There are many ways to tap into the frenzy of artificial intelligence (AI). Many investors are looking at AI hardware designers Nvidiamaking the former video game accelerator one of the most valuable companies in the world.
Nvidia is a great company, but its shares may have risen too fast and too high. There are more reasonable AI ideas out there right now. Let me tell you why IBM (NYSE: IBM), Micron technology (NASDAQ:MU)And Fiverr International (NYSE: FVRR) seems to me like stronger AI investments in the fall of 2024.
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This trio may not be the most obvious AI investment on the market. But they have deep ties to the growing generative AI market, just from slightly unusual angles:
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IBM is letting other companies focus on consumer-friendly AI tools and services, while instead emphasizing enterprise-class variants. Features like auditable data flows and integration with business intelligence tools may not make headlines, but they do inspire long-term service contracts with deep-pocketed companies. As a result, Big Blue’s generative AI platform already has $3 billion in service contracts less than two years after launch.
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Micron doesn’t make AI accelerators. Instead, it designs and produces fast memory chips. The massive systems that train and then control generative AI platforms require enormous amounts of memory, and that includes the next generation of smartphones launching with their own AI features. Thanks to these AI-based connections, Micron’s chips are in high demand.
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Fiverr doesn’t work on the infrastructure side of the AI tree, but uses generative AI in two different ways. The company’s platform for matching freelancers with freelance service providers makes extensive use of various AI technologies. The company also sells AI-related freelance services to a wide range of clients. These AI systems cannot be built or managed on their own, and a human touch is needed to squeeze business value from generative AI tools. AI-related services have become a major growth driver for Fiverr.
|
AI stock |
Total return over 2 years |
Price to free cash flow |
Forward price to profit |
|---|---|---|---|
|
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 crushed the rest of the stock market since key customer OpenAI introduced ChatGPT almost exactly two years ago. That’s great for longtime Nvidia owners, but the galloping profits left the stock stuck at an uncomfortably high valuation. Any way you look at it, Nvidia stock is priced for perfection. The chart may still point upward from here, but there is a real risk of painful price corrections if Nvidia doesn’t maintain its early lead in AI accelerators.
