In this article, we will take a detailed look at 10 AI stocks insiders are selling.
Positive sentiment is prevailing in the market after strong bank earnings and increasing hopes of a soft landing. Ryan Detrick, Carson Group chief market strategist, said while talking during a recent program on CNBC that he sees more runway for the current bull market.
“This is a bull market. Now we’re in the third year of a bull market. My friend Sam Stovall said once you get to 65 years old, the odds of getting to 85 are really, really high. Bull markets work that way. Going back 50 years, there’s five other bull markets that made it into their third year, like this one is right now. The worst any of them went was another three years. A five-year total. The average was eight years. I’m not saying we have another six years of a bull market but what we’re saying is this is an economy that keeps surprising to the upside.”
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However, the analyst said large-cap tech stocks are “pricey.” He believes small- and mid-cap stocks are cheap and labeled financials and industrials as fairly valued.
There are some top AI stocks that are seeing insider selling activity. In this article, we take a look at those stocks and analyze their fundamentals and market sentiment. With each company, we have mentioned its hedge fund sentiment. 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: pexels
10. Palantir Technologies Inc (NYSE:PLTR)
Number of Hedge Fund Investors: 44
On September 24, 2024, Palantir Technologies Inc (NYSE:PLTR) Director Peter Thiel sold 16,178,415 shares at $36.90 per share, reducing his ownership by 16% to 83,283,878 shares. The sale was valued at approximately $597 million. The stock is up 17% since then.
On September 27, 2024, Thiel made another sale, disposing 12,412,322 shares at $36.85 per share, further decreasing his ownership by 15% to 70,871,556 shares. This transaction was valued at roughly $457 million.
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.
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.
However, Palantir Technologies Inc (NYSE:PLTR) stock’s valuation has been a concern for many.
The stock is trading at about 21.2 times the next 12 months (NTM) revenue. For fiscal year 2024, Palantir expects revenue growth of 24% year-over-year (YoY) to $2.746 billion, with an adjusted operating income of $970 million, representing a 35.3% margin. However, revenue growth is expected to slow over the next two years, with estimates suggesting a 22% YoY growth rate, potentially bringing revenues to around $4 billion by fiscal 2026. If Palantir Technologies Inc (NYSE:PLTR) can improve margins by 100 basis points annually, it would be able to generate about $1.5 billion in adjusted operating income by FY26, with a present value of $1.3 billion when discounted at 8%. Applying an S&P 500-like growth multiple of 2.5 to 2.75 times earnings, Palantir Technologies Inc (NYSE:PLTR) would have a P/E of 46, translating to a price target of $27, significantly down from its current price of $42.
9. AppLovin Corp (NASDAQ:APP)
Number of Hedge Fund Investors: 54
On September 12, 2024, AppLovin Corp (NASDAQ:APP) Corp CEO and Chairperson Arash Adam Foroughi sold 200,000 shares at $107.80 per share, reducing his ownership by 2% to 9,243,217 shares. The sale was valued at approximately $21.6 million. The stock is up 35% since then.
Ankur Crawford, Alger executive VP, while talking to CNBC in a latest program said that in about 3 to 5 years AI is going to provide us with superhuman intelligence.
“All of the CapEx being spent today is whole-heartedly justifiable because the opportunity to monetize that AI by that time is beyond what anyone has contemplated in the market so far.”
Ankur Crawford believes Applovin Corp (NASDAQ:APP) is one of the top underappreciated AI stocks.
She said that AppLovin is a gaming advertising platform.
“They are using AI to basically make you download more games and they can monetize inventory better than anyone else can. They have 70% market share, and they are going into ecommerce as well. So, instead of serving you up a game, they will serve you up a product and monetize their inventory better than they were able to before,” the analyst said.
Crawford said Applovin Corp (NASDAQ:APP) is “interesting” because their cost structure is already “embedded.”
