The latest buzz on Wall Street is undoubtedly Artificial Intelligence (AI). NVIDIA has been the biggest beneficiary, with its stock soaring over 240% in the past 12 months.
This is because NVIDIA is at the heart of the AI revolution, creating dedicated chips that power AI.
However, the stock price has risen so much that the Price-Earnings Ratio (PER) exceeds 71, which is considered high compared to the general PER of around 20.
As a result, U.S. investment specialist media Motley Fool recommended Meta, the parent company of Facebook, and China’s search engine Baidu instead of NVIDIA on the 5th.
Both companies also focus on AI, and their stock prices are significantly undervalued compared to NVIDIA.
Meta is leveraging AI in various ways. It monitors comments and uses AI to introduce appropriate content to users.
Even if the AI bubble collapses, Meta owns some of the most popular social media platforms, such as Instagram, WhatsApp, Facebook, and Threads.
Above all, it provides solutions enabling companies to effectively deliver messages to users using AI, improving their sales.
Meta’s social media attracted about 4 billion monthly active users last quarter. That’s half of the world’s population.
The industry is well aware that Meta’s social media is the most effective way to reach consumers, which indicates that Meta has the power to set the price of advertising.
Meta’s stock price has also risen significantly, surpassing $500 last weekend. However, its PER is around 33, which is about half of NVIDIA ‘s.
China’s Baidu is also recommended. Although Baidu has aggressively invested in AI, its core business is still an internet search engine.
In January, Baidu accounted for about 65% of the internet search market in China, 44 percentage points higher than the runner-up. It’s not an exaggeration to say that it practically monopolizes the search market of 1.4 billion people.
Baidu’s search engine is secured as their “cash cow,” allowing the company to make timely and effective investments in AI through it.
Moreover, companies know that targeting consumers through Baidu’s search advertising is effective. Its cash flow is so good that there won’t be a problem even if the AI bubble bursts. As of 2023, Baidu has secured over $28 billion in cash.
The most important part? Baidu’s PER is only 13.
sinopark@news1.kr