We recently compiled a list of the 15 AI News Investors Should Not Miss. In this article, we are going to take a look at where Pegasystems Inc. (NASDAQ:PEGA) stands against the other AI news investors should not miss.
According to Ark Invest, an investment manager focused on disruptive technologies, artificial intelligence breakthroughs are expected to increase the share of the global equity market associated with disruptive innovation from 16% to 60% by 2030. With inflation transitioning to deflation in several sectors, the firm believes that five innovation platforms, namely robotics, energy storage, AI, blockchain, and multi-OMIC (biological analysis) sequencing will be profoundly impacting macroeconomic metrics over the next few years.
“Interest rates are likely to surprise on the low side of expectations, broadening the equity rally from a narrow subset of stocks and reinforcing the need for diversified AI investments.”
–Catherine Wood, CEO and CIO
Read more about these developments by accessing 30 Most Important AI Stocks According to BlackRock and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.
One of the firm’s ETFs with the investment theme of next-generation internet outperformed broad-based global equity indices in the third quarter, benefiting from its holdings in companies involved in innovative technologies. The year-to-date performance of the fund is 16.81%, outperforming its category by 1.59 percentage points year-to-date.
In light of this trend, joining CNBC’s “The Exchange”, technology reporter Kate Rooney revealed how Wall Street is trying to cash in on the AI craze using AI itself. According to Rooney, the new world of generative AI is starting an “arms race for hedge funds”. Modern versions of AI today are better than human traders in ways more than one. They learn from mistakes and get smarter along the way, and they ultimately require minimal human intervention. Combining this with the rise of OpenAI and Anthropic, these “off-the-shelf” models tend to be cheaper.
Moreover, while human traders may be capable, they often succumb to emotions and tend to make mistakes. This is why Intelligent Alpha CEO Doug Clinton believes that a “lack of emotion” is actually the edge or “superpower” of AI. That said, the program revealed how hedge funds are now looking into AI to “get ahead of the markets”, where their use of AI will ultimately help them improve decision-making in the field. Companies like OpenAI and Anthropic, which have raised significant capital along the way, ultimately need enterprise clients to scale, and Wall Street is an ideal fit due to its reliance on data and analysis.
Intelligent Alpha has launched a first-of-its-kind ETF named after famed stock trader Jesse Livermore. The ETF uses OpenAI’s ChatGPT, Anthropic’s Claude, and Google’s Gemini to construct a global equity portfolio. As per Clinton, firms that get on board with AI could gain an edge with a price tag of millions of dollars.
“What it does is it adds some intelligence to indexes, which are just definitionally sort of a set of rules that can’t be smart. And they also take that emotion out of the active side where human beings are still making decisions, but we get caught up. You know, we make mistakes and sometimes those compound. And so I think by fixing those two issues, AI has the potential to really capture a lot of value in terms of assets flowing to these new AI-powered funds.”
– Intelligent Alpha CEO
Read more about these developments by accessing 10 Unsexy AI Stocks According to Goldman Sachs and 10 Buzzing AI Stocks According to Goldman Sachs.
Methodology
For this article, we selected AI stocks by combing through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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).
Photo by Possessed Photography on Unsplash
Pegasystems Inc. (NASDAQ:PEGA)
Pegasystems Inc. (NASDAQ:PEGA) is a Massachusetts-based American software and enterprise transformation company. As an AI-powered platform, Pegasystems helps organizations personalize engagement, automate services, and overall streamline their business operations. Their “enterprise AI decisioning and workflow automation platform” delivers business-transforming value. One of its newest offerings is the Pega GenAI Blueprint, the company’s latest SaaS capability incorporating generative AI into the ideation phase of the initial design stage for application development.
Pegasystems Inc. (NASDAQ:PEGA) has recently been named by Citi as one of its “top picks” on the back of an “underappreciated artificial intelligence story” and an “attractive valuation” (see 20 Hidden Gem AI Stocks). The Wall Street bank set a price target of $92 with a 25% upside from its current trading price. This comes after the software company persuaded the court to partially reverse a jury’s earlier decision to award rival Appian $2bn in damages after a legal battle alleging that Pegasystems stole its rival’s trade secrets.
“We recently moved PEGA to our top pick, seeing the recent VA Appellate Court ruling as a key unlock on valuation, sentiment, and investor interest now that the $2B lawsuit and going concern risk have now rolled off (expect few-hundred million potential risk). While there is still risk given APPN re-appealing to the VA Supreme Court and impact from legal fees/distractions, we significantly lowered the discount applied to our base case post-appeal (from $1B to $200M).”
– Citi analysts Steven Enders and George Kurosawa
Overall PEGA ranks 13th on our list of AI news investors shouldn’t miss. While we acknowledge the potential of PEGA as an investment, our conviction lies in the belief that some 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 PEGA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
