Remember 1996: A Lesson for Today’s AI Craze

If you were around in 1996, you might recall the early days of the internet. I remember the excitement of connecting to the internet through services like AOL and CompuServe, discussing stocks on bulletin boards, and watching the tech world evolve. Back then, no one could have predicted how deeply the internet would integrate into every part of our lives. Fast forward to today, and we’re witnessing a similar evolution with AI. Just like the internet revolutionized commerce, communication, and finance, AI is poised to do the same—but on an even larger scale. Figuring out how to invest in AI now feels a lot like investing in the internet back in the ’90s.

The Explosion of AI Companies

Today, there are nearly 17,000 AI companies in the U.S. alone, with thousands more around the globe. With so many companies flooding the market, how do you identify the best AI stocks to invest in?

History tells us that only a few companies will stand the test of time, just as Amazon and eBay survived the dot-com crash while countless others failed.

How to Find Undervalued AI Stocks and Avoid Hype

The key to successful AI investing lies in knowing which companies have substance and which are simply riding the AI wave. A crucial trick is to focus on AI dividend-paying stocks.

Why?

Companies that consistently pay dividends are often more stable, financially sound, and poised for long-term growth. This strategy not only helps you avoid risky, overhyped stocks but also positions you to benefit from the upside of AI while enjoying steady returns. Finding the best AI stocks starts with looking at companies that reward their shareholders through consistent and rising dividends.

Dividends: Your Best Defense in an AI Frenzy

Investors often get caught up in the allure of small-cap stocks that promise to be the next big thing. But the truth is, many of these companies are more likely to fizzle out like Pets.com than to become the next Microsoft or IBM. How to find undervalued AI stocks that offer real value requires looking beyond the hype and focusing on companies that have proven they can generate profits and reward shareholders. In fact, dividend-paying AI companies offer a double benefit: stability and potential for significant growth as AI technology continues to advance.

Proven AI Giants to Watch

While many investors chase small, speculative stocks, the best opportunities in AI might be with established tech giants. Companies like Microsoft (NASDAQ: MSFT) and IBM (NYSE: IBM) are already leading the charge in AI innovation and have a proven track record of rewarding investors with consistent dividends. For those seeking a balance of safety and upside potential, large-cap AI stocks like these are an excellent starting point. But that doesn’t mean you should ignore smaller players altogether—you just need to do your due diligence.

How to Avoid AI Stock Land Mines

When considering any AI company, especially smaller ones, it’s essential to remain cautious. Many will make bold claims about their potential but lack the substance to back them up. Here are a few tips on how to avoid AI stock land mines: Look for Dividend History—companies that have consistently paid and increased dividends are usually in a better financial position. Analyze Financials—pay close attention to a company’s revenue, earnings, and cash flow. If these are lacking, it’s a red flag. Check Leadership and Innovation—strong leadership and a commitment to innovation are key indicators of a company’s long-term viability in the AI space. By following these principles, you can increase your chances of finding AI stocks with real potential and avoid getting burned by hype.

Conclusion: Invest Wisely and Avoid AI Land Mines

Investing in AI can be incredibly rewarding, but it’s essential to approach it with caution. By focusing on dividend-paying AI stocks, doing thorough research, and avoiding overhyped companies, you can position yourself for long-term success in this exciting sector. So, as you explore AI investment opportunities, remember the lessons from 1996—avoid the land mines and focus on companies with real potential to grow and thrive.

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The Revival of Three Mile Island

Three Mile Island (TMI), located in Pennsylvania, is a landmark in the history of nuclear energy, though not for the best reasons. It was the site of the most severe nuclear accident in U.S. history in 1979, which led to the closure of one of its reactors, TMI-Unit 2. However, TMI-Unit 1 operated successfully until 2019 when economic factors led to its closure. Now, thanks to a partnership between Constellation Energy and Microsoft, TMI-Unit 1 is expected to come back online by 2028, producing over 800 megawatts of carbon-free energy.

This is no ordinary energy deal. Constellation Energy’s partnership with Microsoft marks its largest-ever agreement, with Microsoft committing to purchase all the energy generated by the plant. This is part of Microsoft’s broader strategy to meet the energy needs of its data centers, which are increasingly being utilized to power AI applications.

The AI-Energy Nexus

Artificial intelligence, particularly in the form of large-scale models, requires vast amounts of computational power. This means more data centers, more servers, and consequently, a significantly larger energy footprint. Microsoft’s latest AI-driven initiatives, such as its cloud services, generative AI models, and advanced computing systems, have placed immense pressure on the company to secure reliable, always-on energy sources.

Nuclear energy, long criticized for its risks and waste issues, is now being revisited by tech companies as a potential solution. Unlike wind and solar, which can be intermittent, nuclear plants provide a steady, constant supply of energy 24/7, making them ideal for energy-intensive AI operations. According to experts, AI data centers may need to operate at full capacity continuously to keep up with processing demands, and few energy sources outside of nuclear can meet that requirement reliably.

