We recently published a list of 10 Biggest AI Stories and Ratings Updates You Should Not Miss This Week. Since HP Inc (NYSE:HPQ) ranks 10th on the list, it deserves a deeper look.
The Federal Reserve now expects just one rate cut in this year, and the market’s reaction to this development has been calmer-than-expected, showing investors are now paying little to no attention to what the Fed does and instead have their eyes focused on AI, which continues to push the markets higher. Tech companies, small and large, are continuing to roll out AI-focused products and solutions, while funds are pouring billions into AI. SoftBank has recently committed another $5 billion in AI investments for 5 companies ($1 billion each). A Wall Street Journal report cited SoftBank’s CFO, who said the bank’s chief Masayoshi Son was taking a “break from quarterly earnings meetings so he could focus on AI.”
In this backdrop it’s important to stay ahead of the curve and see what’s happening in the AI space.
In this article we will take a look at some of the biggest AI stock ratings updates and stories which can’t be missed. We focused on AI stocks that are popular among the smart money 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).
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HP Inc (NYSE:HPQ)
Number of Hedge Fund Investors: 49
HP Inc (NYSE:HPQ) is the limelight amid the stock’s growth catalysts stemming from the AI PC growth catalysts. Alex Cho, HP Inc (NYSE:HPQ) President of Personal Systems, recently highlighted the potential of the AI PCs market while presenting at Bank of America Global Technology Conference. Here’s what Cho said:
“We expect that in three years, 40% to 60% of shipments of PCs will be AI PCs. That’s a pretty big penetration rate to your question of these devices. Secondly, we said that the contribution of that will increase ASPs, 5% to 10%. I think it’s a good starting point. Remember that we’re just in early days on this, but as a good starting point for the entire computing industry of 5% to 10%, and why because you need to configure it more. And why? Because we think from a customer perspective, there’s tangible benefits for them, right, overall. What we said is to a market that’s deemed to be about single-digit growth, those two factors alone over the long period of time or that planning period can double the growth rate of the market.”
Why could HP Inc (NYSE:HPQ) be one of the best AI PC and hardware stocks in the coming months? Let’s take look at our bull case.
Microsoft has named HP Inc (NYSE:HPQ) as one of its notable partners in the production of AI PCs. HP is also making waves in the AI PC market with HP’s OmniBook X AI PC and HP EliteBook Ultra G1q AI PCs. HP recently posted strong Q2 results, which also indicated the company has started to see a new AI-powered PC refresh cycle. Morgan Stanley analyst Erik Woodring said in a note that HP’s PC business saw growth for the first time since April 22. The analyst also maintained his Overweight rating and increased the stock’s price target to $37 from $36.
HP shares have gained about 18% so far this year. HP is also a dividend-paying company, with a 3% dividend yield as of June 4 market close. HP shares are trading at 9.53X the company’s 2025 estimated earnings per share, which makes the stock undervalued given the industry’s forward P/E median sits at 22%. According to data from Yahoo Finance, HP is expected to grow at 6.70% next year and at 5.10% for the following five years on a per-annum basis.
Overall, HP Inc (NYSE:HPQ) ranks 10th on Insider Monkey’s list titled 10 Biggest AI Stories and Ratings Updates You Should Not Miss This Week. While we acknowledge the potential of HPQ, our conviction lies in the belief that 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 HPQ 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.