Demand for artificial intelligence is soaring, making it a great time to search for the most undervalued AI stocks. New developments in generative AI, machine learning, and natural language processing (NLP) are set to transform industries as we know it.
PwC estimates that AI could contribute $15.7 trillion to the global economy by 2030. This is not a one and done hype train, and the AI revolution has only just begun.
With demand for AI network infrastructure skyrocketing, these 3 undervalued AI stocks will outperform the market through 2030.
Below are my top three most promising AI stocks to buy right now!
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) should be on your radar when considering the most undervalued AI stocks to buy for 2023. The company has been making serious strides in artificial intelligence this year with integration across all levels of its technology stack. Microsoft’s stock is up 53% year-to-date, and 2024 will be another transformative year.
Following this year, Microsoft has delivered strong financial results. CEO Satya Nadela, is bullish on the prospects of its generative AI backed startup, OpenAI. The company is also focused on Azure cloud deployment, expected to continue driving operating leverage.
In its recent FY24 Q1 financial results, revenue rose 13% year-over-year (YOY) to $56.5 billion. Revenue in the intelligent cloud grew to $24.3 billion, an increase of 19% YoY. Azure saw 21% growth in the quarter, with artificial intelligence being the primary driver. Microsoft’s cloud strategy is working and continues to pay dividends to both the company and its shareholders. As demand for AI cloud services accelerates, Microsoft is one of the best undervalued AI stocks to buy now.
Alphabet (GOOG,GOOGL)
Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) is an American multinational technology company headquartered in Mountain View, California. The company primarily specializes in search engine technology. However, over the years they have diversified into areas like cloud computing, e-commerce, consumer electronics, and artificial intelligence.
Alphabet is investing significant CAPEX towards generative AI. They plan to ramp up spending for AI in Google search and the cloud. For Q3 2023, revenue swelled to $76.7 billion. Google cloud and Google search revenue were up 22% and 11% YOY, respectively. YouTube ad revenue also jumped to $7.95 billion, primarily driven by the company’s generative AI strategy.
AI in Google search and Youtube is truly just the tip of the iceberg. Alphabet plans to integrate artificial intelligence across all segments of its business. The large amounts of data the company holds might be its biggest competitive advantage. With a P/E ratio of 25.45, Alphabet is still cheap when you consider their long term FCF potential. Therefore, investors should buy Alphabet as demand for AI continues to accelerate.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) shareholders suffered immense pain during the broader technology stock slump at the start of 2022. Shares fell more than 65% from the all time high in 2021 as corporations cut back on their advertising spending. Furthermore, the company’s metaverse plans have not panned out as they had hoped.
Meta has been losing money hand-over-fist at their Meta Reality Labs division. Their Q3 2023 financial results revealed they lost $46.5 billion on their metaverse bet since 2019. This is no small figure and the long term growth prospects of the metaverse look abysmal. However, the company remains in strong financial shape as they focus on cost cutting and artificial intelligence.
In Q3 2023, revenue rose 23% year-over-year to $34.1 billion. Net income was up 163% YOY to $11.58 billion, or $4.39 per share. Meta began its cost cutting strategy in 2022 in the form of layoffs and its impacts will be material in 2023. The company has also been ramping up its generative AI strategy with Meta AI, which will include full integration across all its apps and devices.
While the company expects operating losses to accelerate at Meta Reality Labs, they are well equipped to weather the storm. Meta ended the quarter with $61.12 billion in cash and marketable securities. With generative AI and cost cutting at the forefront, investors should snap up Meta before the end of 2023.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
