There are many ways to participate in the artificial intelligence (AI) frenzy. Many investors turn to AI hardware designer NVIDIAwhich makes the former video game accelerator one of the most valuable companies in the world.
Nvidia is a great company, but the stock may have skyrocketed too much, too fast. There are more reasonable AI ideas today. let me tell you why IBM (NYSE: IBM), Micron technology (NASDAQ:MU)and Fiverr International (NYSE: FVRR) Stronger investments in AI in fall 2024 look to me.
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This trio may not be the most obvious AI investment on the market. But they have deep connections to the growing generative AI market, just from slightly unusual angles:
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IBM is allowing other companies to focus on consumer-friendly AI tools and services, while instead doubling down on enterprise-class variants. Features like auditable data streams and integration with business intelligence tools don’t make headlines, but they do inspire long-term service contracts with deep-pocketed corporations. As a result, Big Blue’s generative AI platform already has $3 billion in service contracts, less than two years after its launch.
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Micron does not make AI accelerators. Instead, it designs and manufactures high-speed memory chips. Massive systems that train and then operate generative AI platforms require enormous amounts of memory, as do next-generation smartphones launching with their own AI features. Micron chips are in high demand thanks to these AI-based connections.
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Fiverr isn’t working on the infrastructure side of the AI boom, but it is leveraging generative AI in two different ways. The company’s platform for connecting freelancers with buyers of independent services makes extensive use of various artificial intelligence technologies. The company also sells standalone AI-related services to a wide range of clients: those AI systems don’t build or operate on their own, and a human touch is needed to extract business value from generative AI tools. AI-related services have become a key growth driver for Fiverr.
|
AI Stocks |
2-year total return |
Price to free cash flow |
Forward Price to Earnings |
|---|---|---|---|
|
NVIDIA |
848% |
76.5 |
33.9 |
|
IBM |
58% |
15.8 |
20.0 |
|
Micron |
70% |
901.4 |
7.7 |
|
Fiverr |
(18%) |
13.9 |
11.6 |
Data collected from YCharts and Finviz on November 21, 2024.
Nvidia has been crushing the rest of the stock market since key customer OpenAI introduced ChatGPT almost exactly two years ago. That’s great for long-time Nvidia owners, but the runaway gains left the stock at uncomfortably high valuation ratios. No matter how you look at it, Nvidia stock is priced to perfection. The graph may still be pointing up from here, but there is a real risk of painful price corrections if Nvidia doesn’t maintain its early lead in AI accelerators.