“For every dollar they get, they get a almost a 100% fall through on the margin line. So, massively cash-flow generative. The Street has $6 in earnings (estimate) in 2026,” the analyst added.
Carillon Scout Mid Cap Fund stated the following regarding AppLovin Corporation (NASDAQ:APP) in its Q2 2024 investor letter:
“AppLovin Corporation (NASDAQ:APP) was another top contributor. The advertising technology platform, focused on mobile applications, reported strong earnings results in early May. Its AI-driven Axon 2.0 mobile advertising platform continues to produce strong returns for customers, which is leading to more than expected spending on the platform. Although the one-year anniversary of Axon 2.0’s release occurs this year, the company is already working to expand beyond mobile applications with opportunities in e-commerce and connected television. We believe AppLovin’s valuation, free cash flow, and leading market share remain attractive.”
8. Arista Networks Inc (NYSE:ANET)
Number of Hedge Fund Investors: 65
On September 6, 2024, Arista Networks Inc (NYSE:ANET) CTO and Senior Vice President of Software Engineering Kenneth Duda sold 38,311 shares at $317.23 per share, reducing his ownership by 7% to 548,183 shares. The transaction was valued at approximately $12.15 million. The stock is up 26% since this transaction.
The Information recently reported that Meta Platforms is preparing a cluster of over 100,000 NVIDIA H-100 GPUs to train the latest version of its Llama language model. Evercore ISI believes Arista Networks Inc (NYSE:ANET) is likely to be the networking partner for Meta Platforms’ cluster. Ethernet will handle the networking for the project, as InfiniBand isn’t capable of supporting a cluster of this scale, leading Evercore to believe Arista Networks Inc (NYSE:ANET) will supply some of the infrastructure.
“Assuming GPU’s represent 80% of total spend on this AI cluster, this would imply total cost of around $2.5B, of which 10% is likely spent on infrastructure,” said Evercore analyst Amit Daryanani, in a note. “This could represent a $250M revenue opportunity for Arista, if they won the business.”
Arista Networks Inc (NYSE:ANET) has previously worked with Meta, providing switches for a cluster with 24,000 GPUs. Daryanani noted that their strong relationship makes it likely Arista will supply the switches for this new cluster. If successful, this could boost Arista’s $750 million AI revenue target for 2025. Evercore maintains an Outperform rating on Arista Networks Inc (NYSE:ANET) with a $400 price target.
What makes Arista Networks Inc (NYSE:ANET) a promising AI stock?
Arista Networks Inc (NYSE:ANET) is set to gain amid the AI-driven shift to high-speed networks due to its open Ethernet design and unified Arista EOS. The company’s partnership with Broadcom also created an opportunity for Arista Networks Inc (NYSE:ANET) to expand its integrated software and hardware solutions.
Arista Networks Inc (NYSE:ANET) claims its Ethernet architecture based on merchant silicon allows fast deployment for major hyperscalers and Tier-2 cloud providers.
Madison Mid Cap Fund stated the following regarding Arista Networks, Inc. (NYSE:ANET) in its Q2 2024 investor letter:
“We trimmed our positions in Arista Networks, Inc. (NYSE:ANET) and Carlisle Companies. Both of these companies have witnessed strong multi-year growth in their stock prices, which have resulted in elevated valuations. While we remain confident in the long-term prospects of both of these businesses, we trimmed our holdings to more appropriate position sizes given the risk/reward offered.”
7. Palo Alto Networks Inc (NASDAQ:PANW)
Number of Hedge Fund Investors: 66
On September 3, 2024, Palo Alto Networks Inc (NASDAQ:PANW) EVP and CTO Nir Zuk sold 36,000 shares at $359.17 per share, reducing his ownership by 2% to 1,426,481 shares. The sale was valued at approximately $12.93 million. The stock is up 4.4% since then.
