Enterprise spending on cloud services is just beginning to gain momentum, setting the stage for significant growth in the future.
An Undervalued Gem: Alibaba
Amidst the market volatility, Alibaba’s stock is valued at less than 8 times its forward-year earnings, a remarkable steal considering its massive cash reserves of $85.5 billion as of March 31.
Intel: A Phoenix Rising?
After playing catch-up to Nvidia in recent years, Intel is poised for a resurgence. The upcoming release of its Gaudi 3 AI-accelerator chip is expected to be a game-changer, especially given Nvidia’s struggles to meet the demand from its customers. Additionally, Intel’s traditional CPU segment continues to be a cash cow, fueling its growth in high-potential areas such as foundry services.
Trading at a modest premium above its book value, Intel presents a compelling investment opportunity, especially considering its historical valuation dating back to the 1980s.
Baidu: Chinese Technological Prowess
Baidu, China’s premier internet search engine, stands out as a reliable investment choice even in the midst of an AI market correction. With a dominant market share and robust AI initiatives, such as its AI Cloud and autonomous ride-hailing service, Baidu is well-positioned for sustained growth. Despite its substantial cash reserves, Baidu’s forward P/E ratio of 7 is exceptionally low, making it an attractive prospect.
Amazon: E-Commerce Giant
As the leader in U.S. online retail, Amazon’s core e-commerce business continues to thrive. However, the real growth lies in its ancillary operations, particularly Amazon Web Services (AWS). Surpassing $100 billion in annual run-rate revenue, AWS’s utilization of AI solutions is poised to drive further innovation and market expansion.
Furthermore, Amazon’s advertising and subscription services are experiencing robust growth, indicating a promising future for the company. Although Amazon may not appear cheap based on traditional metrics, its historical affordability relative to future cash flow presents an enticing investment opportunity.
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*Stock Advisor returns as of July 2, 2024