What This Means for Investors

For investors, the Constellation-Microsoft deal offers valuable insights into the future of AI and energy investments:

1. Nuclear Energy is Back on the Table: As governments worldwide push for cleaner energy solutions, the nuclear industry is seeing renewed interest. The Biden administration’s climate bill, which offers billions in tax credits for clean energy projects, has made deals like this one financially viable. Constellation Energy’s stock saw a 16% surge following the announcement, signaling investor optimism about nuclear’s future in the energy mix.
2. AI is Driving Demand for Sustainable Energy: As AI technologies expand, they are reshaping industries, economies, and now, energy markets. Data centers, which power AI systems, consume an enormous amount of electricity, and companies like Microsoft are proactively seeking carbon-free solutions. Investors should keep an eye on AI-focused companies that are forming partnerships to ensure sustainable growth.
3. Opportunities in Infrastructure and Clean Energy: The revival of TMI-Unit 1 is part of a larger trend where older energy infrastructure is being repurposed to meet modern demands. With AI, electric vehicles, and renewable energy all converging to require more electricity, investors in energy infrastructure and utilities are likely to benefit from long-term growth.
4. Microsoft’s Role as a Clean Energy Leader: Beyond AI, Microsoft’s commitment to decarbonizing its operations is driving a larger shift in corporate energy use. The company’s investments in nuclear, along with other energy initiatives like small modular reactors, signal a trend where tech companies are becoming major players in the clean energy transition.

Conclusion: The Future is AI-Powered and Carbon-Free

As Microsoft prepares to reopen Three Mile Island’s reactor to fuel its AI-powered future, the implications for the energy market and investors are profound. Nuclear energy, once considered a relic of the past, is making a comeback thanks to its ability to provide reliable, carbon-free power, which is essential for the growing demands of AI technology. For investors, this signals new opportunities in both the energy and tech sectors, where AI is not just shaping the future of industries but also the very infrastructure that supports them.

Investing in companies that bridge the gap between AI and clean energy could be the key to capitalizing on this rapidly evolving market. As AI continues to expand, so too will the need for sustainable, always-on energy sources like nuclear. In this new AI-powered world, energy is not just about meeting today’s needs—it’s about building the infrastructure for tomorrow’s innovations.

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SYM’s Most Recent Quarter

Symbotic produces robotic arms and robots that can be programmed to fit specific needs, mainly in warehouses. By offering end-to-end systems, Symbotic helps other companies automate their supply chains for improved efficiency, speed and flexibility. To get an idea of whether or not to buy SYM stock, I dug into the company’s most recent earnings report (May 6th). Here’s what I learned:

• Q2 FY2024 Income:  Symbotic posted revenue of $424 million (+59% annually) and a net loss of $41 million.
• Annual Revenue Growth: Symbotic’s revenue is expanding quickly, growing at nearly 100+% annually over each of the past three years. Symbotic reported $252 million in revenue in 2021, $500 million in 2022, and $1.2 billion in 2023. 
• Guidance: Symbotic expects revenue of $450 million to $470 million next quarter. 
• Product Progress: In Q2, Symbotic deployed three new systems and completed three systems, bringing the company to 18 fully operational systems
• Backlog: Symbotic has an incredible backlog of committed contracted orders worth $22.8 billion.

There’s little doubt that Symbotic is already growing quickly. But, I’m mainly excited about SYM stock due to its industry: supply chain management and automation.

Opportunity in the Supply Chain Sector

Symbotic is a company that’s likely in the right place at the right time for expansive growth. This is because many companies are prioritizing their supply chains in the wake of the Covid-19 pandemic. The pandemic uncovered the risks of having a non-optimized supply chain and many companies are investing heavily to ensure this does not happen again. According to a study by Project 44, executives are planning to prioritize supply chains in 2024 onward. 

• 89% of executives see supply chain disruption as the biggest short-term risk for their organization.
• 43% of executives say supply chain investment will increase in the next 12-18 months.
• 72% of executives say they’re looking to make significant technology investments to reduce long-term costs.

In other words, the sales team at Symbotic will likely see hefty commission checks over the coming months. At the same time, innovation in supply chain technology is rapidly advancing thanks to artificial intelligence. 

Symbotic’s Recent Innovations

In recent months, Symbotic has made significant advancements to its products such as allowing its robots to see and interpret live images. Their autonomous bots can “view” a box in front of them and make determinations on what to do with it. If the box is labeled correctly then the robot will move it to the next location. But, if the box is damaged then the robot will set it aside. You can watch Symbotic’s marketing video and see its bots in action for yourself.

In Symbotic’s own words, its robots are “equipped with advanced sensors and AI-driven software, that allow them to navigate complex warehouse spaces, pick and place items and manage inventory with remarkable precision”

Symbotic has also been incorporating Nvidia’s (Nasdaq: NVDA) chips into its robots. These chips allow the robot to “think” more strategically when compared to older models. For example, the bots can view irregularly shaped boxes and still identify them correctly so that production doesn’t shut down if a box gets a little bit crushed. Think of this like Google’s (Nasdaq: GOOG) algorithm still recognizing that you meant “stocks to buy” even if you typed “Stkcs to buy”

As of Q2 2024, Symbotic owns 401 patents with 203 pending. So, the company seems to be investing heavily in improving its product – which is almost always a good sign for the company.

