The market is not giving these AI stocks enough love.
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The market is overlooking many stocks that could benefit from the proliferation of AI over the longer term. There are companies using AI to solve real-world problems, and others providing the raw materials that enable the AI boom to progress. We’re even seeing the undervaluing of companies whose chips enable AI to be produced and work its magic, or that build and run the data centers that host the processors that AI utilizes. With that said, here are three undervalued AI stocks for long-term investors to consider buying now.
iCAD (ICAD)
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iCAD’s (NASDAQ:ICAD) AI-based screening detects breast cancer cases sooner than conventional mammograms. Moreover, iCAD’s products save radiologists and breast cancer screening centers time.
The firm’s performance improved greatly last quarter. I believe that the rebound reflects the boosts that the company is getting from its partnerships with GE Healthcare (NASDAQ:GEHC) and Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google. This performance boost can also be attributed to increased AI awareness, and its highly effective new CEO, Dana Brown.
Last quarter, the company’s EBITDA loss sharply narrowed to $400,oo from $3.6 million in the first quarter of 2023. Meanwhile, in the first three quarters of 2023, iCAD averaged 73 orders per quarter. Last quarter, it generated 89 orders, indicating that its business is accelerating. With only 37% of U.S. breast cancer screening facilities using AI-base solutions, iCAD has a great deal of room to grow.
Moreover, the firm has developed a product that successfully predicts the potential for heart attacks base on the amount of calcium in breast arteries. The product is currently up for FDA consideration.
Iron Mountain (IRM)
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Iron Mountain (NYSE:IRM) owns and operates about 24 data centers in the U.S. and India.
Given the centrality of data centers to the AI boom, it’s unsurprising that IRM reported very strong Q4 results. Specifically, the firm’s top line climbed 11% last quarter versus the same period a year earlier to $1.4 billion, while its EBITDA rose 11% year-over-year to $525 million. Both its revenue and its adjusted EBITDA set all-time records last quarter.
Investment bank Oppenheimer in December identified IRM stock as a good name to buy in the real estate sector.
The shares have a significant dividend yield of 3.25%.
Broadcom (AVGO)
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Bank of America recently named chip and networking giant Broadcom (NASDAQ:AVGO) as one of the “obvious beneficiaries” of AI investments.
TD Cowen notes that AI is expected to generate roughly 35% of Broadcom’s sales this year. It’s custom silicon and Ethernet switching businesses will also get lifts from the boom. Moreover, TD Cowen theorized that Broadcom’s recent big customer for its AI ASIC chips is Meta (NASDAQ:META).
Japanese bank Mizuho reacted to Broadcom’s Q4 results by raising its price target on the shares to $1,625. Analysts, on average, expect the firm’s earnings per share to climb to $46.78 this year and $46.63 next year from $42.25 in 2023.
Given this strong, expected growth, the firm’s forward price-earnings ratio of 26.8 is quite attractive, and AVGO is one of the best AI stocks to buy.
On the date of publication, Larry Ramer held a long position in ICAD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
