Time and again, Wall Street eagerly awaits the emergence of groundbreaking innovations that could rival the transformative impact of the internet on the business landscape. The ascent of artificial intelligence (AI) may just be the technological marvel they’ve been longing for.
AI employs software and systems as substitutes for human intervention in overseeing and executing tasks. The intrinsic value of AI lies in its capacity to learn and evolve autonomously, enhancing its efficacy in tasks and even acquiring new capabilities over time.
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Diving Into a $15.7 Trillion Opportunity: AI by 2030
While estimates on the potential of AI vary widely, a report by PwC projected that AI could contribute up to $15.7 trillion to the global economy by the end of the decade.
Given such a colossal addressable market, there’s a plethora of companies poised to thrive. Nonetheless, success isn’t guaranteed by merely picking any AI stock randomly from a list.
Though Nvidia (NASDAQ: NVDA) is currently at the forefront of reaping benefits from the AI revolution, with its stock soaring and market value escalating by trillions since 2023, history warns of a cautionary tale.
Over the last three decades, emerging technologies like the internet have encountered early-stage bubbles that eventually burst. This cyclical trend suggests that AI, too, will need time to mature, casting a shadow on Nvidia’s stock performance.
Yet, not all AI stocks would be vulnerable to an AI bubble burst. Thanks to their sturdy foundational segments, the following five historically affordable AI stocks present a compelling buy opportunity for the latter half of 2024.
Meta Platforms: A Social Media Dynamo
The first enticingly affordable AI stock to consider for the upcoming months and beyond is the social media behemoth Meta Platforms (NASDAQ: META).
Meta’s revenue stream heavily relies on advertising, constituting nearly 98% of its revenue. Despite CEO Mark Zuckerberg’s aggressive AI investments, the backbone of Meta’s profitability lies in its prime social media real estate, which continues to drive cash flow amid economic expansions.
With a staggering 3.24 billion daily active users on its platforms, Meta remains a pinnacle for advertisers. Even after a remarkable surge from the 2022 downturn, Meta’s shares are trading at less than 14 times the estimated cash flow for 2025—a 6% discount to its historical average multiples.
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Alibaba: Powering AI in E-Commerce
The next alluringly economical AI stock for your portfolio in the second half of 2024 is the e-commerce titan Alibaba (NYSE: BABA) headquartered in China.
As per the International Trade Administration, Alibaba commands the lion’s share of China’s online retail sector through Taobao and Tmall, cornering approximately 50.8% of the e-commerce sales in the country.
Even with China’s post-COVID economic sluggishness, the anticipated growth in the nation’s middle class is primed to uplift Alibaba’s long-term prospects. Alibaba Cloud, China’s leading cloud infrastructure service platform by revenue, paves the way for offering innovative AI solutions that bolster businesses.
The Undervalued Path: Historical Gems in AI Stocks for 2024
Enterprise spending on cloud services is just beginning to rev up, akin to a classic muscle car roaring to life after years of dormancy.
Value in the Shadows
Shares of Alibaba are currently valued at less than 8 times forward-year earnings, presenting a bargain when considering its significant cash reserves of $85.5 billion as of March 31.
Intel’s Redemption
Intel, the semiconductor stalwart, might have lagged behind Nvidia recently, but with the imminent release of its Gaudi 3 AI-accelerator chip, a new dawn beckons. The company’s diversified revenue streams, including legacy CPU operations, mark a solid foundation for future growth.
The stock’s current trade at a 25% premium to its historical book value adds allure. This discounted valuation harks back to the mid-1980s, painting a picture of Intel ripe for resurgence.
Baidu’s Brilliance
Baidu, China’s internet search leader, stands as a solid addition to any portfolio with its robust position in the market. The company’s foray into AI through Baidu’s AI Cloud and autonomous ride-hailing service spells a promising future.
With a forward P/E ratio of only 7, coupled with a substantial $26 billion in cash reserves, Baidu offers an enticing investment opportunity.
Amazon’s Odyssey
Despite Amazon’s dominance in e-commerce space, its true potential lies in AWS, the leading cloud service provider, and a crucial avenue for AI-driven growth. The company’s diversification into advertising and subscription services hints at a prosperous road ahead.
Despite a high P/E ratio, Amazon’s stock is a historical steal based on future cash flows. With shares currently trading at 13 times the consensus cash flow in 2025, a bet on Amazon promises substantial returns.
The Motley Fool Stock Advisor team has identified the 10 best stocks to buy now, excluding Meta Platforms. These selected stocks have the potential for impressive returns in the near future.
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The Magic of Nvidia and Stock Advisor
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