Wall Street has long been a fertile ground for innovation, a breeding ground for ideas that push boundaries and redefine the status quo. Yet, for three solid decades now, we’ve seen the rise and fall of multiple so-called game-changing innovations that never quite matched the seismic impact the internet brought to corporate America in the mid-1990s. Now, standing on the cusp of a new era, the dawn of artificial intelligence (AI) promises to herald a renaissance moment for businesses.
In the realm of AI, we’re talking about a realm where software and systems take the reins on tasks traditionally handled by humans. The sheer potential of training these systems, allowing them to learn, adapt, and evolve over time, is what makes AI not just another buzzword but a disruptor with the power to permeate every sector and industry.
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Respectfully, history has taught us that every next-big-thing trend over the past three decades, including the rise of the internet, has endured an early-stage bubble. It’s a cautionary tale that the AI revolution, no matter how promising its growth estimates may seem, is unlikely to be an exception. Yet, within this surge, there are opportunities for discerning investors to unearth long-term winners, those with a measure of resilience if the AI bubble were to burst – enterprises that can weather the storm, unlike certain other players we could name.
Discovering Baidu’s Value
Enter the first gem in our trove of historically cheap AI stocks for the month of April: the China-based powerhouse Baidu (NASDAQ: BIDU).
Baidu’s stronghold as China’s premier internet search engine gives it a robust framework that would stand firm even if history were to repeat itself and the AI bubble were to deflate. With a commanding 60.1% share of China’s internet search market as of February, Baidu has demonstrated a consistent dominance over the past nine years, ranging between a market share of 60% and 85%, making it the indisputable go-to for businesses seeking to target Chinese consumers effectively and affording the company enviable ad-pricing leverage.
Moreover, amidst China’s post-COVID recovery and economic realignment, Baidu stands to benefit from a reacceleration of economic growth and advertising spending in the region.
Delving deeper, Baidu’s foray into the AI revolution is evident in its flourishing non-online marketing segment. Ranked as the fourth-largest cloud-infrastructure service platform by spending in China as of March 31, 2023, Baidu’s AI Cloud positions the company to integrate generative AI solutions that empower businesses to create applications and enhance customer interactions.
Furthermore, as the parent company of the autonomous ride-hailing service Apollo Go, Baidu boasts a milestone of over 5 million cumulative rides since its inception, underscoring its prowess in the realm of intelligent driving.
Despite the inherent regulatory risks associated with investments in Chinese equities, Baidu offers an enticing proposition for opportunistic investors. With a forward-year earnings multiple of less than 9 and a substantial net cash reserve exceeding $17 billion – nearly half its current market capitalization – Baidu emerges as a beacon of value in the AI landscape.
The Meta Platforms Perspective
Turning the spotlight to another potent contender in the realm of AI stocks, we find the trailblazing Meta Platforms (NASDAQ: META) beckoning to long-term investors with its historical allure.
Pioneering strides in AI notwithstanding, Meta Platforms holds a distinctive advantage that could shield it in the event that the prophesied AI bubble undergoes a period of pricking. With ownership of the most frequented social media precincts worldwide, Meta’s flagship Facebook draws in a staggering 3.07 billion monthly active users (MAUs) as of the recent quarter, surpassing all competitors on the global social media landscape.
Expanding its dominion to include Instagram, WhatsApp, and Threads among other popular platforms, Meta’s ecosystem lures in a colossal 3.98 billion MAUs, creating an unparalleled magnet for advertisers. A near-monolithic 98% of Meta’s $134.9 billion in net sales for 2023 stemmed from advertising, underscoring the unassailable appeal of its advertising platform.
Under the visionary leadership of CEO Mark Zuckerberg, Meta Platforms continues to funnel investments into cutting-edge technologies, paving the way for augmented reality, virtual reality devices, and a myriad of metaverse solutions. Bolstered by a substantial war chest of $65.4 billion in cash, cash equivalents, and marketable securities, and with over $71 billion in net cash from operations, Meta Platforms stands as a paragon of financial flexibility unrivaled in the social media sphere.