3 AI Stocks on the Edge of a Massive Surge On Wednesday, Nvidia Corp. (NVDA) briefly eclipsed Microsoft Corp. (MSFT) as the world’s most valuable company. The AI chip maker is now worth $3.3 trillion... or roughly the combined value of every residential property in the state of Florida. Shares trade for 50 times forward earnings.
That’s caused expected hand-wringing on Wall Street.
“We're not necessarily at peak bubble levels,” said Jonathan Stubbs of Berenberg, a wealth management firm, “but there's definitely a whiff of bubble about it.” Even some InvestorPlace.com writers are getting nervous about high valuations and urging readers to protect their gains by cashing out.
History, however, tells us that we're only getting started.
“American shares could get pricier still,” The Economist notes. “Pricey shares can always get pricier if investors keep bidding them up... It would probably be closer to the truth to say that just now, for whatever reason, investors seem willing to buy whichever narrative paints the rosiest picture.”
That’s particularly good news for second-wave AI companies – those riding the coattails of Nvidia’s graphics processing unit (GPU) innovations. These are the firms that benefit as AI technologies become more widespread. And they’re the focus of the writers at InvestorPlace.com - our free news and analysis site – this week.
This week, our writers make the case that Nvidia’s meteoric rise is now spawning a whole new cohort of AI winners. Here are their Top 3 picks... AI Drug Development: Recursion Pharmaceuticals Drug development has long been a slow, expensive process. Thousands of candidates are discarded in preclinical trials, and even the most promising ones generally fail. Only 3.4% of all cancer-related drugs make it from Phase 1 human trials to final U.S. Food and Drug Administration approval, according to a study by Massachusetts Institute of Technology researchers.
It’s like throwing spaghetti at the wall to see what sticks... at a far costlier scale. Analysts expect the pharmaceutical industry to spend $260 billion this year on research and development. ADVERTISEMENT  You are eligible to receive an up-front cash payout opportunity every day at 12 pm ET. To get started...
Go here Now To Sign Up During This Limited-Time Offer Window. But what if you could automate that process? What if AI-powered computers become able to model the human body and test how thousands of drug candidates will work?
That’s precisely what Recursion Pharmaceuticals Inc. (RXRX) seeks to do. As Ian Cooper notes this week at InvestorPlace.com, the Utah-based firm is pioneering a platform that uses machine learning to identify new drugs at scale: At $9.30, Recursion Pharmaceuticals holds immense potential. With a $50 million investment from Nvidia, the two are working on drug discovery driven by AI.
However, with AI the rate of failure could drop, which is where Recursion Pharmaceuticals comes into play.
“To find the drug and get it into the clinic, I think we can shorten that from five or six years and hundreds of millions of dollars into, perhaps, one or two years and just $10 million or $20 million,” Chief Executive Officer (CEO) Chris Gibson says. The rise of better computing power (thanks to Nvidia’s latest chips) will enable Recursion to do even more. Last month, the company announced it had completed construction of the Nvidia-powered BioHive-2, the fastest supercomputer in the pharma industry. Such processing speeds will allow digital experiments that previously would have required several months to be done in parallel in far shorter time frames. And as AI processing power increases, so, too, should Recursion’s chances for finding the next blockbuster drug. Sunnier Days Ahead: Stem It’s admittedly been a difficult year for Stem Inc. (STEM), a company that’s seen shares drop 70% since January. The solar industry has struggled with the phase-out of California’s NEM 2.0 tax breaks, and STEM’s focus on solar monitoring has left it exposed to the slowdown. During the first quarter, management was forced to reduce recorded revenues by $33 million to account for cuts in contract value estimates. First-quarter bookings collapsed to $23.8 million from $636.5 million a year earlier.
However, the selloff now leaves Stem as an incredibly underpriced bet on AI technologies. As Jeremy Flint explains this week at InvestorPlace.com: Stem’s Athena software is an advanced control system that optimizes the interaction between generators, grid power, renewable energy sources like solar farms, and battery storage. An artificial intelligence framework drives the system; Athena autonomously optimizes energy distribution based on variables like weather conditions and energy pricing, making it a pivotal tool for large-scale enterprise clients in managing their sustainable energy resources...
Stem harbors ambitious growth plans that set it apart amid stocks to 20X. The company’s vision, detailed in its “AI and the Future of Energy” white paper, showcases a strategic roadmap for leveraging AI to drive efficiency and advancement across the sustainable energy landscape. The company also retains an enormous $1.6 billion contract backlog, up 33% from the prior year. Analysts expect the firm to break even on an EBITDA (earnings before interest, taxes, depreciation, and amortization) basis for the first time ever this year.
The success of Nvidia and AI optimism now makes STEM a stock that could rise 20X in the next decade, as Flint notes. The company’s low share price values its equity at just $180 million – a small fraction of its current backlog. And analysts expect strong growth ahead as solar and other clean-energy networks come online. Revenues at Stem are projected to rise almost 30% annually through 2026. ADVERTISEMENT  When you click here and see what Elon Musk’s new invention does…
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Click here to see it. Buy the Dip: SoFi Finally, a recent 10% selloff in the past month now puts online banking firm SoFi Technologies Inc. (SOFI) in prime buying territory. Shares trade at $6 – barely above book value.
Thomas Niel now advises InvestorPlace.com readers to buy SoFi’s stock before it sizzles off the market’s back burner: Wall Street and Main Street investors remain “on the fence” at best, bearish at worst, about the fintech firm and neobank. Burned by past price declines, retail traders have ceased to be excited about SOFI. That’s clear, from the fact that shares barely budged during last month’s short-lived “meme wave.”
