Editor 
Artificial intelligence (AI) has been the talk of the town for several years now, and it’s no wonder why. As AI technology continues to evolve rapidly, it’s increasingly shaping industries, enhancing services, and creating new market opportunities. With AI stocks often being perceived as highly volatile, it’s crucial for investors to identify those with solid long-term potential. Let’s dive into five historically undervalued AI stocks that you can confidently consider for your portfolio in the second half of 2024—Nvidia isn’t one of them!
Meta Platforms (META)
Meta Platforms, formerly known as Facebook, continues to dominate in the social media space, with its revenue primarily driven by advertising. An impressive 98% of Meta’s income streams from ads on its platforms like Facebook, Instagram, and WhatsApp. This robust cash flow offers stability amidst the AI frenzy.
The share price of Meta Platforms is valued at less than 14 times the estimated cash flow for 2025. This valuation sits at a 6% discount to its average forward-year cash flow multiple over the last five years, presenting a substantial buying opportunity.
Alibaba (BABA)
Alibaba Group remains the titan of e-commerce in China. Its online shopping platforms, Taobao and Tmall, command a massive 50.8% share of China’s e-commerce market. What makes Alibaba compelling is not just its e-commerce dominance but also its strides in cloud computing.
Alibaba Cloud has emerged as a significant player, offering generative AI solutions. The stock is priced at less than 8 times forward-year earnings, making it a bargain in the AI segment.
Intel (INTC)
Intel Corporation has been synonymous with computing power for decades. With the upcoming rollout of its Gaudi 3 AI-accelerator chip, Intel aims to capture a larger piece of the AI market.
In addition to its innovative chip designs, Intel’s legacy CPU operations and its foundry services segment continue to be cash-generating machines. Historically, Intel’s stock is trading at 25% above its book value, a premium it hasn’t seen since the mid-1980s.
Baidu (BIDU)
As China’s leading internet search engine, Baidu holds a unique position in the digital landscape. With its established internet search dominance, Baidu leverages its AI capabilities to enhance its service offerings.
Baidu’s consistent market share in internet search combined with its AI-driven advancements makes it a key player worth watching. Despite its technological prowess, Baidu’s shares remain undervalued compared to its historical performance metrics.
Palantir Technologies (PLTR)
Palantir Technologies specializes in big data analytics and AI, catering to government and commercial sectors alike. Its platforms, reminiscent of an AI-powered crystal ball, drive strong revenue growth thanks to their high customer retention rates.
The sticky nature of Palantir’s business model makes it particularly attractive. The company’s shares are a promising pick for investors keen to explore beyond the usual suspects like Nvidia.
Conclusion
While Nvidia often captures the limelight in AI discussions, these five stocks offer a blend of foundational strength, growth potential, and exceptional affordability. As the AI industry burgeons, investors have compelling reasons to explore these picks. Each company’s unique position in its respective industry provides a solid bedrock should the AI bubble ever show signs of bursting. As you strategically position your portfolio for 2024, keep an eye on these promising, undervalued AI stocks.
