We recently published a list of Top 10 AI Stocks on Investors’ Radar These Days. In this article, we are going to take a look at where HP Inc (NYSE:HPQ) stands against other top AI stocks on investors’ radar these days.
The debate around AI systems hitting a “data wall” or plateau is heating up in the tech industry with many arguing that the performance of AI models is not showing signs of further improvement amid a lack of quality inputs, causing scaling issues in the industry.
CNBC’s Deirdre Bosa recently discussed this debate in a program and said:
“All it feels like anyone is talking about right now in tech is this debate over scaling laws and a data wall, which continues to rage in Silicon Valley. This is the idea that more data and bigger models will always lead to better AI, with some arguing that progress has peaked or is starting to plateau. Put another way, it’s a debate over a core assumption in AI that could have massive implications for the industry, from valuations to the GPUs powering it, and of course, the Nvidia story. I was at the Newcomer AI conference yesterday here in San Francisco. It was the theme of the day, with everyone from Scale AI’s Alexander Wang to Anthropic’s Dario Amodei to Databricks’ Ali Ghodsi weighing in.”
Jensen Huang was also asked about the issue of AI systems hitting a data wall and possible scaling issues in a latest earnings call. Here is what he said:
“A foundation model pre-training scaling is intact and it’s continuing. As you know, this is an empirical law, not a fundamental physical law, but the evidence is that it continues to scale. What we’re learning, however, is that it’s not enough that we’ve now discovered two other ways to scale. One is post-training scaling. Of course, the first generation of post-training was reinforcement learning human feedback, but now we have reinforcement learning AI feedback and all forms of synthetic data generated data that assists in post-training scaling.”
Read Huang’s comments in detail here.
Bosa mentioned some other tech leaders pushing back against the idea of AI hitting a data wall and said:
“…..also acknowledge that this alone isn’t enough to push AI further, and progress will come from post-training scaling, which is the development of AI applications on top of existing models. He and others say this will still require massive amounts of compute power.
An open question remains: will it be as much? A helpful way to frame that next phase of AI development is digestion or innovation. Maybe both are possible, but digestion might suggest a pullback on the huge amounts of spending and capital expenditures we’ve seen over the last few years. Innovation, on the other hand, could mean doubling down, with just another phase of development beginning. It’s still very much an open question.”
READ ALSO Jim Cramer’s Latest Lightning Round: 11 Stocks to Watch and Jim Cramer on AMD and Other Stocks
For this article we picked 10 AI stocks currently trending on the back of latest analyst ratings and news. With each stock we have mentioned the number of hedge fund 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).
A laptop, showing off the companys sleek notebook computers and workstations.
HP Inc (NYSE:HPQ)
Number of Hedge Fund Investors: 42
HP Inc (NYSE:HPQ) recently posted quarterly results and the stock fell amid downbeat Q1 guidance.
Citi maintained its Neutral rating on HP Inc (NYSE:HPQ) but reduced the price target to $36.50 from $37.
Analysts, led by Asiya Merchant, noted HP’s stock fell due to weaker-than-expected guidance, driven by subdued PC recovery and inflated commodity costs impacting margins in the short term.
While they expect the PC recovery to gain momentum in upcoming quarters with margin improvement, the Print segment exceeded expectations. However, HP Inc (NYSE:HPQ) anticipates a low single-digit decline in the overall market through fiscal 2025.
Margins are expected to remain at the top of HP Inc (NYSE:HPQ)’s target range, thanks to a shift towards more profitable units and cost actions. The analysts noted that EPS for the year will likely fall a penny below consensus expectations at $3.60 (midpoint), but still below Citi’s forecast.
On the other hand, Evercore kept an Outperform rating and a $40 price target.
Amit Daryanani and his team highlighted HP Inc (NYSE:HPQ)’s solid results despite weak PC market conditions. While there are concerns about below-seasonal EPS guidance for Q1, the analysts believe the second-half guidance is reasonable given industry dynamics.
TD Cowen maintained its Hold rating but raised the price target to $39 from $32, citing soft end markets that hinder the company’s progress with cost restructuring.
The analysts noted that HP’s Q4 EPS met Street estimates, but the outlook missed expectations due to continued softness in the PC market and higher variable compensation costs for fiscal Q1 2025.
Importantly, the analysts said HP’s fiscal 2025 EPS outlook is in line, as PC growth in the second half of the year and strong Print profitability should drive mid-single-digit EPS growth.
While premium PC mix and the repricing of PC parts support Free Cash Flow, weak consumer PC demand and challenges in Print may limit HP’s ability to achieve significant EPS growth.
J.P. Morgan maintained its Overweight rating but lowered the price target to $40 from $41.
Overall, HPQ ranks 10th on our list of top AI stocks on investors’ radar these days. While we acknowledge the potential of HPQ, our conviction lies in the belief that under the radar 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.
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.
