We recently compiled a list of the 8 Best Information Technology Services Stocks to Invest in Now. In this article, we are going to take a look at where International Business Machines Corporation (NYSE:IBM) stands against other best information technology services stocks.
As per AXA Investment Managers, the US appears to be well-placed to continue to dominate the technology space. The frenzy related to generative artificial intelligence topped in June and tech stocks have underperformed the overall market since then. From the end of June to the end of October, the NASDAQ-100 Technology Sector saw a fall of over ~2% while the broader market (S&P 500) went up by over ~5%. AXA Investment Managers highlighted that the guidance from tech companies concerning new products and services demonstrates that earnings growth is expected to remain healthy moving forward.
Even though AI technologies are more prevalent in the consumer products category, many experts believe that we are in the early stages of this tech revolution.
Generative AI and Hyperautomation – Well-placed for a Next Revolution
Over the past few years, tech industry veterans have been amazed by the potential of generative AI. Moving forward, in 2025, Forbes believes that market players will begin seeing organizations move beyond this hype. This means that companies are expected to integrate generative AI into their business strategy. In the earlier wave of the AI revolution, experts saw leading tech companies rethink and transform their existing business models like online advertising, retail, and media streaming.
Forbes highlighted that 2025 can be a year of change. This is because more strategic use cases – such as realigning business models concerning the potential of generative AI – are expected to come forward. Therefore, there can be generative tools and applications enabling entirely new possibilities throughout different industries such as healthcare, manufacturing, education, and several other industries.
As per ConnectWise, one of the most important emerging technological trends is hyperautomation. It revolves around the end-to-end unification of automated functions powering efficiency at scale. Several organizations have been leveraging AI, ML, and robotic process automation (RPA) in a bid to automate independent business functions in a highly integrated way.
While several technologies leveraged AI in automation, the strong dynamics of hyperautomation should not be overlooked. One of the biggest trends is increased productivity and accessibility of the technology. The secondary impacts of this expansion should be seen across every industry as full-scale digital transformation becomes feasible. Talking about the industry-specific applications, in manufacturing, hyperautomation should help in enhancing production efficiency in factories and in healthcare, this technology will help in automating sensitive data processing and gain insights into patient care.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Intelligent Enterprise- An Idea or a Reality
A trend that is likely to revolutionize the broader technology industry is the idea of intelligent enterprise. As per SAP, this concept revolves around using data assets in a bid to achieve the desired outcomes faster with lesser risk and anticipating and proactively responding to customer needs. As per Future Market Insights, the intelligent enterprise data capture software market could see a CAGR of ~12.70%. By 2034, this market could soar to a strong valuation of US$37,189.90 million. The increased adoption of automation technologies across businesses should result in increased demand for intelligent enterprise data capture software.
With the help of automating data extraction and processing tasks, the technology supports businesses seeking to streamline workflows.
A technician installing a complex of microcontrollers and internet of things devices inside a server rack.
Our Methodology
To list the 8 Best Information Technology Services Stocks to Invest in Now, we used the Finviz screener to extract the relevant stocks. Finally, the stocks having the highest hedge fund holdings were considered. The list has been arranged in the ascending order of their hedge fund sentiment, as of Q2 2024.
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).
International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 54
International Business Machines Corporation (NYSE:IBM) provides integrated solutions and services worldwide.
Amidst the evolving technology landscape, International Business Machines Corporation (NYSE:IBM)’s strategic focus on AI and hybrid cloud services placed the company well to capitalize on emerging trends while, at the same time, navigating challenges in the IT services sector. The company’s dual focus on AI and hybrid cloud services should act as a primary growth enabler. International Business Machines Corporation (NYSE:IBM) has been investing heavily in such areas and is leveraging its extensive enterprise client relationships in a bid to drive the adoption of its AI and cloud solutions.
The company’s progress in the field of Generative AI has been lauded by analysts and industry experts. International Business Machines Corporation (NYSE:IBM) has been positioning itself to help customers with managing and optimizing LLMs both on-premises and off-premises. While there was a temporary pause in Red Hat’s growth acceleration, industry experts remain optimistic about its prospects moving forward.
International Business Machines Corporation (NYSE:IBM)’s focus on AI, mainly in the enterprise space, places the company well to tap significant growth opportunities. The company’s approach to AI, which focuses on responsible and explainable AI, aligns well with the requirements of large organizations requiring transparency and governance in AI implementations.
Bank of America upped its price objective on the shares of International Business Machines Corporation (NYSE:IBM) from $209.00 to $250.00, giving a “Buy” rating on 9th October. Diamond Hill Capital, an investment management company, released its Q1 2024 investor letter. Here is what the fund said:
“Among our bottom Q1 contributors short positions in Dick’s Sporting Goods, International Business Machines Corporation (NYSE:IBM) and Palomar Holdings. Though we believe the quality and durability of IBM’s free cash flow-generating capabilities remain questionable, investor sentiment has improved amid optimism for the company’s still-nascent AI product suite.”
Overall, IBM ranks 3rd on our list of 8 Best Information Technology Services Stocks to Invest in Now. While we acknowledge the potential of IBM 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 IBM 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.