Snowflake

Based

Radar

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<p>After reaping the benefits from the artificial intelligence (AI) hype, Nvidia (NASDAQ: $NVDA) stock is down 13% since the end of July. Yet, the demand for generative AI is so strong that the GPU maker is still up 184% year-to-date. This suggests that NVDA’s price is in the correcting stage of its overbought level.</p>
<p>In these market conditions, when flagship trendsetter is in a downturn, investors look into discount stocks serving the same market niche.&nbsp; Which AI stocks are currently flying under the market’s AI radar?</p>
<h3 id="servicenow-nyse-now">ServiceNow (NYSE: $NOW)</h3>
<p>Making chips for AI data centers is only the first step in the new AI era. On top of that foundation are companies that automate digital workflows. Based in Santa Clara, California, ServiceNow is the leading cloud computing provider and an <a href="https://nvidianews.nvidia.com/news/servicenow-and-nvidia-announce-partnership-to-build-generative-ai-across-enterprise-it" target="_blank" rel="noopener noreferrer nofollow">Nvidia partner</a>, generating the bulk of its revenue from recurring subscriptions.&nbsp;</p>
<p>Just as memberships create a predictable and stable revenue stream for <a href="https://tokenist.com/these-4-consumer-staple-stocks-can-help-protect-your-portfolio/" rel="noopener noreferrer nofollow">Costo (NASDAQ: $COST)</a>, this business model does the same for ServiceNow. Moreover, the digital workflow management market has high growth potential, expected to reach <a href="https://www.grandviewresearch.com/industry-analysis/workflow-management-systems-market" target="_blank" rel="noopener noreferrer nofollow">$86 billion</a> by 2030 from last year’s $9.5 billion.</p>
<p>For Q3 2023, ServiceNow reported $2.28 billion in revenue, a 25% increase from a year-ago quarter, beating the Street consensus of $2.274 billion. The company’s earnings per share (EPS) increased to $2.92, 49% up from $1.96 a year ago. ServiceNow’s subscription revenue increased 24.5% year-over-year to $2.216 in the latest Q3 earnings report.</p>
<p>Given the rising demand for cloud-based digital workflow management, the Nasdaq consensus pulled from 34 analysts places NOW stock in the “strong buy” category. The average NOW price target is $652.42 vs the current $559.87. The high estimate is $706, while the low estimate is above the present NOW price at $575.</p>
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<h3 id="ibm-nyse-ibm">IBM (NYSE: $IBM)</h3>
<p>What Microsoft is today is what IBM was in the 1970s as the dominant player in the mainframe computer market. As the company’s name implies, “International Business Machines” was the digitizing leader for governments and businesses. Nonetheless, IBM is still at the cutting edge of AI research and development, most notably as the key contributor to open-source AI projects PyTorch and TensorFlow.</p>
<p>Nearly all AI models today are based on the training these deep machine learning frameworks provide. For instance, the TensorFlow library has been used to train Transformer models that made ChatGPT possible. IBM is also a major contributor to the <a href="https://tokenist.com/new-blockchain-launched-for-institutions-backed-by-microsoft-goldman-sachs/" rel="noopener noreferrer nofollow">Canton blockchain network</a>.</p>
<p>Regarding AI commercialization, IBM has a broad range of products, from Watson AI as a general cognitive computing platform to Cloud Pak for Data for analyzing data to generate insights.</p>
<p>For Q3 2023, IBM reported a 4.6% year-over-year revenue increase to $14.8 billion. Most importantly, IBM’s operating earnings are up 22% to $8.2 billion, indicating significant cost-efficiency improvement from core business operations. Much of it comes from IBM’s hybrid cloud offering, having increased 15% YoY to $4.4 billion, while AI products generated 20% more YoY, at $2.5 billion.</p>
<p>However, as an iconic company with a solid track record, IBM is rarely heavily discounted. Based on 11 analyst inputs, Nasdaq consensus places IBM stock in the “buy” category. The average IBM price target is $149.75 vs current $143. The high estimate is $179 vs the low estimate of $130.</p>
<h3 id="databricks-and-snowflake-nyse-snow">Databricks and Snowflake (NYSE: $SNOW)</h3>
<p>Although not publicly listed, investors should watch cloud-based AI analytics company Databricks. The San Francisco-based company is valued at $43 billion, having built its reputation on selling machine learning software and data.&nbsp;</p>
<p>This Monday, Databricks acquired Arcion, a real-time database replication platform worth $100 million. This is the second largest acquisition after absorbing MosaicML, an AI training startup directly competing with OpenAI. This puts Databricks as the major player in the rapidly evolving AI market.</p>
<p>Databricks hinted at an initial public offering (IPO) in 2021, but it was postponed to accrue more favorable funds. In August 2021, the company’s valuation gained $38 billion after Morgan Stanley led the funding round.&nbsp;</p>
<p>Databricks IPO is rumored to unfold in late 2023 or early 2024 if <a href="https://tokenist.com/rising-treasury-yields-put-a-damper-on-the-impact-of-tech-earnings/" rel="noopener noreferrer nofollow">macroeconomic conditions</a> permit it.&nbsp;&nbsp;</p>
<p>In the meantime, there is a discounted alternative in the form of a rapidly growing Snowflake. Snowflake provides the dataset infrastructure for AI models to be trained on. In Q2 2023, Snowflake’s earnings beat analyst expectations on revenue and earnings.</p>
<p>Year-over-year, Snowflake revenue grew 36% to <a href="https://d18rn0p25nwr6d.cloudfront.net/CIK-0001640147/6de79890-1e5b-4450-86f8-19e922678bf0.pdf" target="_blank" rel="noopener noreferrer nofollow">$674 million</a>, holding a net revenue retention rate (NRR) at an impressive 171% as of July 31st. Based on 36 analyst inputs, Nasdaq places SNOW stock in the “strong buy” category. The average SNOW price target is $192.6 vs the current $144 per share. The high estimate is $215, with a low estimate of $160.</p>
<p><em>Editorial Update (30th October, 2023 3:03 PM): Corrected the total revenue growth figures for ServiceNow.</em></p>
<p><strong><em>Do you think AI-induced productivity gains can offset money erosion via inflation? Let us know in the comments below.</em></strong></p>
<p>The post <a rel="noopener noreferrer nofollow" href="https://tokenist.com/these-3-ai-stocks-offer-great-value-but-are-under-the-radar-for-now/">These 3 AI Stocks Offer Great Value But Are Under the Radar for Now</a> appeared first on <a rel="noopener noreferrer nofollow" href="https://tokenist.com">Tokenist</a>.</p>

These 3 AI Stocks Offer Great Value But Are Under the Radar for Now

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