Should You Buy SYM Stock?

SYM stock seems poised for growth, due to the industry that it operates in and the quality products. Symbotic’s massive $22 billion backlog of orders is a testament  that the company has way more demand than it can handle – a good sign.

As I write this, Symbotic is currently worth $21 billion. With 2023 annual sales of just over $1 billion, the company trades at 21X sales – fairly cheap considering how quickly the industry and company could grow in the coming years. 

However, while I like SYM stock’s prospects over the long term, I’d be careful buying too much at once in the short term. Since going public in 2022 (via SPAC), SYM stock has had a history of intense volatility, especially during earnings events. A good earnings report can send the stock shooting up 20%. But, a bad report (or poor guidance) can cause the stock to sink 20%. With this in mind, consider using Dollar Cost Averaging to avoid getting caught on the wrong side of a price swing.

I hope that you’ve found this article valuable when it comes to discovering whether or not to buy SYM stock. If you’re interested in learning more then please subscribe below to get alerted of new articles.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. Ted also did not own shares of SYM stock at the time of writing.

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Before I jump into it, remember that most brokerages will let you buy fractional shares of popular stocks. This means that you can buy a small part of a stock, instead of the whole thing. So, you don’t need $800 to buy a share of Nvidia (Nasdaq: NVDA). You can buy just a piece of it for as low as a few dollars.

That said, exploring artificial intelligence stocks under $10 is also a great way to identify potentially undervalued companies. Some of the stocks that are trading for $10 today could be worth $100 or more a year from now.

Top Artificial Intelligence Stocks Under $10

1.) Pagaya Technologies: Building an AI Lending Network

Pagaya Technologies (Nasdaq: PGY) is an AI lending company that uses AI to make borrowing/lending money easier. Pagaya’s technology allows for precise, real-time customer credit evaluations to match people with lenders. Here’s how it works:

1. John Doe submits an application for a loan that falls outside his lender’s requirements.
2. John’s application is automatically sent to Pagaya.
3. Pagaya’s model analyzes John’s application and sends it to other lenders with less strict requirements.
4. John instantly gets a direct offer from another lender.

Despite the size of the lending market, many lenders still use fairly one-dimensional metrics to evaluate lendees (like a credit score). Using AI, Pagaya is attempting to bridge the gap between lenders and under served borrowers. This creates a rare win-win-win opportunity. Borrowers get better access to loans, lenders get access to high-quality borrowers, and Pagaya gets a small percentage of each transaction.

In 2023, this “small percentage” added up to an annual revenue of $812 million and a net loss of $128 million. In fact, Pagaya only has a market cap of $622 million – meaning that it’s currently valued at less than its 2023 sales. This is very unusual. Usually, companies will trade at several multiples of their previous sales. For example, Tesla (Nasdaq: TSLA) is worth $455 billion on 2023 sales of just $97 billion.

This incentivized me to do a bit more research to understand why Pagaya’s stock is trading so low.

What’s Going on at Pagaya?

If Pagaya did nearly $1 billion in 2023 sales then why is it worth under $700 million? And, why is its stock price cheap enough to land on a list of the top artificial intelligence stocks under $10?

My first thought was that Pagaya must be doing poorly financially. But, I read their most recent quarterly update and it seemed like there was a ton of good news. The company reported record results that exceeded their expectations from earlier in the year. This included Q4 revenue of 218 million (+13%) and signing US Bank (NYSE: USB) as a client. The company has also been rapidly adding investor and funding partners. So, this doesn’t explain why Pagaya’s stock is sub $10.

I did a bit more digging into Pagaya’s past. Here’s what I found out:

• Pagaya went public via an SPAC in 2022: The company merged with EJF Acquisition Corp and was first valued at $8.5 billion. But, after going public, two things happened:

1. Barclays (NYSE: BCS) backed out of being Pagaya’s underwriter.
2. Many Pagaya insiders sold their shares before Pagaya’s stock began trading.
3. Pagaya went public at $120/share. The stock initially surged to almost $300/share before crashing down to between $10 and $20 per share – where it has stayed ever since.

When an underwriter backs out of a deal, it’s a sign that they might disagree with the company’s valuation. And, when insiders are unloading stock, it’s a sign that they don’t expect the stock to go any higher.

During 2021 and 2022, there was a rush of companies going public via SPACs. This created a bit of a bubble. It’s likely that Pagaya’s insiders secured a massive overvaluation when going public and cashed out their chips quickly. This has likely left a bad taste in investors’ mouths and could be one reason why no one is talking about Pagaya or buying the stock. If this is true, Pagaya could be a massive underappreciated opportunity.

NOTE: There’s also a chance that Pagaya issues share splits or reverse splits. This would impact the stock’s price significantly. This analysis has a fair bit of conjecture, as there was little reporting on Pagaya’s SPAC merger.

2.) United Microelectronics Corp: A Smaller TSM?

United Microelectronics Corp (NYSE: UMC) is another company that’s a bit of a headscratcher. UMC is a top semiconductor chip foundry in Tawain. On its website, it boasts that it’s top 3 in global pure-play foundry market share. It also reports having 12 fabs across Asia. But, despite this strong resume, UMC seems a bit undervalued.

