We recently published a list of Wall Street Is Focusing on These 10 AI Stocks as New Year Begins. In this article, we are going to take a look at where Uber Technologies, Inc. (NYSE:UBER) stands against other stocks Wall Street is focusing on as the new year begins.
Dan Niles, Niles Investment Management founder, recently said in a program on CNBC that a slowdown in spending could be a “big problem” for major AI players in 2025. The analyst highlighted that when Satya Nadella was asked whether his company was facing a chip shortage, the head of the Redmond software giant said his company was facing a power shortage, not a chip shortage. Niles said this goes against the claims of Jensen Huang who has been pointing to unprecedented demand for AI chips.
“If you look at the Magnificent 7 (except one) …. they are trading at a low 30 PE. The S&P 500 is trading at a 25 PE, but if you look at the midcap and small-cap stocks, which people have forgotten about because they’re not really AI plays, they’re trading at around 19 to 20 times. They’ve underperformed up until sort of mid-year when the performance picked up. If you look at stocks since June 30th, basically, the S&P is up about 8%, but the NASDAQ 100 is only up 7%. The Russell 2000 is actually up 10% after being only up 1% for the first six months of the year. So you’re already starting to see this broadening out, and I think with the new administration really focused on domestic manufacturing, deregulation, etc., that’s going to benefit the small midcap names more so than names in the S&P 500,” Niles said.
Niles said stocks can face a “rough” time in the first quarter amid the changing posture of the Fed.
“The Fed finally admitted inflation wasn’t transitory. I think that might have been the wakeup call, which is why I think Q1 could be a really rough time for a lot of the, you know, the market as a whole, but a lot of the mega cap stocks as well. As we have to kind of price in the fact that the FED might, you know, they might pause or they might even raise next year, which I think that’s a 50/50 shot of whether they cut, raise, or hold.”
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For this article, we picked 10 AI stocks analysts are talking about heading into 2025. With each company we have mentioned its 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).
A close up view of a hand holding a smartphone, using a ride sharing app.
Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Investors: 136
Mark Mahaney from Evercore ISI recently said in a program on CNBC that Uber Technologies Inc (NYSE:UBER) is his top pick heading into 2025. The analyst believes the stock is “dislocated” in terms of valuation over concerns that the upcoming robotaxi revolution would impact the company’s business.
“It’s really triggered by this selloff recently from, call it, the mid-90s down to 60 on the thesis that Uber Technologies Inc (NYSE:UBER) is going to be Robo taxi roadkill. And it may well be—I mean, that’s a possible outcome here. I just think that I’m taking the other side on this, that the stock’s had a 30% plus correction that makes it dislocated in my book. I think it’s still a very high-quality asset, the world leader, global leader in terms of market share in both delivery and mobility, with an ads business that’s building up. You know, it’s part of the lucky lexicon, like ” Uber Technologies Inc (NYSE:UBER)”—everybody sort of globally knows what the brand means and what it does, which allows them to spend less and less on marketing over time. So the real debate is on Robo taxis. But I think it’s the largest demand aggregator out there. I think chances are we’re going to see Robo taxis as part of your Uber Technologies Inc (NYSE:UBER) app in the future, definitely on the mobility side, maybe on the delivery side too. So I can’t guarantee that, but I know that the market is so negative on that thesis that I think it creates the opportunity for asymmetric upside. So that’s why we’re long Uber Technologies Inc (NYSE:UBER).”
Overall, UBER ranks 6th on our list of stocks Wall Street is focusing on as the new year begins. While we acknowledge the potential of UBER, 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 time frame. If you are looking for an AI stock that is more promising than UBER but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.