We recently compiled a list of the 10 Trending AI Stocks on Wall Street’s Radar. In this article, we are going to take a look at where Teradyne, Inc. (NASDAQ:TER) stands against the other AI stocks.
In the latest news in AI, SoftBank Group CEO Masayoshi Son said that he has agreed with OpenAI CEO Sam Altman to set up a joint venture in Japan. The venture will be offering artificial intelligence services to corporate customers. Known as SB OpenAI Japan, the joint venture will be owned by OpenAI together with a company established by SoftBank and its domestic telecoms arm. This move by Son’s company aims to deepen relations with OpenAI, which has been looking at investing around $15 billion to $25 billion in the company. The company has also committed $15 billion to Stargate, a joint venture with OpenAI and Oracle.
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With AI efforts such as the Stargate initiative and advancements coming from companies such as DeepSeek and Alibaba, the world of AI is shaking up and moving pretty fast. In response, OpenAI is considering a shift to its closed-source development approach. DeepSeek’s release of a lower-cost open-source AI model has led OpenAI to rethink how to move forward, as reported by Seeking Alpha on February 1st citing OpenAI executives’ comments during a Reddit “Ask Me Anything” event. CEO Sam Altman said during the event that OpenAI needs to “figure out a different open-source strategy”.
Altman further added that not everyone shares the same view and that figuring out the strategy is “not our current highest priority”. OpenAI Chief Product Officer Kevin Weil even said during the same event that the company was considering open-sourcing older AI models. Here is what Chief AI Scientist Yann LeCun on OpenAI models:
“DeepSeek has profited from open research and open source. … They came up with new ideas and built them on top of other people’s work,” LeCun wrote. “Because their work is published and open source, everyone can profit from it. That is the power of open research and open source.”
For this article, we selected AI stocks by going 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).
A team of engineers discussing around a fully-equipped flex test platform system.
Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Holders: 43
Teradyne, Inc. (NASDAQ:TER) creates automated test systems and robotic solutions. On January 31, Bank of America Securities analyst Vivek Arya reiterated a Sell rating on the stock and set a price target of $100.00. Several reasons impacting the company’s performance have led to the sell rating by the firm. To begin with, Teradyne reported a beat in Q4 sales and earnings but fell short in its Q1 guidance. This has revealed that it faces challenges in meeting its ambitious targets. The company is also dealing with macroeconomic weaknesses, notably in the smartphone and industrial automation sectors. The firm has pointed out limited opportunities in the rapidly growing AI compute and memory markets given its products aren’t utilized by major players like NVIDIA GPUs and Broadcom ASICs. Other concerns pointed out by the analyst include Teradyne’s continuing investments in the industrial automation sector which are capping its gross margins at 59-60% over the next four years. This is despite a sales growth target of 15% CAGR. Arya also highlighted that the company’s valuation is at a premium compared to its peers, with a 26x price-to-earnings ratio. This ratio is not justified by its limited growth prospects and model leverage.
Overall TER ranks 7th on our list of the AI stocks on Wall Street’s radar. While we acknowledge the potential of TER 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 TER 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.