DA Davidson’s Rudy Kessinger thinks Palo Alto Networks Inc’s (NASDAQ:PANW) three platforms will result in vendor consolidation which would be better than other companies. They believe Palo Alto Networks Inc (NASDAQ:PANW) has so far captured only 7% of the market which could reach a whopping $200 billion.
Palo Alto Networks Inc’s (NASDAQ:PANW) biggest strength is its Prisma Secure Access Service Edge (SASE) product, which generated about 50% growth in the fiscal third quarter year over year. Another growth catalyst for Palo Alto Networks Inc (NASDAQ:PANW) is Thunderdome Defense Information System Agency’s zero-trust network architecture.
TimesSquare Capital Management U.S. Focus Growth Strategy stated the following regarding Palo Alto Networks, Inc. (NASDAQ:PANW) in its Q2 2024 investor letter:
“Our cybersecurity holdings were also beneficial to the strategy this quarter. The global provider of network and cloud-based cybersecurity systems, Palo Alto Networks, Inc. (NASDAQ:PANW), chipped in with a 19% return. Its revenues and earnings were higher than anticipated as Palo Alto shifted its marketing strategy to emphasize larger platform contracts.”
6. Dell Inc (NYSE:DELL)
Number of Hedge Fund Investors: 88
On September 26, 2024, Dell Inc (NYSE:DELL) CEO Michael S. Dell sold 10 million shares at $122.40 per share, reducing his ownership by 35% to 18,292,241 shares. The transaction was valued at approximately $1.224 billion. The stock is down 3.8% since then.
UBS recently listed Dell Technologies Inc (NYSE:DELL) as one of the top tech stocks to own for the end of 2024.
UBS believes Dell Technologies Inc’s (NYSE:DELL) emerging strength in AI-focused servers and a refresh cycle for PCs are being supported by better pricing. Dell recently reported second-quarter results that topped estimates.
Bill Baruch, founder and president at Blue Line Capital, said in an interview with CNBC that there were margin concerns in the previous quarter report but in the latest results we saw “significant” margin improvement in the infrastructure solutions group which holds the AI server subsegment. This subsegment saw about 80% year-over-year growth.
“This was a great report. It’s everything we wanted to see.”
The analyst said that the stock could reach $134 by the end of this year.
Dell Technologies Inc (NYSE:DELL) got attention when Elon Musk said on Twitter that the company, along with Super Micro Computer, would make servers for his AI startup xAI. But Dell is expanding its partnerships with other companies, too. In just a few quarters, AI servers have surged to account for 12.4% of total revenue, up from 2.2% three quarters ago. Dell Technologies Inc (NYSE:DELL) closed the quarter with a record $3.8 billion backlog, which is impressive. In May 2024, Dell expanded their AI factory with Nvidia to include the new PowerEdge XE9680L server, as well as storage, edge, and workstation solutions.
Carillon Scout Mid Cap Fund stated the following regarding Dell Technologies Inc. (NYSE:DELL) in its Q2 2024 investor letter:
“Dell Technologies Inc. (NYSE:DELL) was a top contributor despite reporting disappointing first-quarter earnings results, because investors looked through the near-term disappointment and expected strong growth from AI-related servers and personal computers. We expect Dell to participate in the growth of artificial intelligence hardware, especially as enterprises invest more aggressively. We like the company’s depth and breadth of products and services, as well as its focus on keeping costs low.”
5. Adobe Inc (NASDAQ:ADBE)
Number of Hedge Fund Investors: 107
On September 25, 2024, Adobe Inc (NASDAQ:ADBE) Chair and CEO Shantanu Narayen sold 25,000 shares at $521.58 per share, reducing his ownership by 7% to 357,967 shares. The transaction was valued at approximately $13 million. The stock is down 5% since then.
Adobe Inc (NASDAQ:ADBE) expects fourth-quarter revenue between $5.5 billion and $5.55 billion, with a midpoint of $5.525 billion, falling short of the $5.6 billion consensus estimate. Adobe Inc (NASDAQ:ADBE) also forecasts earnings per share (EPS) ranging from $4.63 to $4.68, with the midpoint slightly below the $4.67 estimate.