In 2023, UMC reported an annual revenue of $6.8 billion and a net income of $1.87 billion (converted from TWD to USD). But, it has a market cap of just $19 billion. This just seems incredibly low, given the nature of UMC’s business (helping provide chips to AI companies). 

One thesis is that UMC likely competes directly with Taiwan Semiconductor (NYSE: TSM). TSM is one of the biggest foundries in the world, which means UMC faces steep competition – a fact that investors might be factoring into UMC’s valuation.

3.) Iris Energy: A BTC and AI Combo Play

I’ve written about Iris Energy (Nasdaq: CIFR) pretty extensively in my article on “The Top 5 Bitcoin Mining Stocks.” Iris Energy owns and operates a number of data centers. It uses these data centers primarily for Bitcoin mining. But, it diversifies its business by also offering AI cloud services. This puts Iris Energy in a unique position to capitalize on two rapidly growing industries (crypto and AI).

4.) Snap Inc: Can This Social Media Company Make a Comeback?

I was surprised to see Snap Inc. trading at less than $10 since it still seems incredibly popular. I use it all the time and so do most of my friends/family. Upon further review, Snap Inc. brought in a healthy $4.6 billion in 2023 annual revenue. But, this revenue was flat YoY and Snap also posted a loss of $1.32 billion.

Snap seems to suffer from the same issue that Twitter did from 2010-2020. It has an insanely loyal fan base who use the app all the time. But, it has trouble when it comes to growing this user base and converting it into a consistent revenue stream. Twitter had the same problem for years. Despite being the main hub for breaking news, Twitter has never been able to consistently turn a profit. Snap Inc. has had the same trouble so far.

A lot of this has to do with the fact that Snap can’t charge for its products. If Snap starts charging its users to use the platform then there’s a good chance many people will simply delete the app and move to Instagram (Nasdaq: META), TikTok, or another app. So, Snap has to come up with more creative ways to make money.

I doubt Snap will ever really compete with apps like Facebook or TikTok. But, if they can figure out the right way to monetize the platform then I wouldn’t be surprised to see Snap make a comeback.

5.) Lantern Pharma: An AI Pharma Play

Investing in pharmaceutical companies can be a good way to find artificial intelligence stocks under $10. This is because early-stage pharma companies are usually unprofitable, as they work to develop treatments. If the treatment gains regulatory approval then the company’s stock can quickly soar. But, if the treatment fails to get approved then the stock will remain worthless.

Lantern Pharma (Nasdaq: LTRN) is using AI and machine learning to streamline the development of drugs. Notably, the company just recently gained approval for expanding its Phase II Harmonic clinical trial of a new drug for treating non-small cell lung cancer. This approval could pave the way for Lantern’s drug to enter the market. 

You’ll want to continue following the approval process for this drug closely if you plan on buying Lantern Pharma stock. If it gets approved then Lantern’s revenue could quickly soar from $0 to $1m, $10, or even $100m.

I hope that you’ve found this article valuable when it comes to discovering 6 artificial intelligence stocks under $10. If you’re interested in reading more, please subscribe below to get alerted of new articles as I write them.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. 

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In this article, I’ll break down why you should stay away from SOUN stock for the time being.

What is SoundHound AI?

SoundHound AI is a leader in voice AI conversational technologies. It offers complete solutions and individual components that help companies create unique voice assistants. It’s voice assistants are mainly used by automotive and fast food companies. SoundHound went public in 2022 during the peak of the SPAC-craze. Since then, SOUN stock is down a total of 41%.

SoundHound’s Last 3 Quarters

The first thing I always do when analyzing a stock is glance at its financial statements. This immediately tells you if the company is profitable or not. Here are SoundHound’s last 3 quarters:

• December 2023
  • Revenue: $17.15 million (+80% annually)
  • Net Income: $-18 million (+40% annually)
• September 2023
  • Revenue: $13.27 million (+18% annually)
  • Net Income: $-20.20 million (+33% annually)
• June 2023
  • Revenue: $8.75 million (+42% annually)
  • Net Income: $-24.37 million (+20 annually)

SOUN stock might look rosy if you look at just the percentage increases in revenue. This snapshot makes it seem like SoundHound’s revenue is growing handsomely each quarter. But, revenue growth doesn’t matter as much when the company is consistently posting hefty losses.

SoundHound has never come close to turning a profit (at least not anytime recently). When you look at the last few years, the outlook only gets worse. Over the past 5 years, SoundHound has routinely lost more than twice as much money as it makes.

These losses might be OK if SoundHound was in “startup mode.” In other words, investing all money back into the company and growing quickly. But, SoundHound was founded in 2005. So, it should be well out of startup mode by now.

As if these losses weren’t bad enough, Capybara Research recently published a scathing short report on SoundHound AI.

