When it comes to artificial intelligence, the usual suspects for AI stocks comes up. Clearly, going with these winners has not been a bad idea. However, investors that are just tuning into this opportunity may want to consider lesser-appreciated ideas.
A primary concern is that the top-tier AI stocks feature rich multiples, whether against sales, earnings or some other metric. To be fair, with such a vast opportunity, it’s difficult to determine valuation. What seems like an overvalued play could indeed be a discounted prospect.
Nevertheless, there are quite a few compelling enterprises that just aren’t getting the spotlight. The argument here is that they should. So, without further delay, below are intriguing ideas for AI stocks to buy.
IBM (IBM)
With discussions about digital intelligence, IBM (NYSE:IBM) tends to be an afterthought. That’s not meant to be a pejorative against the company known as Big Blue. It’s just that the legacy tech firm has been slow to adapt to various changes in the tech ecosystem, such as cloud computing. However, with IBM’s aggressive (if not audacious) plan to replace nearly 8,000 jobs with AI, it’s one of the top names to consider.
Other companies talk a good game when it comes to generative AI. However, if Big Blue is successful in replacing human workers with machines, it would achieve an unprecedented level of productivity acceleration. Obviously, humans have this pesky tendency of demanding things like salaries and civil rights. With machines, you don’t deal with any of these “unproductive” issues.
It’s also hard to dismiss the results so far. Last fiscal year, the company beat bottom-line targets four times out of four. The average positive earnings surprise came out to 5.58%. For the current fiscal year, analysts see revenue of $58.69 billion. That would be up 3.1% from last year’s print of $56.94 billion.
Combined with IBM’s forward yield of 3.48%, it’s one of the underappreciated AI stocks to consider.
Walmart (WMT)
When you hear the name Walmart (NYSE:WMT), you immediately think about retail and discounts. Chances are, you’re not really looking at WMT stock as an AI play. However, the company’s leadership team would like to shift this paradigm. Per its website, the big-box retailer is leveraging generative AI to give time back to households for more important endeavors.
Under a typical search protocol, a customer may go to a retailer’s e-commerce platform and look for items to buy. However, knowing what you want requires some planning. And planning takes time. That can accrue to wasted hours during the week that can be spent on more important matters. Therefore, Walmart has integrated a large language model to provide smart recommendations to their customers.
Stated differently, Walmart aims to take away the pain point of the planning process and just get right down to product recommendations. That’s a win for the customer and a win for Walmart. Moving forward, analysts see the company hitting just under $620 billion in sales for fiscal 2025. That should be more than doable.
Plus, you’re looking at a solid retail business that pays dividends. Therefore, WMT ranks among the hidden-gem AI stocks.
Baidu (BIDU)
For tech-centric AI stocks, Baidu (NASDAQ:BIDU) is notable because it really hasn’t received much love at all. While other tech firms have seen nothing but green ink over the past 52 weeks, BIDU stock is deep in the red. For full disclosure, lingering questions about the viability of China’s economy has sidelined Baidu and other Chinese tech firms. Still, BIDU makes for a tempting source of speculation.
However, the underperformance might not last indefinitely. Last week, consumer tech giant Apple (NASDAQ:AAPL) held preliminary talks with Baidu about using the Chinese firm’s generative AI technology in its devices in China. Unique regulations within the world’s second-largest economy has somewhat forced Apple to consider a local AI partner. Cynically, that’s great news for Baidu shareholders.
Based on past financial performances, it almost seems a matter of time before BIDU stock really soars. In the past four quarters, Baidu’s positive earnings surprise came out to just under 27%. For fiscal 2024, analysts believe that revenue will reach $20.08 billion. If so, that would be up 7.8% against last year’s print of $18.62 billion.
On the date of publication, Josh Enomoto 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.
