What do you get when you combine declining stock prices with an economic and technological niche poised to win as it becomes more important? You get stocks with low entry costs – plus high upside potential and approval from Wall Street analysts.
The niche we are talking about is AI, artificial intelligence, once a pipe dream of science fiction but now a computing technology that is becoming increasingly important. AI powers the rapidly growing Internet of Things, is the technology behind game changers like 3D printing and has already transformed the world of online marketing. In its application to autonomous vehicles, it even promises to change the way we travel forever. No matter where you go, you can’t get away from AI.
The crushed prices are an artifact of the current bear market and the ongoing supply chain snarl. We’ve faced a semiconductor chip shortage for the past year, affecting everything from heavy industry to healthcare to high-end computing. But supply issues are beginning to resolve, and demand for AI-related technology remains high.
So let’s take a look and look at some artificial intelligence stocks that are primed for growth in the months and years to come — and whose prices now represent a low entry point. We take the latest data from the TipRanks platform, add the analyst commentary on these stocks and get the complete picture.
Nvidia Corporation (NVDA)
First up is Nvidia, one of the big names in the chip industry. Nvidia has long been known for its high market share — better than 80% — in the graphics processing unit (GPU) segment, a major coup for the company since high-end GPUs are in high demand. Initially designed to enable sharper, more realistic graphics for computer games, the chips have found applications in many other areas where their high computing power has enabled AI and machine learning in computing, medical imaging, smart home, urban technology, and autonomous Machinery.
Nvidia has customers in all of these areas, and its autonomous machines — vehicles in particular — proved a bright spot in the company’s most recent Q2 23 earnings report. In the quarter ended July 31, Nvidia’s revenue and earnings fell from the first Quarterly down sharply, but drilling down shows the company’s news also had some positives.
Bottom line, revenue fell sequentially from $8.3 billion to $6.7 billion. At the same time, Q2 results were still up 3% year over year. However, revenue hasn’t fared so well. Diluted non-GAAP EPS fell to $0.51 from $1.36 quarter-on-quarter and was down 51% year-on-year. And that’s just part of the bad news.
Nvidia’s revenue came in well below expectations of $8.1 billion, a failure that was blamed on contractions in the computer games segment. And the company withdrew its Q3 guidance, which spooked investors — and prompted a sharp fall in the stock after the earnings release.
On the plus side, Nvidia saw big gains in the data center and automotive segments, both areas where the company’s high-end AI-enabled chips have strong potential to expand market share — offering strong computing capability backed by a Companies with a reputation for delivering quality in these areas. Data center revenue grew to $3.81 billion in the fiscal second quarter, up 61% year over year. The company’s auto business is smaller, generating $220 million in revenue in the second quarter — but that was up 45% year over year and 59% quarter over quarter, showing not just earnings, but accelerating earnings.
Truist 5-star analyst William Stein acknowledges Nvidia’s decline in gaming revenue, calling it a “bitter medicine” but recommends the stock for its AI leadership. He writes, “Bears will focus on the potential of a vulnerability spreading to data centers. While recognizing this opportunity, we continue to see NVDA as best positioned to capture long-term market share in the data center as its GPU lead has stalled and its newer products (DPU & CPU) are geared towards emerging disaggregated compute architectures…. In CQ2, automotive sales of $220 million grew ~45% year over year, hitting an all-time high. Management noted strength driven by self-driving and AI cockpit solutions, partially offset by a decline in legacy cockpit revenue. The long-awaited growth in NVDA’s automotive business finally seems to be happening. Data center revenue was also strong, driven by demand in vertical markets and North American hyperscale customers.”
Along with a bullish outlook, Stein gives NVDA stocks a buy rating; its price target of $198 implies a 1-year upside potential of 50%. (To see Stein’s track record, click here.)
Now turning to the rest of the street, where the stock has posted 31 ratings, weighing 23 buys against 9 holds to come up with a moderate buy consensus rating. Nvidia shares are selling for $131.98 and their average price target of $206.71 indicates a potential for a 57% improvement over the next 12 months. (See Nvidia’s stock forecast at TipRanks.)
Marpai, Inc. (MRAI)
From semiconductor chips, we will move into the healthcare sector, where technology company Marpai has seen an opportunity to bring AI technology to the third-party administrator (TAP) segment. This is a $22 billion market, and Marpai is using AI to develop system features that increase quality of care while reducing claims costs and lowering stop-loss premiums. Marpai’s TAP approach is based on using proprietary prediction algorithms to streamline processes.
This healthcare management tech company is relatively new to the public markets, having only gone public in late October of last year. The offering, which opened on the 27th and closed on the 29th of the month, sold over 7.1 million shares for $4 each and raised gross proceeds of $28.75 million, up from the originally planned $25 million -dollars exceeded. Since the IPO, however, the stock is down 78%.
Marpai has published 4 quarterly financial reports since the IPO and has reported consistent revenue ranging from $4.8 million to $6.2 million. The most recent report for Q2 ’22 showed revenue of $5.6 million, which is in the middle of that range — and slightly ahead of expectations. In terms of earnings, the company reported a net loss of $6.66 million, or 34 cents per diluted share. On a per share basis, that was a significant improvement over the diluted EPS loss of 54 cents recorded a year earlier.
Analyst Allen Klee of Maxim Group gives Marpai a detailed look, describing both the company’s product innovation and potential: “MRAI is well positioned to drive innovation in the third-party administrator (TPA) space. Employers who self-insure their employees’ healthcare can use Marpai to process claims and manage benefits. The company’s technology uses artificial intelligence (AI) to predict and mitigate potential high-cost healthcare events and automatically adjudicate claims to reduce costs. The technology can also reduce waste in the system by directing members to the most cost-effective providers in advance. Through these efficiencies and by reducing excess spending from traditional healthcare plans, Marpai believes employers can reduce healthcare costs by over 25%.”
Convinced that Marpai has something to offer investors, Klee rates the shares as a Buy, and its 12-month price target of $2.50 implies a robust 162% gain. (To see Klee’s track record, click here.)
Some stocks fly under Wall Street’s radar, and Marpai seems to be one such name; Klee’s is the only analyst rating published in the last 3 months. (See Marpais stock forecast at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.