Artificial intelligence (AI) has been around for decades. From industrial automation and unbeatable chess engines to self-driving cars and automatic vacuum cleaners, AI-enabled technologies are becoming a normal part of our daily lives.
But AI adoption and general awareness accelerated dramatically in November 2022, when OpenAI released the ChatGPT AI platform. This state-of-the-art large language model (LLM) could do things previously considered uniquely human. ChatGPT and its rivals can write fairly decent text, generate almost photorealistic images and videos, and even create new music from a primordial soup of previous examples. Large groups of human creations have become fodder for computer-controlled, semi-creative productions.
A handful of companies are driving this generative AI boom, led by an AI accelerator designer Nvidia (NASDAQ: NVDA). That stock is up more than 1,000% in two years, driven by a 237% increase in revenue and a ninefold boost to Nvidia’s free cash flows. The LLMs you see today wouldn’t be possible without Nvidia’s powerful AI accelerator chips, and the company is often seen as the best AI stock on the market today.
But even excellent business performers can become overvalued. Nvidia stock is trading at extremely high valuation ratios today, and many die-hard bulls are ignoring the rise of alternative AI hardware solutions.
So I have a few Nvidia shares in my portfolio, but I’m not eager to buy more today. There are safer AI investments available, and I’m here to show you some great AI stocks that aren’t named Nvidia.
|
Stock |
Two year returns |
Price-to-sales ratio (P/S) |
Price-free cash flow ratio (P/FCF) |
|---|---|---|---|
|
Nvidia |
1,050% |
58.4 |
72.4 |
|
IBM |
92% |
3.4 |
16.9 |
|
UiPath |
5% |
5.1 |
21.6 |
Data collected from Finviz.com and YCharts on 10/18/2024.
IBM’s strategic focus on enterprise-class AI
Yes, you heard me: International business machines (NYSE: IBM) is one of the best AI stocks you can buy right now.
Big Blue has been an AI innovator since the 1970s, introducing groundbreaking technologies such as the first speech recognition system and the first programming language for self-learning manufacturing robots. And IBM’s interest in AI has never gone away. The company is still a leading AI researcher today, even if you don’t often see its name in headlines about generative AI.
You see, IBM is letting other companies mess around with consumer-friendly chatbots and image generation systems. Meanwhile, the company is targeting its AI products at corporate customers with deep pockets. IBM Watsonx’s generative AI platform delivers business-focused features such as deep integration with other business information systems, audit-ready paths from input data to generated content, and robust digital security.
That’s why IBM took some extra time to get these AI tools ready for release, focusing on quality results rather than coming to market with a half-baked solution. Now it’s time to reap the benefits of that strategic slowdown.
Watsonx has been around for a year and a half now and has already generated over $2 billion in generative AI orders. Next week’s third-quarter report will show how quickly enterprise customers are embracing IBM’s AI solutions in a healthier economy. And as you can see from the table, the stock looks downright cheap next to high-flying Nvidia stock.
UiPath’s AI-powered automation solutions
Process automation expert UiPath (NYSE: PAD) is another cheap bet on a solid AI company. The company’s Robotic Process Automation (RPA) may sound like an industrial hardware controller, but it is actually software that helps companies automate repetitive tasks.
Automated software has many advantages over their human counterparts in this area. Computers don’t get boring or tired. Their actions shouldn’t result in “human error,” and UiPath’s advanced software robots don’t suffer from machine learning equivalents like sloppy programming. With the recent addition of LLM features, UiPath’s robots can even perform advanced but repetitive tasks such as filling out forms and interpreting the meaning of text entered by end users.
“RPA is not AI; AI is not RPA,” UiPath said. But the combination of robust RPA systems and powerful AI backends brings out the best of both worlds in a single task automation process. UiPath’s tools are already game changers for customers with many information management activities. They will only become more powerful over time.
UiPath’s shares have barely changed in two years and lag far behind other AI specialists S&P500 (SNPINDEX: ^GSPC) market index. At the same time, revenue rose 32% over the past two years, while free cash flows rose from a $134 million loss to $327 million in cash profits.
Stock prices are plummeting while financial results are skyrocketing, and UiPath’s AI-plus-RPA solutions are only getting more powerful. That’s why this gamechanger seems like a no-brainer purchase today.
Don’t miss this second chance at a potentially lucrative opportunity
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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Amazon: If you had invested $1,000 when we doubled in 2010, then you have $21,285!*
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Apple: If you had invested $1,000 when we doubled in 2008, you would have $44,456!*
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Netflix: If you had invested $1,000 when we doubled in 2004, you would have $411,959!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns October 14, 2024
Anders Bylund holds positions at International Business Machines and Nvidia. The Motley Fool holds and recommends positions in Nvidia and UiPath. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.
2 Breakthrough Artificial Intelligence (AI) Stocks to Buy Right Now (Hint: Not Nvidia) was originally published by The Motley Fool