A Scathing Short Report by Capybara Research

This report is part of the reason why SOUN stock has lost 50% off its all-time high. I read the full report (which was quite long as they had a lot of negative things to say) and pulled out some of the highlights:

• Manipulating financial statements: Capybara alleges that SoundHound manipulates its financial statements to appear more profitable than they are. For example, the company has been known to pull forward revenue for products that they haven’t even started working on yet. They’ve also treated one-time cancellation fees (paid by clients) as “product revenue” to help improve their margins.
• Losing major clients: In 2022, SoundHound was very boastful of its top clients in its 10k filing. But, in 2023, SoundHound didn’t mention any clients by name. This implies that the company probably lost its top clients. Not a good sign.
• Massively unprofitable: SoundHound was founded 19 years ago and has accumulated losses of $592 million – including losing $91 million in 2023. The company has no clear path to building a sustainable business or earning a profit
• Issues filing consistent updates: SoundHound has often filed its accounting documents late and frequently revises them after the fact. In 2023, it also used the auditor Armanino LLP to edit its books. This is the same auditor that FTX used. Not good company to keep.
• Insider control: SoundHound is controlled by insiders who have super-voting shares granting them 10 votes per share and 63% of the voting power. This implies that just a few people control the company and they might not act in the interest of other investors.
• Overly optimistic projections: The company has a history of over-promising and under-delivering on its promises to investors. There’s a thin line between “over-promising” and committing fraud.

Capybara’s report offered quite a lot to take in. But, this is also just the analysis of just one short seller. Short sellers are wrong all the time. So, we also have to consider that Nvidia, one of the world’s leading AI companies, also invested in SoundHound.

But What About Nvidia?

I wasn’t able to dig up a whole lot of extra information on Nvidia’s investment. All I could find was that Nvidia’s 13F statement (released on Feb. 14) disclosed a stake of 1.73 million shares.

But, I’d like to point out that Nvidia is worth over $2 trillion and earned revenue of $61 billion in 2024. So, for a company of Nvidia’s size, a small stake in SoundHound is almost a rounding error. You’d also be surprised by the lack of due diligence that often goes into deals like this. For example, just look at the startup, Theranos.

Theranos was a biotech startup company founded by Elizabeth Holmes. It grew to a valuation of 9 billion before investors realized that the company’s product (a home blood testing kit) didn’t work. Elizabeth was able to raise money early on by tricking early investors after faking a product demo. Then, she was able to raise additional funds because later investors just assumed that someone else had done the due diligence. It’s a fascinating story and there’s a great documentary of it on Hulu, called The Dropout.

Now, I’m not saying that Nvidia did no due diligence on SoundHound. But, there’s a chance that they just placed a handful of bets on companies working in the AI space, without doing much due diligence. After all, if the investment doesn’t work out then it won’t hurt Nvidia at all. Nvidia might’ve also had a strategic reason to invest in SoundHound, like getting access to its tech.

Either way, the bottom line is that you shouldn’t buy SoundHound just because Nvidia did.

SoundHound’s Broken BusinessModel

Even if we put the accounting sketchiness to the side, there’s one more glaring issue with SoundHound: it has a broken business model.

SoundHound makes most of its money (which isn’t much) from voice assistants. So, first off, it already has to compete with Google Voice (Nasdaq: GOOGL) and Amazon Alexa (Nasdaq: AMZN). Tough competition. But, even if we assume that SoundHound has a superior product, the voice assistant space is notoriously unprofitable.

Although the tech works amazingly, Amazon has described its Alexa product as a “colossal failure.” Amazon reported that Alexa lost up to $10 billion in some years. In fact, the Everything Store recently announced massive layoffs in its Alexa division. So, if Amazon isn’t making any money in voice assistants then I can’t imagine that SoundHound is.

Should You Buy SOUN Stock?
I wouldn’t. Even if Capybara’s short report is wrong in some areas, it’s a simple fact that SoundHound has been losing money for over a decade. Plus, there’s the fact that voice assistants are widely unprofitable. When you consider that SoundHound also likely uses sketchy accounting practices, SOUN stock just isn’t worth the risk.

Fortunately, there are lots of other AI companies out there that are much more exciting.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor.

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With that in mind, this article will break down Applied Materials and determine whether or not you should buy AMAT stock.

What is AMAT Stock?

Applied Materials is the largest provider of semiconductor wafer fabrication equipment in the world. Per the company’s website, it

“modifies materials at atomic levels and on an industrial scale to enable our customers to transform possibilities into reality.” 

In other words, Applied Materials helps create the products/solutions that go into creating semiconductors, fab equipment, and other technologies. Applied Materials operates in five main industries: semiconductors, display, roll coating, solar, and automotive.

But, the main category I want to talk in this article is semiconductors. I feel that AMAT stock is highly underrated when it comes to the growth it will enjoy from artificial intelligence.

To get a better understanding of Applied Materials business, I dug through its financial statements. In short, the company passed my review with flying colors.

AMAT’s Last 3 quarters

Here is how Applied Materials has performed over the last three quarters: 

• January 2024

• • • Revenue: $6.71 billion (-0.5% annually) 
    • Net Income: $2.02 billion (+18% annually)

• October 2023

• • • Revenue: $6.72 billion (-0.4% annually)
    • Net Income: $2 billion (+26% annually)

• July 2023

• • Revenue: $6.43 billion (-1.5% annually)
  • Net Income: $1.56 billion (-3% annually)

From this, we can see that Applied Materials’ revenue is actually fairly stagnant on a quarterly basis. This makes a bit of sense, since Applied Materials is a fairly mature company (founded in 1967). But, this stagnant revenue doesn’t quite worry me. I believe that AMAT will receive a fresh bump in revenue over the coming years thanks to how many companies are investing in AI.

