Why These 3 Stocks Are the Best Ways to Play AI Right Now
Goldman Sachs recently asserted “that AI adoption could boost productivity growth by 1.5 percentage points per year over a 10-year period.” The venerable firm’s estimate shows how tremendously valuable the technology can be to many companies. These three AI stocks are the best way to play the technology now because they are growing rapidly, their stock prices are a very long way from reflecting their true, tremendous potential, and other firms and/or analysts have largely validated their offerings.
Super Micro Computer (SMCI)
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Research firm Rosenblatt Securities last month issued a very bullish note on Super Micro Computer (NASDAQ:SMCI) stock, saying that the firm is well-positioned to benefit from the AI boom. Specifically, the firm, which initiated coverage of SMCI stock with a “buy rating” and a $300 target, thinks that SMCI will receive a boost from “cloud computing giants splurging on data center gear for” AI, Investor’s Business Daily reported.
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In fact, Rosenblatt contended that SMCI, which specializes in making and marketing servers, “is perfectly positioned to profit from” the proliferation of AI, according to the well-respected publication.
Also upbeat in June on SMCI was investment bank Loop Capital, which hiked its price target on the name to $325 from $200, citing the highly customized nature of its servers, which enables them to be optimized for various emerging technologies, including 5G, “edge comput8ng, and, of course, AI.
SMCI has soared 216% this year, showing the extent to which the Street has become enchanted with the name. But the shares have a reasonable trailing price-earnings ratio of 24.5 times.
Symbiotic (SYM)
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Symbiotic’s (NASDAQ:SYM) “AI-powered robots” and “AI-enabled data platforms” allow warehouse operators to cut costs, transport their products more quickly, and attain nearly flawless “accuracy,” Seeking Alpha columnist Arban Shahzeb reported.
Very impressively, Symbiotic’s backlog amounts to more than $12 billion, and analysts, on average, anticipate that the company’s top line will increase at an annual percentage rate of over 15% going forward. Moreover, two huge retailers —Walmart (NYSE:WMT) and Albertsons (NYSE:ACI) — have bought its products., validating its offerings. According to IP columnist Marc Guberti, Symbiotics reported a net loss of $6.1 million in Q1, way down from its nearly $30 million loss during the same period a year earlier, showing that the bottom line is headed rapidly in the right direction.
Symbiotic is also poised to benefit from higher spending by consumers on physical products, a phenomenon that I expect to begin occurring in earnest during the current quarter.
Schrodinger (SDGR)
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Schrodinger (NASDAQ:SDGR) uses a software platform based on physics and AI to greatly speed up the drug discovery process.
Seeking Alpha columnist Stephen Tobin states that” all of the top 20 Pharmaceutical companies” are utilizing SDGR’s platform. Moreover, its partnerships with drug makers “has led to two approved drugs [and] three compounds in phase 2 testing.” This data indicates that the platform is quite powerful and well-positioned to yield great results.
Also importantly, one of Schrodinger’s own drugs, currently undergoing a Phase 1 trial, has demonstrated the ability to strongly combat cancerous tumors.
SDGR stock has soared 162% this year, showing that the Street is beginning to recognize the company’s huge potential. However, I believe that the company’s market capitalization of $3.5 billion still greatly undervalues its outlook.
On the date of publication, Larry Ramer owned shares of SMCI and SDGR. 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 PLUG, XOM and solar stocks. You can reach him on Stocktwits at @larryramer.
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