These tech giants generate billions of dollars in revenue on a quarterly basis.
Artificial intelligence (AI) stocks offer investors big profit potential thanks to the technology’s promise to revolutionize many areas: from making businesses more efficient to developing the next breakthrough drug, AI could make a huge impact on the can print history. That’s why many AI stocks have soared higher, with high valuations, and many investors felt that if they wanted to achieve an AI win, they would have to pay a high price.
But I have a surprise for you: Some promising AI players are increasingly looking like value stocks, as their valuations have reached bargain levels given their track records and future potential. They may not have quite crossed the border into value stock territory yet, but they are close enough to encourage growth and value investors to take notice. Let’s take a look at three AI stocks that look dirt cheap right now and may offer you an excellent buying opportunity.
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1. Super microcomputer
Super microcomputer‘S (SMCI 0.78%) profits and shares soared earlier this year as customers flocked to the company for its AI data center equipment – products such as workstations and servers. In fact, Supermicro’s quarterly sales, which were in the billions, only exceeded annual sales in 2021.
Earnings remain strong, and the company even gave investors some great news this past week when it said it is shipping 100,000 graphics processing units (GPUs) for AI on a quarterly basis. The company works with top chip designers such as Nvidia to integrate their chips into its equipment.
But recent headwinds have held back the share price. These include a report from a company shorting the stock, claiming there are problems at Supermicro, and a Wall Street Journal report of a possible investigation by the Ministry of Justice. At the same time, Supermicro postponed its annual 10-K report. All these elements have depressed investor confidence.
I don’t recommend Supermicro for cautious investors at this time until these uncertainties are resolved, but aggressive investors might consider a small position in this top AI player as it trades at a bargain price, at just 14x forward earnings estimates.
2. Alphabet
Alphabet (GOOG 0.33%) (GOOGL 0.30%)Trading at 21x forward earnings estimates, it is the cheapest of the high-growth tech stocks known as the ‘Magnificent Seven’. Yet the company has a track record and future prospects that are just as exciting as those of its peers.
You probably know Alphabet best thanks to Google Search, the most popular search engine in the world. Advertising on Google generates the lion’s share of Alphabet’s revenue. But the company also has another promising business that recently achieved major milestones thanks to the company’s investment in AI. I’m talking about Google Cloud.
Its cloud business reported double-digit revenue growth and triple-digit operating income growth last quarter, and these numbers also reached key milestones. Google Cloud’s revenue rose above $10 billion for the first time, and the company’s operating income rose above $1 billion. The company says its AI infrastructure and solutions for cloud customers have generated billions of dollars in revenue this year – and more than 2 million developers are using these tools.
Alphabet offers customers AI solutions for all their needs, and has also applied AI to its Google Search business, so Alphabet could become an AI powerhouse in the long term.
3. Metaplatforms
Metaplatforms (META -0.70%) is another Magnificent Seven player trading at a very reasonable price, at estimated future profits of 27x. The company is a leader in the world of social media, as it owns Facebook, Messenger, Threads, WhatsApp and Instagram – and its investment in AI could strengthen its position here.
Meta pledged to make AI this year’s biggest investment theme, aiming to have the equivalent of 600,000 graphics processing units on board by the end of the year. The tech giant is working to develop AIs that all its users can apply to their needs – from leisure to business. This should encourage us to spend more time on Meta’s apps, and in turn, advertisers can increase their already sizable ad presence there to reach us.
Advertising currently represents the majority of Meta’s billion-dollar revenue, so investing in an area that can secure advertising spend makes sense. Plus, Meta is going all-in on AI, so other products or services may be on the horizon. At its current price, Meta is a great addition to investors’ portfolios with a focus on both growth and value.
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adria Cimino has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