To learn more, I also dug through the company’s most recent earnings report. Here’s what I found:

• Reported record revenue in Q1 2024, marking 18 consecutive quarters of YoY growth
• Recently increased its cash dividend by 25%
• Issued $700 million in share repurchases 
• 66% of AMAT’s revenue comes from subscriptions and they have a 90% renewal rate

Over the past decade, Applied Materials has posted 13% annual revenue growth, 33% growth in annual free cash flow, and 12% growth in dividends per share. Since the beginning of 2023, AMAT stock is up roughly 100%.

That will work. AMAT is essentially an old-school chemical engineering company that has established itself as the world leader. It doesn’t have to worry about landing new clients each year because so much of its revenue comes from sticky subscriptions. Additionally, even though revenues aren’t growing significantly, AMAT has returned value to shareholders through stock buybacks and dividends. At the same time, the stock has doubled in the last year.

Should You Buy AMAT Stock?

Applied Materials is a great example of a decades-old company that is likely getting overlooking in the AI arms race. I would even go so far as to call it an AI turnaround story. I recently wrote something similar about Dell stock, which is in a similar position (AKA an old school company that will benefit from the rise of AI).

Applied Materials doesn’t have the sexiest brand name or products of all time. Its bread and butter is “water fab equipment.” The majority of investors don’t even know what this is (and I admittedly had to do some reading before writing this article).

So, Applied Materials doesn’t get talked about as much as other “trendier” AI companies like Nvidia (Nasdaq: NVDA) or SMCI (Nasdaq: SMCI). But, the rising tide raises all ships.

As long as industry leaders like Nvidia or Microsoft (Nasdaq: MSFT) continue to prioritize AI, then it will provide a massive tailwind for AMAT stock. On that note, I want to talk a little bit about why I’m investing in the future of AI.

Why Invest in AI?

It’s very easy to write AI off as “just another investment trend.” If you’ve been following the stock market over the past few years then you know what I mean. Haven’t we seen these types of bubbles before? Meme stocks? NFTs? The Metaverse?

Trust me when I say that artificial intelligence is much, much different than these trends. There’s one easy way to know why.

Ask yourself this, how many times did you venture into “the metaverse” when the metaverse was trending? Probably few. Or, how many NFTs did you buy during the peak of the NFT boom? For most people, probably 0 but maybe 1 or 2.

But, how many times have you used ChatGPT over the past year? Tons. The same goes for AI-powered tools like Adobe Firefly (Nasdaq: ADBE), Google Bard (Nasdaq: GOOGL), or any number of other tools.

The key difference with AI is that it has tangible real-world use cases – tons of them. In fact, it’s not hyperbole to say that we don’t even know all of the ways that we will use artificial intelligence yet. If you need more inspiration, check out the highlights of Nvidia’s 2024 Keynote. At 5:07, you can see a short list of all the companies that are working with Nvidia to develop AI applications. A few companies include:

1. Amazon (Nasdaq: AMZN)
2. Google
3. Oracle (Nasdaq: ORCL)
4. Meta Platforms (Nasdaq: META)
5. Tesla (Nasdaq: TSLA)

The list goes on and on. If you talk to anyone in the tech space, they’ll likely tell you that we are at the next stage of computing. We’ve only seen two major game-changing evolutions like this in recent memory. The first was the invention of the internet. The second was the invention of smartphones. Now, we’re witnessing the invention of AI.

Should You Invest?

There’s definitely a chance that AI won’t be as big as the world is expecting it to be. But, I doubt that’s the case. It’s much more likely that AI revolutionizes the world as we know it and lead to entirely new technologies. As investors, this means that the future is ripe with opportunity. 

Everyone wishes that they could go back in time and buy Amazon or Google in the 1990s. If they had the foresight to predict the internet then they could have made a fortune. Well, here you are with a similar opportunity. I’m not saying that you need to dump your life savings into AMAT stock. But, the world around us is definitely changing in real-time. So, how are you going to take advantage?

I hope that you’ve found this article valuable when it comes to learning about AMAT stock. If you’re interested in reading more, please subscribe below to get alerted of new articles.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. 

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On the surface, C3.ai (Nasdaq: AI) might seem like a no-brainer when it comes to top AI stocks to buy. But, you should stay far away from this company. Here’s why.

What is C3.ai?

C3.AI is a bit of an all-in-one AI software company. It offers ready-to-use AI applications across a range of different industries including CRMs, supply chains, defense & intelligence, financial services, and more. C3.AI also boasts a handful of impressive clients including Koch Industries, Shell (NYSE: $SHEL), and the U.S. Air Force. C3.ai focuses primarily on enterprise AI solutions, meaning that it offers generative AI tools for corporations – not consumers. 

