These undervalued AI stocks offer a good margin of safety for long-term investors
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Artificial intelligence stocks have captured headlines and captivated investors for several years. However, the excitement reached the mainstream in 2023 as many firms delivered exceptional earnings. The trend has continued in 2024, with artificial intelligence stocks leading the way yet again. However, some AI stocks have missed the rally, while others look undervalued despite strong surges at the start of the year. These are some of the undervalued AI stocks to consider.
Supermicro (NASDAQ:SMCI) shares have soared as more investors recognize the stock’s optimal position in the artificial intelligence boom. The company’s AI servers and storage solutions are experiencing record demand, which prompted the firm to set ambitious guidance.
Supermicro exceeded expectations in the second quarter of fiscal 2024 by delivering $3.66 billion in net sales. The company’s revenue was higher than the projected $3.6 billion to $3.65 billion in a business update leading to the earnings results.
The $3.66 billion figure represents 103% year-over-year revenue growth. Net income growth came in at 68.2% year-over-year. Supermicro does a good job at managing its debt and has more than twice as many current assets as current liabilities.
Leadership feels confident that growth will continue. The company previously anticipated generating $10 billion to $11 billion in fiscal 2024. Supermicro raised its fiscal 2024 revenue guidance to $14.3 billion to $14.7 billion. The midpoints of these forecasts represent a 38.1% jump.
Axcelis Technologies (ACLS)
Axcelis Technologies (NASDAQ:ACLS) is an under-the-radar semiconductor stock that produces equipment that assists ion implantation. Although Axcelis Technologies does not produce semiconductor chips, the company’s equipment plays a crucial role in chip development.
The company is positioned to benefit from higher demand for artificial intelligence chips and electric vehicle chips. Many industries rely on semiconductor chips, and Axcelis Technologies gets to ride the tailwinds.
Axcelis Technologies offers better value than most of the available semiconductor stocks. A 33% drop over the past six months has resulted in a 19 P/E ratio. A wider horizon will reveal that the $4.4 billion firm has increased by 523% over the past five years.
There isn’t much to justify the stock’s descent from $201/share since revenue and earnings growth have been exceptional. Axcelis Technologies posted $292.3 million in Q3 2023 revenue and $65.9 million in net income. These figures represent 27.6% and 63.7% year-over-year growth rates, respectively.
Axcelis Technologies has a 22.5% net profit margin and still reports solid financial growth. This setup can result in a meaningful rally for long-term investors.
Nvidia (NASDAQ:NVDA) has been a top-performing stock for several years. The stock has almost tripled over the past year and is up by 1,600% over the past five years. Analysts have been rushing to raise price targets, with the average price target sitting at $675.40.
This average price target indicates a 10% upside, but the highest price target of $1,100 implies shares can soar by almost 80%. Investors have been loading up on shares as the company releases earnings reports that few investors have seen.
Not every day a company reports 206% year-over-year revenue growth and 1,259% year-over-year net income growth. Nvidia reported those numbers in Q3 FY24. The firm has a net profit margin above 50%, which gives it the resources to invest more capital and reward shareholders with buybacks.
As long as the artificial intelligence tailwinds remain strong, Nvidia will continue to soar. Recent earnings reports from other stocks riding the AI tailwind suggest Nvidia will continue to perform well for long-term investors.
On this date of publication, Marc Guberti held long positions in SMCI, ACLS, and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.