Adobe Inc (NASDAQ:ADBE) has become a complex case for analysts who are still gauging whether Adobe would be a net beneficiary of the AI boom or a loser. On the one hand, Adobe Inc (NASDAQ:ADBE) is under threat with tons of AI tools good enough to make beginner-level designs, posts and videos for individuals or companies with low or no marketing budget. But on the other hand, the company is launching several AI-powered tools and integrating generative AI tools in its products that could boost its revenue in the future.
Daniel Newman, CEO of Futurum Group, said in a program on CNBC that the latest earnings show the effects of a macro slowdown but Adobe Inc (NASDAQ:ADBE) could benefit if companies decide to use the company’s AI tools to cut its reliance on human workers.
Polen Global Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter:
“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings.
In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
4. Broadcom Inc (NASDAQ:AVGO)
Number of Hedge Fund Investors: 130
On September 24, 2024, Broadcom Inc (NASDAQ:AVGO) President and CEO Hock E. Tan sold 150,000 shares at $172.94 per share, reducing his ownership by 10% to 1,289,440 shares. The sale was valued at approximately $25.94 million. The stock is down 3.3% since this transaction.
On September 19, 2024, Broadcom Inc (NASDAQ:AVGO) President of the Semiconductor Solutions Group Charlie B. Kawwas sold 25,200 shares at $168.27 per share, reducing his ownership by 3% to 838,470 shares. The transaction was valued at approximately $4.24 million.
In its last reported results, Broadcom Inc (NASDAQ:AVGO) beat estimates on both EPS and revenue, but guidance failed to impress the Street, resulting in a share price decline. However, Jefferies said the dip was a buying opportunity.
“Guidance came in a bit lighter than expected, but management has been messaging lumpiness in AI revenue and growth is set to reaccelerate in 4Q,” said Jefferies analyst Blayne Curtis, in a note. “The cyclical correction in non-AI revenue is in-line with peers, and our view is the long-term trend in AI still favors an industry shift to custom ASICs, where Broadcom Inc (NASDAQ:AVGO) remains well-positioned. Factor in the added benefit of the VMware acquisition running ahead of schedule on both revenue and earnings, and it’s easy to look past one minor bump in the road.”
Broadcom Inc (NASDAQ:AVGO) continues to be a leader in the AI ASCI and networking chips market. The company expects about $12 billion in AI revenue in fiscal 2024, which means 20% of its total revenue will come from AI and counting.
Broadcom Inc (NASDAQ:AVGO) has 3nm AI ASIC chip deals with Alphabet and Meta in addition to many other tech giants aiming massive spending for AI hyperscaling.
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.
Columbia Threadneedle Global Technology Growth Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
Broadcom Inc. (NASDAQ:AVGO) also performed well during the quarter, as the company reported better-than-expected earnings, with upside from demand related to AI. This long-term holding is strongly positioned to benefit from continued AI demand, with AI sales in the quarter up 400% over the prior year. Overall, AI-related revenue accounted for 30% of total revenue in 2024 and is on pace to represent a majority of the company’s revenue within two to three years.
3. Nvidia Corp (NASDAQ:NVDA)
Number of Hedge Fund Investors: 179
On September 19, 2024, Nvidia Corp (NASDAQ:NVDA) Director Tench Coxe sold 2 million shares at $117.87 per share, reducing his ownership by 5% to 34,578,208 shares. The sale was valued at approximately $235.7 million. The stock is up 16% since then. But that wasn’t the only insider selling move around the stock.
On September 6, 2024, Nvidia Corp (NASDAQ:NVDA) President and CEO Jen Hsun Huang sold 240,000 shares at $104.35 per share, with no significant change to his ownership of 861,499,236 shares. The transaction was valued at approximately $25 million.