C3.AI: Last Three Quarters

To get a better understanding of whether or not to buy C3.ai stock, we need to look at its financial statements. This is how we determine how much money the company makes (Or, in C3.ai’s case, loses). Here’s how C3.ai has performed over the last three quarters:

• January 2024

• • • Revenue: $78.4 million (+18% annually)
    • Net Income: $-72.63 billion (+10% annually)

• October 2023

• • • Revenue: $73.22 million (+17% annually)
    • Net Income: $-69.78 million (-1% annually)

• July 2023

• • Revenue: $72.36 million (+11% annually)
  • Net Income: $-64.36 million (+10% annually)

Right away, we can see that C3.ai is posting fairly moderate revenue growth. Annual revenue growth of 18% isn’t bad. But, it’s also not overly impressive. There are dozens of much larger companies in less exciting industries that are growing faster than this. But, it’s not C3.ai’s moderate revenue growth that concerns me – it’s the consistent losses.

C3.ai has posted increasingly larger losses over the past 3 years – which is bad news for C3.ai stock.

• 2021: Net loss of $55.7 million
• 2022: Net loss of $192.07 million
• 2023: Net loss of $268.84 million

There are some scenarios where this type of increasing loss is acceptable. For example, Amazon (Nasdaq: AMZN) was famously unprofitable for years while it built up its business. For example,  if C3.ai’s revenue was soaring and the company was investing heavily back into its businesses then I might be willing to overlook these losses. But, the company’s revenue is showing only moderate growth while losses increase rapidly – not good.

The main goal of a company is to make money and return value to its shareholders – either through stock price growth or dividends. C3.ai is going in the opposite direction and making less money year after year. So, at what point do investors start to view C3.ai as simply an unprofitable failure of a company?

Right now, C3.ai is valued at close to $3.4 billion. But, there’s a good chance that much of this valuation comes from the hype surrounding AI. If C3.ai posted similar revenue and net income numbers but operated in, say, the waste management industry then I doubt it would be worth $3 billion. 

So, what happens after a few more quarters of slow growth and unprofitability? C3.ai’s stock and valuation will quickly start to plummet.

C3.AI Most Recent Earnings Call

To give C3.ai a fair and unbiased shot, I dug through the company’s most recent earnings report. Here’s what I learned:

• Q3 revenue was $78.4 million, up 18% compared to $66.7 million last year.
• Quarterly GAAP gross profit was $45.3 million, a 58% gross margin (this is gross profit, not net).
• In Q3, C3.ai closed 50 agreements, up 85% year-over-year
• Customer Engagement for the quarter was 445, an increase of 80% compared to 247 one year ago
• C3.ai’s AI system uses “full traceability to find the truth.” This means that its AI tech can always reference source documents or data for each insight it generates.

In all fairness, I have to say that C3.ai actually had a pretty solid quarter. But, again, a lot of this growth just feels like C3.ai being in the right place at the right time. I don’t expect the positive news from this quarter to lead to C3.ai stock gains down the road. Let me explain.

Here’s Why You Should Stay Far Away From C3.AI Stock

Before I jump into it, remember that C3.ai stock is already down over 75% since going public in late 2020. But, that’s not the reason that you should stay away. After digging through C3.ai’s investor presentation, quarterly earnings, and website, my biggest takeaway is that…there is no big takeaway. This is terrible news for C3.ai. To give you a better idea of what I mean, allow me to make a bit of a comparison.

C3.ai Vs. Dropbox

If I had to compare C3.ai to another company, I’d compare it to the cloud storage company, Dropbox (Nasdaq: $DBX). Both of these companies are just outmatched within their respective industries, which will make it very hard to grow quickly. Dropbox mainly offers cloud storage products. So, it competes directly with the likes of Microsoft Azure (Nasdaq: MSFT), Amazon Web Services (Nasdaq: AMZN), and Google Suite (Nasdaq: GOOG). Tough competition.

Due to the competitiveness of its industry, Dropbox just has a very hard time competing and growing significantly year-over-year. I mean, it’s not a terrible company and still posted a respectable $2.5 billion in 2023 annual revenue. But, Dropbox’s growth has stalled at around 7-12% in past years and the company’s stock is up just 11% over the past five years. I don’t necessarily think Dropbox will go bankrupt anytime soon. But, the company (and its stock prices) will struggle to grow. C3.ai stock will likely share a similar fate.

C3.ai offers enterprise AI solutions. This means that compete directly against the world’s biggest and brightest companies. This includes Nvidia (Nasdaq: $NVDA), OpenAI, Google, Microsoft, Apple (Nasdaq: AAPL), and many others. This doesn’t mean that C3.ai won’t be able to lure any new customers to grow revenue. But, it will likely be an afterthought within the industry and have a very hard time competing against the world’s biggest tech giants.

For C3.ai, the most likely scenario is modest 5-15% annual growth in the coming years – which will only lead to subpar stock returns. As an investor, I’d recommend staying away. Fortunately, there are much more exciting AI companies to invest in than C3.ai.

I hope that you’ve found this article valuable when it comes to learning about C3.AI stock. If you’re interested in reading more, please subscribe below to get alerted of new articles.

