We recently published a list of 12 Cheap AI Stocks to Buy in 2025. In this article, we are going to take a look at where Palo Alto Networks, Inc. (NASDAQ:PANW) stands against other cheap AI stocks to buy in 2025.
Artificial Intelligence (AI) was a buzzword around Wall Street for most of 2024. AI has shown immense promise but comes with significant risks. Big AI players are dominating the broader market, but there will be opportunities for other companies to explore as the AI market continues to expand. For instance, the new administration is keen on technological advancement, and recently, President Donald Trump announced a $500 billion AI initiative, a joint venture known as Stargate between OpenAI, Softbank, and Oracle.
However, DeepSeek’s introduction shocked the U.S. companies after it released a new AI model, a much better alternative to GPT-4. DeepSeek claims to have designed the AI model in just two months and at around under $6 million using Nvidia’s less-advanced H800 chips, as reported by Reuters on January 27. Since the news broke out, NVIDIA Corporation (NASDAQ:NVDA) shares have plunged over 16%, wiping away $600 billion in market capitalization, the biggest one-day loss in U.S. history.
Moor Insights & Strategy founder, CEO, and chief analyst Patrick Moorhead, speaking to Market Domination, shared his views on DeepSeek. Moorhead was impressed by the efficiency of DeepSeek’s AI. He pointed out that the Chinese have used different techniques compared to American developers, where they were able to parse or train maybe 5% of the data, which is a 95% reduction.
However, Moorhead also addressed the U.S. market drop as an “overreaction.” “I think the market overall should be going crazy because [this is the] uplift of what we were looking for [from AI],” said Moorhead. He added that the investors’ focus should be on the progress in inference.
It might be a good time to invest in AI stocks, especially cheap AI stocks during the market’s overreaction.
Our Methodology
To determine the list of cheap AI stocks, we went through various news articles and stock analyses. We shortlisted the AI stocks with the minimum analyst upside of 30%, as of January 27. Cheap, in the context of this article, means stocks that Wall Street analysts believe are undervalued and will surge to higher share prices. We have ranked the cheap AI stocks to buy based on their popularity among hedge funds, as of Q3 2024, in ascending order.
Why do we care about what hedge funds do? 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 cutting-edge computer lab full of IT experts monitoring the security of multiple systems.
Palo Alto Networks, Inc. (NASDAQ:PANW)
Analyst Upside (as of January 27): 124.51%
No. of Hedge Fund Holders: 64
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leading cybersecurity firm that offers a comprehensive platform and services backed by AI. On January 22, the company launched Quantum Random Number Generator (QRNG) Open API framework, an AI solution that will empower organizations to protect their systems against quantum security risks. QRNG will utilize AI, ML, and deep learning in quantum computing to enhance its solution offering.
Palo Alto Networks, Inc. (NASDAQ:PANW) is aggressively investing in AI, and over the last ten years, it has developed into a more complete security platform, adding ML and AI capabilities into a wide range of cloud-based products. The company’s latest deal of $100 million plus with the U.K. Home Office reflects Palo’s growing influence.
On January 21, Morgan Stanley analyst Hamza Fodderwala rated PANW an Overweight stock, lifting its price target from $223 to $230 per share. In addition to Morgan Stanley maintaining an overweight rating on PANW, Scotiabank also raised its price target on the stock from $200 to $225 with a Sector Outperform rating. Analysts see Palo Alto Networks, Inc. (NASDAQ:PANW) to outperform considering its growing business as it continues to land big deals and demonstrate a strong position in the cybersecurity market.
Overall, PANW ranks 6th on our list of cheap AI stocks to buy in 2025. While we acknowledge the potential of PANW to grow, our conviction lies in the belief that 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 PANW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