Yet while SOFI still hasn’t become a hot stock once again, a resurgence in popularity could still arrive relatively soon. At least, when you consider the next big event for the company and for the stock is just a little over a month away... The event Niel refers to is, of course, SOFI’s earnings. Analysts expect the company to notch a 16% increase in revenues and flip from negative $0.05 earnings per share to positive $0.01. The company has been riding a wave of higher interest rates, which raises net interest income.
It’s important to note that SoFi is one of the leaders of AI use in retail banking. The firm was an early adopter of AI chatbots for financial advisory. And InvestorPlace.com’s Muslim Farooque notes that SoFi also employs the technology heavily in its underwriting business – something that has helped firms like Verisk Analytics Inc. (VRSK) stay ahead in insurance underwriting.
That suggests SoFi could produce even better figures than expected. Markets have long worried about the quality of the online bank’s loan portfolio, given the firm’s relatively young age and lack of lending history. But lower loan losses (thanks to advancements in AI-assisted lending) could quickly flip the needle on this stock again.
Now, on to a look at this week’s buys and sells by insiders and other notables from Eddie Pan... Notable Trades of the Week Michael Dell's 2024 Sales Climb to $2.1 Billion – Shares of Dell Technologies Inc. (DELL) have doubled this year on the heels of the AI Revolution, leading to billions of dollars of insider sales from a key executive.
As I reported at InvestorPlace.com on Thursday, CEO Michael Dell has now sold $2.12 billion worth of DELL this year and recently revealed a $379.54 million sale on June 17. (Note: The sale was on June 14, but he disclosed the trade on June 17.)
At the same time, Dell remains a major shareholder of his company. As of December 31, he had a 58.9% ownership stake in DELL, equivalent to 345.07 million shares.
So, while Dell's sales may have sparked concern among shareholders, his remaining stake still implies heavy conviction in his company. On top of that, DELL stock outstanding has fallen in recent years, which means that Dell's stake has grown higher.
"I’ve been contributing shares to our foundation and selling some stock,” Dell said in a recent interview. “But actually, because the share count’s shrinking and I own about half the shares, my ownership percentage is going up.”
Warren Buffett Continues to Double Down on Occidental Petroleum – Last week, I reported that =Berkshire Hathaway Inc. (BRK. A, B) purchased $105.55 million shares of Occidental Petroleum Corp. (OXY) between June 10 and June 12. It seems that wasn't enough for Warren Buffett’s conglomerate. ADVERTISEMENT  It’s already creating millionaires at the fastest rate we’ve seen… And it will destroy almost everything you hold dear about America. Beginning Tuesday, June 25, it’ll open a unique new investment vehicle on a scale we haven’t seen since 1994, which could double your money 6 different times if you get positioned now.
Click here to learn more (and to get our #1 pick). As covered by InvestorPlace.com's Josh Enomoto, Buffett's stake in the oil and gas company is now nearly 29% after he picked up 2.94 million shares of OXY worth $175.98 million between June 13 and June 17. On top of that, the hedge fund also owns warrants to acquire 83.9 million shares.
Buffett isn't interested in acquiring the company, however. Rather, his investment thesis lies in the prowess of CEO Vicki Hollub.
"In an interview with CNBC, Buffett stated that he ‘read every word’ of one of the oil company’s earnings conference call transcripts," Enomoto writes. "Further, the investor stated that Hollub is ‘running the company the right way.’”
Starboard Value Discloses a $500 Million Stake in Autodesk – Activist investor Starboard Value has a new target in sight. On Monday, InvestorPlace.com's Dana Blankenhorn broke the news that Starboard has amassed a $500 million position in Autodesk Inc. (ADSK).
Starboard notes that it is displeased with how the software company handled an internal investigation concerning a misleading presentation of free cash flows and operating margins.
"Starboard had privately criticized the company for not disclosing the investigation before nominations for directors were closed in March," Blankenhorn writes. "Starboard is now considering legal action to either delay Autodesk’s July 16 annual meeting or reopen nominations."
As evident by its investment, Starboard still believes that ADSK has upside left. Starboard states that margin improvements and communication with shareholders could help bolster the company. The Biggest Financial Mania of the Past 47 Years is Coming... Investing veteran Louis Navellier has a long history of identifying trends early. He began investing in dot-com stocks as early as May 1994, the post financial crisis melt-up in 2009, and the recent AI Revolution in 2022.
But he’s also excelled at riding the second wave of these sorts of manias, even as other early adopters cash out. He recommended Netflix Inc. (NFLX) well after the dot-com bust... riding gains of 7,749% in the process. His pick of Super Micro Computer Inc. (SMCI) came in 2023 – almost a year into the recent AI mania. Shares are up sixfold since.
And now he has a new message for those who might have missed out on Nvidia’s incredible rise. (Nvidia itself was one of Louis’s AI picks.)
In his latest presentation, he says that there’s a new financial mania that’s about to happen. One that’s so notable that it will likely be the last he will see in his financial career.
Louis will talk about all that – plus what “financial mania” could lead to the rise of a “New America” that’ll be almost unrecognizable to anyone from our generation – in more detail on Tuesday, June 25, at 8 p.m. during his special event, Prediction 2024.
To reserve your spot for that event, click here.
We’ll see you back here next Sunday. Enjoy your weekend, Tom & Eddie | | |
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