Disclaimer: This article is for general informational and educational purposes only. It should not be construed as financial advice as the author, Ted Stavetski, is not a financial advisor. Ted also does not own shares of C3.ai.

The post C3.ai Stock: Why You Should Stay Far Far Away appeared first on Investment U.

Arm Stock: What to Know

Arm Holdings is known for creating power-efficient CPUs. On its website, Arm boasts that it has 280+ billion chips in “everything from sensors to smartphones to servers.” It also claims to have helped power the smartphone revolution, since its chips are known for being small, efficient, and powerful. Arm is confident that this success in smartphones will continue into the AI revolution.

Arm mainly operates in the following four industries: automotive, computing infrastructure, consumer technologies, and the Internet of things.

In other words, the company is in a good position to take advantage of the AI wave, since it powers tech across a range of industries. But, to get a better idea of whether Arm stock is worth buying, we need to take a closer look at its financial statements.

Arm Stock’s Most Recent Earnings:

To understand whether or not Arm stock is worth buying, let’s examine its three most recent quarters:

• December 2023:

• • • Revenue: $824 million (+14% annually)
    • Net Income: $87 million (+52% annually)
  • September 2023:
    • Revenue: $806 million (+28% annually)
    • Net Income: -110 million (-196% annually)

• June 2023:

• • Revenue: $675 million (-2% annually)
  • Net Income: $105 million (-53% annually)

On its earnings report, Arm claims to be a “strong growth, highly profitable and cash generative company.” But, based on these financials, this isn’t really the case. 

The chip-maker’s annual revenue was actually down from 2022 to 2023 ($2.7 billion vs $2.68). More recently, Arm posted revenue growth of just 14% last quarter. On one hand, any growth is still a positive sign. But, for a company that is supposed to be in one of the fastest-growing industries, this isn’t overly impressive. There are dozens of much larger, established companies whose revenue grows at a faster rate than Arm’s

But, these numbers don’t always tell the full story. To get more insight I read through Arm’s most recent quarterly report. Here are the biggest takeaways:

1. Delivered record Q3 revenues: Arm exceeded the high end of its guidance ranges for both revenue and non-GAAP EPS. It posted strong growth in royalty revenue and licensing revenue (its two main ways of making money).
2. The broader semiconductor market is recovering: Particularly in smartphones, which returned to strong growth in Q3.
3. Arm expects royalty revenue to drive growth: Especially in the automotive and cloud server sectors.

All pretty good news. So, is the main takeaway?

Arm Stock: Should You Invest?

I’ll be honest, Arm is a CPU company during the beginning of an AI revolution. This is like owning a pickax company in the midst of the California Gold Rush. Arm Holdings will most likely perform well over the coming years. But, Arm stock is not the best pick if you’re looking to capitalize on AI investing. Here’s why…

Arm stock brought in just $824 million last quarter, up 14%. Not bad. But, this level of income is just a drop in the bucket compared to other companies in the industry. The same goes for its revenue growth. 14% isn’t bad. But, it’s not explosive growth. If the company isn’t experiencing explosive growth then neither will the stock price. 

For comparison, Nvidia just posted quarterly revenue of $22 billion. Not only is this multiples higher than Arm, but it was also a growth rate of 265% year over year. If you’re going to buy an AI stock, why would you go with Arm over a company like Nvidia? Even a dinosaur like Dell (NYSE: DELL) feels like a better buy than Arm – due to its recent turnaround story.

AI: An All-or-Nothing Race

There’s a very good chance that the AI arms race will be an all-or-nothing race. In other words, every company wants to have the most cutting-edge technology. So, companies like Amazon (Nasdaq: AMZN) or Microsoft (Nasdaq: MSFT) only want to partner with the best of the best. This is why Microsoft partnered directly with ChatGPT-owner, OpenAI.

So far, Nvidia has proved itself as the leading AI computing company. During its recent 2024 AI Keynote event, Nvidia announced that it’s already providing computing power for most of the world’s biggest companies. As the industry moves forward, other companies will want to work with Nvidia by default – since it’s already established as the leader in AI. This means that companies like Arm will forever be an afterthought.

With this in mind, buying Arm stock feels a bit like going back in time to 2012 and choosing to invest in Myspace, instead of Facebook (Nasdaq: META). I’m not necessarily saying that Arm will go out of business in the coming years. But, it just won’t be nearly as successful.

Arm’s Absurd Valuation

As a final thought, I need to bring up Arm Holding’s insane valuation. As I write this, Arm has a market cap of just under $140 billion. At the same time, it brought in just under $3 billion in total revenue for 2023. This shows that there’s a massive disparity between how much Arm is worth compared to how much money it actually makes.

This massive valuation might be somewhat warranted if the company was growing rapidly. But, again, revenue grew at a very modest 14% last quarter. So, I’m not quite sure why investors are pricing in such absurd earnings potential for Arm stock. Who knows…maybe they know something I don’t?

As usual, please be sure to do your own due diligence before making any investments. Or, if you think I’m dead wrong on this, feel free to comment your thoughts below. You can even visit me at my blog Do Not Save Money and let me know why I’m wrong on my analysis for Arm stock. 

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