On September 24, 2024, Nvidia Corp (NASDAQ:NVDA) Director Mark A. Stevens sold 165,100 shares at $121.27 per share, with no significant change to his ownership of 38,592,685 shares. The transaction was valued at approximately $20 million.
Nvidia’s declines after the Q2 results were more or less expected amid Blackwell delay reports confirmed by management. However, the delays were mainly due to a change in Blackwell GPU mask. That does not affect the main functional logic or design of the chip, according to analysts. While Blackwell has been delayed for a few months, it does not change the core growth thesis for Nvidia.
Nvidia is set to see huge growth on the back of the data center boom amid the AI wave.
At Nvidia’s GPU Technology Conference in March 2024, CEO Jensen Huang estimated annual spending on data center infrastructure at about $250 billion. Over the next decade, this could total between $1 trillion and $2 trillion, depending on how long this level of investment continues. During the same Q&A session, Bank of America’s Vivek Arya echoed this estimate, suggesting the total addressable market would fall in the $1-2 trillion range, particularly as countries invest in their own AI infrastructure. By the end of the decade, spending could be at the high end of that range.
Of course, Nvidia won’t dominate the entire $2 trillion opportunity, as it faces competition from companies like AMD and internally developed AI accelerators from Google, Amazon, and even Apple. Some analysts believe Nvidia’s data center market share between 2025 to 2029 will be over $950 billion—less than half of the total market—but still enough to make it the leader in the sector.
Vltava Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2024 investor letter:
“Over the summer, we devoted a lot of time to studying the AI-related investment wave. This spans a wide range of sectors and our view could be very briefly summarised as follows: The first-tier beneficiaries are primarily companies in the semiconductor sector, NVIDIA Corporation (NASDAQ:NVDA) perhaps the most. That company is benefiting from the huge increase in investment by large technology companies to build enormous data centres. We know who NVIDIA’s customers are. They are companies like Meta, Alphabet, Amazon, and Microsoft. They are investing hundreds of billions of dollars into their AI capabilities. What is not entirely clear, however, is who are and will be the customers of NVIDIA’s customers, and, more importantly, when, and if, they will be able to come up with such huge demand for AI services that the profits from AI will justify and pay for the enormous investments all these companies have been making. The further we move away from the starting point that NVIDIA represents in our more broadly-reaching estimates, the lessreliable those estimates are.So far, we know just one thing for sure, and that is that investments in AI capabilities are ongoing and they are huge. They are not only bringing large demand to chipmakers and the semiconductor sector but to some other sectors as well. Indeed, building AI clusters also requires the construction of new semiconductor factories, new energy sources, and all the associated infrastructure. The numbers under consideration are incredibly high. It is possible that over the next decade the construction of AI centres will necessitate a 20% increase in US energy consumption. The investment required will be measured not in the hundreds of billions of dollars, but in an order of magnitude higher. Maybe two orders of magnitude.”
2. Meta Platforms Inc (NASDAQ:META)
Number of Hedge Fund Investors: 219
On September 19, 2024, Meta Platforms Inc (NASDAQ:META) Chief Product Officer Christopher K. Cox sold 20,000 shares at $557.52 per share, reducing his ownership by 5% to 393,708 shares. The transaction was valued at approximately $11.15 million. The stock is up about 3.3% since then.
Meta Platforms Inc (NASDAQ:META) crushed past analyst estimates for its Q2 results, giving signs that the huge AI spending it’s doing would bear more results in the future.
The market has been reluctant about Meta Platforms Inc (NASDAQ:META) massive spending on AI. What does Meta want to achieve with its AI spending? The company wants to use AI to improve engagement and language models like Llama 3 to improve user interactions, boost engagement, and better monetize its 3.2 billion daily active users.
