles, and a focus on software and digitalization in the automotive industry, Aptiv PLC (NYSE:APTV) is expected to see its business grow exponentially as more consumers gravitate towards advanced driver assist systems (ADAS).
Considering the immense growth potential of Aptiv PLC (NYSE:APTV) as more drivers and businesses switch to electric or hybrid vehicles, many investors are beginning to see the intrinsic value of this stock, which is not reflected by its share price as of now. As a result, Aptiv PLC (NYSE:APTV) is beginning to be considered one of the cheapest automotive players in the AI space this year.
There were 38 hedge funds long Aptiv PLC (NYSE:APTV) in the second quarter, with a total stake value of $1.03 billion.
ClearBridge Investments mentioned Aptiv PLC (NYSE:APTV) in its first-quarter 2024 investor letter:
“Stock selection in the consumer discretionary sector was the leading detractor from relative performance, driven by idiosyncratic issues within a handful of holdings. Automotive parts supplier Aptiv PLC (NYSE:APTV) faced pressure as headwinds to the broader auto-cycle and a slowing in electric vehicle adoption weighed on margins. However, we believe that the company’s above-market growth, combined with opportunity for margin expansion, are compelling at its current valuation as the auto-cycle rebounds.”
2. HP Inc. (NYSE:HPQ)
Number of Hedge Fund Holders: 41
Expected Earnings Growth: 3%
P/E Ratio: 10.4
HP Inc. (NYSE:HPQ) is a tech hardware and storage company based in Palo Alto, California. It provides personal computing and other digital access devices.
In the third quarter, HP Inc. (NYSE:HPQ) reported revenue growth for the first time in nine quarters, with revenue rising by 2% year-over-year. While this seems to be a nominal figure, many loyal investors expect the company to only go further up from here. This is especially the case considering the fact that HP Inc. (NYSE:HPQ) is currently charging ahead in the AI PC category, with its next-generation AI PCs becoming more popular among knowledge workers and data scientists.
HP Inc. (NYSE:HPQ) seems to be doubling down on the mobility and AI optimization of its newer PC models. In July, the company introduced its new premium model, powered by the latest AMD processor, which has since been heralded as the most powerful AI PC in the industry. In the third quarter, HP Inc. (NYSE:HPQ) took its AI operations even further by becoming the first tech player to build generative AI into its workstation solution.
The company expects personal systems revenue for the fourth quarter to increase sequentially, with the commercial segment also exhibiting continued strength. While the printers segment seems to be lagging for HP Inc. (NYSE:HPQ) this year, many investors are more focused on the potential of HP AI PCs and what they mean for the company’s profitability in the long term instead.
A total of 41 hedge funds were long HP Inc. (NYSE:HPQ) in the second quarter, with a total stake value of $654.9 million.
Greenlight Capital mentioned HP Inc. (NYSE:HPQ) in its second-quarter 2024 investor letter:
“In addition to gold, we had four material winners in our long portfolio this quarter. HP Inc. (NYSE:HPQ) jumped from $30.22 to $35.02. After seven quarters of declines, PC sales turned marginally positive during the quarter. The industry appears to be in the early stages of an upcycle, perhaps to be enhanced by recently launched AI-enabled PCs that are expected to ramp up over the next several quarters.”
1. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 42
Expected Earnings Growth: 0.3%
P/E Ratio: 9.3
Baidu, Inc. (NASDAQ:BIDU) is a Chinese tech company operating in the internet services and AI spaces. It is a market leader in China’s search engine market and offers a wide range of internet services, such as the Baidu App and iQIYI.
Chinese stocks like Baidu, Inc. (NASDAQ:BIDU) have been performing incredibly well in light of China’s central bank’s announcement of stimulative measures, which include lowering interest rates and bank reserve requirements alongside the amount of money consumers are now required to put down on housing. As a result, Baidu, Inc. (NASDAQ:BIDU) has been rallying and is up by 20.8% just this past week.
Alongside this, another factor that has been aiding Baidu, Inc.’s (NASDAQ:BIDU) growth is the company’s recent presentation at an AI event this week. Being one of China’s tech giants in charge of developing its own LLMs for generative AI, Baidu, Inc.’s (NASDAQ:BIDU) presentation at the Yunzhi AI summit has also resulted in greater optimism surrounding the stock.
At the summit, Baidu, Inc. (NASDAQ:BIDU) unveiled its Ernie AI models on the Qianfan Foundation Model Platform 3.0. Many AI investors are thus now following this stock very closely to see how much further it can grow. Considering all this, the stock’s current valuation seems to be quite cheap.
At the end of the second quarter, 42 hedge funds were long Baidu, Inc. (NASDAQ:BIDU) with a total stake value of $1.1 billion.
While BIDU is an exceptional investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BIDU and which trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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