Finding undervalued AI stocks may seem like a search to find a unicorn as valuations in this space are very elevated. Many of the world’s best AI companies are fetching massive premiums, even relative to other high-growth tech sectors.
However, there are still AI-related stocks that have compelling valuations, or are simply overlooked by the market. As AI continues to prosper, it’s worth diving into which stocks are the best to buy and hold in 2024 and beyond
According to expert analysis and predictions, the artificial intelligence industry has yet to develop and acquire more growth. In fact, an increase of up to $2 trillion in 2030 is expected from this sector. In 2023, the industry was at $207.9 billion — and could double in 2024. Thus, investing in high quality AI stocks that are overlooked is a strategy many investors are after.
Let’s dive into three undervalued AI stocks that can provide excellent for growth investors over the next five to ten years.
Salesforce (CRM)
There are plenty of customer relationship management (CRM) companies in the market, but one rules them all: Salesforce (NYSE:CRM). As the most prominent CRM player globally, Salesforce has smoothly streamlined AI into its services, making business functionality more efficient. From sales management to customer support, Salesforce provides smoother workflows for business and teams.
In Q3 2024 ending October 31, 2023, the company posted an impressive $8.72 billion revenue. This is an immediate green flag if you’re looking to buy an AI stock. The company’s revenue grew an impressive 11% over the previous year, driving strong profitability. Analysts also expect the company to generate $9.56 earnings per share in 2024. At that level, Saleforce’s price-earnings ratio improves from a trailing 100-times to less than 30-times.
Additionally, Salesforce has a high-profile partnership with Amazon (NASDAQ:AMZN), deepening the company’s expansion in AI integrations. Its new data cloud products, Data Cloud and Einstein GPT Copilots, are also gaining popularity, delivering upsell opportunities.
Guardforce AI (GFAI)
Despite being perceived as risky, Guardforce AI (NASDAQ:GFAI) may actually be one of the most undervalued AI stocks to own. Why? Simply because the company is an integrated security provider that specializes in secured logistics. With its robotics-based security, Guardforce is truly distinct from other AI companies, and this positions the company well ahead of many of its competitors.
Analyst sentiment is improving around this AI name. In fact, Wall Street analysts anticipate the stock to increase to $14 in the near future. The company is also proud of its financial performance, driving revenue up to $18.4 million and swapping $13.4 million worth of debt into restricted shares.
Moreover, Guardforce collaborated with Concorde Security in Singapore. The deal aims to provide robotic security solutions that can manage visitors, do chores like disinfecting and janitorial tasks, and more. Such collaboration should have a positive effect on both companies, and makes GFAI stock an intriguing, yet speculative, pick in this sector to consider.
BigBear Holdings (BBAI)
Despite being new and smaller than other AI companies, BigBear Holdings (NYSE:BBAI) holds untapped potential many investors are missing out on. BigBear’s key value is its core business model which focuses on three important markets: cybersecurity and autonomous systems, along with logistics and supply chains.
The company also has a large customer base, composed of both government and commercial sectors. BigBear had an excellent Q1 2023 report and has shown positive net income, cash from operations and EBITDA. Revenue is expected to reach $170 million. In November 2023, the company also acquired Pangiam, which provided biometrics and facial recognition software. The partnership aims to enable visual AI services, which will give significant boost and gains for BBAI.
On the date of publication, Chris MacDonald 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.
