Undoubtedly, 2023 was the year of AI on Wall Street. We saw many AI-related companies absolutely skyrocket last year, with semiconductor firms leading the charge. Their meteoric rise and continued lofty valuations demonstrate investors’ confidence that AI represents the future. However, the mainstream AI players could have already made the easy money. With nosebleed valuations, the previous high flyers may not have much fuel left in the tank to continue providing outsized returns in 2024.
So, more specialized AI niches might provide further lucrative opportunities. Areas like robotics and narrow AI applications have yet to grab the spotlight like chips and machine learning did last year. And, they could be primed to deliver strong gains to savvy investors over the next 12 months. The big names have already run, so now it’s time to dig deeper and find the next wave of AI winners.
UiPath (PATH)
Under-the-radar robotics software company UiPath (NYSE:PATH) offers potential for upside moving forward. This firm builds automation software to help deploy robots that can take over repetitive and dangerous jobs. As labor shortages persist in blue-collar industries, UiPath enables companies to automate tasks.
Indeed, white-collar office jobs are increasingly getting displaced by AI algorithms. However, the massive headroom for growth lies with industrial robots that can substitute for manual roles. UiPath provides the software to make that automation possible across warehouses, factories, and other settings. Although the stock trades at a premium, ample runway exists for this first-mover. UiPath can capitalize on the underappreciated, long-term megatrend of automating blue-collar work.
Despite the healthy growth estimates, UiPath’s forward P/E ratio drops to only 30x based on 2028 projections. It offers a cutting-edge way to play AI’s infiltration into the physical economy. The company surpassed earnings estimates by over 120% last year. So, analyst projections could still prove conservative. With the stock recently changing hands near $25, this may be a chance to get in on the ground floor of the industrial robotics revolution.
Cerence (CRNC)
Cerence (NASDAQ:CRNC) focuses on conversational AI and natural language understanding. Its technology powers intelligent assistants and bots across devices and platforms. Despite the vast long-term potential, Cerence trades at a mere 14x forward earnings with margins that leave room for profit growth.
Unlike many AI/ML peers, Cerence operates squarely in the black already. With revenue projected to climb from $360 million to nearly $600 million by 2027, this stalwart looks attractively priced under $20. The company should see tailwinds as demand for conversational AI keeps increasing alongside advances in machine learning. However, Wall Street fails to appreciate Cerence’s solid underlying fundamentals.
As major tech players race to enhance their AI offerings, they will likely turn to specialty providers like Cerence for targeted solutions. With the stock essentially moving sideways over the past year, the stage may be set for a recovery towards $30 on the back of 25-30% annual EPS growth. This overlooked name offers an appealing option for investors seeking AI exposure without nosebleed valuations.
Lantheus (LNTH)
Lantheus (NASDAQ:LNTH) provides AI tools to help clinicians improve patient outcomes.
Its products include imaging agents to detect cancer as well as an AI platform to evaluate scan results. LNTH has partnerships across the pharmaceutical and biotech sectors. And so, it delivers precisely the kind of specialized AI capability that drives the future of precision medicine.
Trading at just 11x forward earnings, this innovator is valued more like a value stock than a high-growth AI disruptor. But with projections for EPS to increase from $5.8 in 2023 to over $21 in 2030, upside potential gets overlooked. Lantheus’s offerings should unlock substantial efficiency and quality gains as AI integration accelerates across healthcare. With shares recently stumbling, the risk-reward looks extremely compelling at current levels.
Rather than chasing the crowded AI chip space, perhaps domain-specific plays like Lantheus could be a smarter idea. This company provides imaging agents and an AI platform focused squarely on improving clinicians’ tools, not sci-fi hype.
On the date of publication, Omor Ibne Ehsan did not hold (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.