But can Meta Platforms Inc (NASDAQ:META) sustain this high spending? The company’s free cash flow margin is around 30%, and it’s well on track to report $50 billion in free cash flow this year. Based on this target the stock is trading at around 26 times this year’s free cash flow. Given the current trajectory continues Meta Platforms Inc (NASDAQ:META) can post $58 billion in free cash flow by next year, which means the stock is trading at 21 times next year’s free cash flow. With a whopping $35 billion in net cash, a strong user base, and a key position in the consumer-facing side of the AI industry, Meta Platforms Inc (NASDAQ:META) could be a solid long-term investment.
Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:
“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.
We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop…” (Click here to read the full text)
1. Microsoft Corp (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
On September 9, 2024, Microsoft Corp (NASDAQ:MSFT) Vice Chair and President Bradford L. Smith sold 40,000 shares at $402.59 per share, reducing his ownership by 7% to 532,347 shares. The sale was valued at approximately $16.1 million. The stock is up about 3% since the transaction.
DA Davidson recently downgraded the stock, with analyst Gil Luria saying the company’s advantages in the cloud and code generation sectors have diminished, making it difficult for Microsoft Corp (NASDAQ:MSFT) to maintain its previous performance. He highlighted that Amazon Web Services is now nearly matching Azure in cloud growth, while Google Cloud is also gaining momentum. Luria downgraded Microsoft Corp (NASDAQ:MSFT) from Buy to Neutral, maintaining a $475 price target. He pointed out that Amazon and Google have made significant strides in integrating custom silicon into their data centers, putting Microsoft at a disadvantage. This reliance on NVIDIA (NVDA) for technology means Microsoft is effectively transferring wealth from its shareholders to NVIDIA’s, according to Luria.
Following a year of margin expansion, Microsoft Corp (NASDAQ:MSFT) is now projecting a decline in operating margins due to increased data center capital expenditures rising from 12% to 21% of revenue. This increase outpaces that of Amazon and Google, largely due to Microsoft’s dependence on NVIDIA. Luria said that if Microsoft Corp (NASDAQ:MSFT) continues to overinvest at the current rate, margins could drop by at least 1 percentage point cumulatively, potentially necessitating layoffs of around 10,000 employees each year to maintain margins. The analyst also thinks Microsoft Corp (NASDAQ:MSFT) has lost much of its edge with GitHub Copilot, as Amazon and GitLab (GTLB) have caught up in capabilities.
The concerns voiced by the analyst are not unfounded. Microsoft is also losing its edge in open-source models as enterprises shift toward cost-effective, transparent open-source solutions like Meta’s Llama 3.1.
Generation Investment Management Global Equity Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Generative AI’s hunger for power has increased disproportionately with its intelligence. According to one estimate, OpenAI’s GPT-4 required 50 gigawatt hours (GWh) of electricity to train, much more than the 1.3 GWh needed for GPT-3.3 And then AI requires even more power when it is put to use (so called ‘inference’). Some of the latest trends worry us. Microsoft Corporation (NASDAQ:MSFT) appears to be slipping in its ESG goals, with its greenhouse gas emissions rising again last year, as it invests in becoming a big player in AI. It is struggling in particular to curb its Scope 3 emissions in the capital goods category – nowhere more so than in the activity associated with the construction of data centres: both the embedded carbon in construction materials like steel and cement, as well as the emissions from the manufacturing of hardware components such as semiconductors, servers and racks. Google’s emissions have risen by close to 50% in the past five years.
We feel it is worth dwelling on Microsoft for a few moments, since we suspect you will be hearing a lot more about the relationship between AI and sustainability in the coming months. The bottom line is that we continue to see Microsoft as a sustainability leader. In the case of Scope 2 emissions, the company covers 100% of its electricity use with purchases of renewable energy. Crucially, though, the majority of this green energy is directly sourced via power purchase agreements, which bring new renewable capacity to the grid. Microsoft is also committed to operating 24/7 on renewable power by 2030, a policy that will help bring energy storage onto the grid as well…” (Click here to read the full text)
While we acknowledge the potential of Microsoft Corp (NASDAQ:MSFT), 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 MSFT 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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