It’s undeniable that artificial intelligence will forever change our society and economy but that doesn’t mean you must pay an exorbitant premium for high-potential AI stocks. For example, we all love and appreciate Nvidia (NASDAQ:NVDA) for empowering digital intelligence. However, NVDA trades at a forward earnings multiple of 61.61, well above the norm.
No, you appreciate wanting to acquire AI stocks ready to explode. You’ve done the research and recognize the underlying innovation’s upside potential. However, you also shouldn’t feel pressured to buy a security that’s already tripled in value for the year. Instead, you should seek the next NVDA before it became the juggernaut. That’s the motif behind undervalued AI stocks.
To be fair, these ideas might seem incredibly risky because there’s not much talk about them, at least compared to the heavyweights. However, with a little patience and some luck, these digital intelligence plays could soar. With that, below are AI stocks to watch.
While Qualcomm (NASDAQ:QCOM) might not be the most under-the-radar example of high-potential AI stocks, it actually offers a legitimate case. Sure, practically every technology investor knows Qualcomm for its relevance in connectivity solutions. However, the company also represents a major player in digital intelligence, particularly in machine learning applications. These include supremely pertinent sectors like Internet of Things (IoT), mobile communications and autonomous driving.
Now, what makes QCOM one of the strong propositions within undervalued AI stocks is its attractive multiples. For example, Qualcomm’s forward price-earnings ratio sits at 12.81x. As a discount to earnings, the tech firm ranks better than nearly 82% of its peers in the semiconductor industry. Also, QCOM trades at a price/earnings-to-growth ratio of 0.31x. In contrast, the sector median stat stands at a lofty 1.15x.
Right now, analysts peg QCOM as a consensus moderate buy. Their average price target lands at $137.56, implying over 9% upside potential. Combined with a dividend yield of 2.46%, Qualcomm makes a solid case for AI stocks to watch.
Interactive Brokers (IBKR)
Making a compelling case for under-the-radar high-potential AI stocks, Interactive Brokers (NASDAQ:IBKR) at first seems somewhat irrelevant. Featuring a professional market trading platform, Interactive belongs in the financial realm. However, the company has quietly rode the AI hype train thanks to IBot, an AI platform that understands and provides immediate results without the need for special syntax or financial jargon.
Per Interactive’s website, IBot provides access to a spectrum of information, trading tools, features and account data. Whether you want to sell an option, view a chart, find stocks that are on the move or conduct a mundane operation, IBot can get you up and running with the info you need. It’s almost like ChatGPT but specifically geared (and updated) for the investment world.
Notably, market participants see the value of the AI protocol. Since the January opener, IBKR gained nearly 22% of equity value. It’s one of the AI stocks ready to explode. In many ways, it already has. Still, analysts – who rate shares a strong buy – see significant upside ahead, forecasting a price of $104.71. This projection implies a return of almost 21%.
Often referred to as the Google of China, Baidu (NASDAQ:BIDU) earned that nickname because its search engine is the largest and most widely used in the world’s second-biggest economy. On that note, BIDU natively doesn’t rank among the under-the-radar high-potential AI stocks. However, contextually it qualifies because Chinese securities lately failed to capture American investors’ interest.
Don’t get me wrong – it’s still a viable idea. However, in the trailing year, shares gained just over 5%. That’s hardly exciting when Nvidia shares returned a blistering 155% during the same frame. However, BIDU doesn’t quite get the love that it deserves in large part because of China’s steady but slow economic recovery. Naturally, investors have questions they want answered before plunking down serious cash.
Still, the hesitation toward Baidu makes it one of the hidden gem AI stocks to consider. For instance, the market prices BIDU at a forward multiple of 15.97. As a discount to projected earnings, Baidu ranks better than 65.75% of companies listed in the interactive media industry. Finally, among 12 analysts, BIDU carries a unanimous strong buy rating. Their average price target stands at $191.73, implying almost 30% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.