The Hot List: 3 AI Stocks Worth Buying on Weakness
Wall Street has correctly recognized that artificial intelligence (AI) is a game-changer. It enables individuals to use computers more easily than ever before to find the best answers to complex questions.
Additionally, AI allows companies to become more productive and profitable by reducing their labor costs. This is because AI can perform some tasks once carried out by humans. However, Wall Street has mostly focused on buying into firms that sell the tools needed to produce or utilize AI.
Further, the Street has ignored the companies that use the technology to improve businesses in fields like healthcare and finance. So, the shares of many firms will eventually climb significantly because they’ve spent years building highly potent AI tools.
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As a result, their products will yield superb results for their customers, causing the demand for their offerings to surge. So, let’s delve into three such AI stocks.
Schrodinger (SDGR)
Source: Olga Kononok/Shutterstock
Schrodinger (NASDAQ:SDGR) uses physics and AI technology to speed up the drug discovery process. The stock was down 15% in early trading on Feb 29 after reporting fourth quarter results.
The company reported strong, as its top line soared 30% versus the same period a year earlier to $74 million. And, the firm is partnering with many huge biotech firms. These include Eli Lilly (NYSE:LLY), Bristol-Myers Squibb (NYSE:BMY), Sanofi (NASDAQ:SNY), and Japan’s Takeda (NYSE:TAK).
However, the shares are tumbling because the Street focuses on its guidance of 6% to 13% increase in software revenue.
The guidance was negatively impacted by changes in the structure of some of Schrodinger’s deals. Examples include whether SDGR or its customers will be hosting the project work and whether the agreements are structured as single-year or multi-year deals. Additionally, some of Schrodinger’s smaller customers are being hurt by macroeconomic issues. The company’s success in Q4 has created difficult comparisons for it.
But 98% of the firm’s customers with active contracts of at least $500,000 remained with the company last year. Also, the number of its customers with active contracts worth $1 million or more jumped 50% to 27 from 18. These metrics, along with its impressive list of huge customers, validates the strength of the firm’s technology. Therefore, it’s outlook is bright.
iCAD (ICAD)
Source: Shutterstock
iCAD’s (NASDAQ:ICAD) ProFound Detection system utilizes AI to accurately detect more breast cancer cases than mammograms. Additionally, its system reduces the amount of work that radiologists must carry out to make breast cancer diagnoses.
ICAD rallied 12% on Feb. 28 after it reported impressive clinical data regarding its breast cancer detection system. Yet, the shares remain down 35% over the last year and over 90% from its all-time high in March 2021.
The data unveiled by iCAD showed that the system, ProFound AI, detected 264 cancer cases missed by mammograms of 151,245 women. Notably, it reduced the amount of work that radiologists have to perform on some mammograms by 25%-36%.
Moreover, ProFound AI showed that it could detect women at high risk of atherosclerosis disease. This disease is a buildup of fats, cholesterol and other substances that surround the artery walls. Women with a high score on iCAD’s system had a 31% chance of having the disease versus 11% of those without an elevated score.
C3.ai (AI)
Source: shutterstock.com/Below the Sky
C3.ai’s (NYSE:AI) products “make it easier for companies to build artificial intelligence applications.” However, the company has developed specialized tools for individual sectors.
AI stock was climbing 16% in early trading on Feb. 29. The company raised its 2024 revenue guidance to $306 million to $431 million from previous $295 million to $320 million. The firm made 50 new deals last quarter. Among the heavyweights that agreed to buy its offerings were Boston Scientific (NYSE:BSX), Abbvie (NYSE:ABBV), and T-Mobile US (NYSE:TMUS). Additionally, its revenue from the U.S. federal government soared 100% last quarter.
Despite the rally, AI stock has still declined about 20% from its August 2023 peak of $44.37.
On the date of publication, Larry Ramer held long positions in SDGR and ICAD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.
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