Photo credit: www.fool.com
The realm of AI investing doesn’t need to be turbulent. Here are three stable options characterized by exceptional management and promising long-term growth prospects.
Once a darling of the market, Super Micro Computer (SMCI 7.91%) saw its stock skyrocket in the two years leading up to March 13, 2024, with a staggering 2,760% increase. This surge was largely driven by demand from hyperscale data centers eager to adopt the company’s hardware for their AI applications.
Why I’m hesitant about investing in Super Micro Computer in 2025
However, this apparent growth seems to have been short-lived. The company faced scrutiny as several key financial filings were delayed, raising alarms about the reliability of its financial disclosures. Matters worsened when the company’s auditors resigned, expressing concerns over the veracity of information provided by Supermicro’s management and audit committee. Consequently, the stock experienced a dramatic drop, plummeting nearly 84.8% from its peak levels.
Recently, Supermicro’s stock has rebounded by over 125% from its lows in November, and the company has taken steps to rectify past mistakes. Although the delayed reports have now been submitted and a new auditor has been appointed, the choice of auditor—a downgrade from the reputable Ernst & Young—might leave lingering doubts. For investors prioritizing reliable management and trustworthy financial communications, the company has tarnished its reputation and will require time to regain trust.
Fortunately, numerous alternative investment opportunities within the AI sector offer strong management teams and reliable reporting. Here are three companies I find more appealing: Alphabet (GOOG 1.75%) (GOOGL 1.68%), IBM (IBM 1.04%), and Nvidia (NVDA 5.27%). Importantly, all of these companies are audited by prominent firms—Ernst & Young for Alphabet and PricewaterhouseCoopers for IBM and Nvidia.
Nvidia’s stock is looking more appealing
Throughout much of 2024, I maintained that Nvidia’s stock price was excessively high, even opting to sell some shares in January for an impressive gain of 775% over three years.
Currently, the stock has dipped by 14% from its previous highs, making it more reasonably priced. Despite increasing competition in the processor market, Nvidia’s dominance in the lucrative AI accelerator sector appears secure and likely to endure.
The company also consistently excels in assessments of leadership quality. While stock price appreciation can influence employee satisfaction metrics, Nvidia’s leadership ratings have demonstrated a long-standing positive trend. For instance, Glassdoor recognized it as the best workplace in 2022, based on feedback collected prior to the launch of ChatGPT.
Alphabet’s formula for enduring success
Another mainstay in the list of top employers, Alphabet’s Google division garners high praise from employees for its competitive compensation and innovative culture. As a major player in AI computing platforms and services, Alphabet is positioned for continued growth.
Initially investing in Alphabet at a split-adjusted cost of $15.03 per share in 2010, I have not sold any shares since converting my Class C stock to Class A in 2014. To date, my investment has appreciated by 992%, and I foresee consistent growth in the future.
Alphabet has ingeniously diversified its offerings beyond its core search and advertising operations, ensuring resilience and adaptability. The next generation might recognize Alphabet for its advancements in autonomous vehicles or as a pioneer in quantum computing. Regardless, the company is well-prepared to navigate future challenges and lead the technology landscape.
Moreover, Alphabet’s current valuation appears attractive, with shares trading at 20.5 times trailing earnings, a reasonable ratio for a stable company. Given the company’s robust 17.3% compound annual growth rate (CAGR) over the past five years, it certainly merits higher price-to-earnings multiples.
IBM’s strategic approach to AI is yielding rewards
Lastly, IBM focuses its AI initiatives on enterprise clients, offering data analytics and large language models (LLMs) that prioritize data security and auditability—features often absent from competing products. After overcoming initial hurdles, IBM’s WatsonX platform is gaining traction among mission-critical clients, fostering loyalty with each successful contract win.
Consequently, IBM’s stock has seen a doubling in value over the past year, as more investors are waking up to its understated prowess in AI. The company exemplifies a commitment to long-term strategy and customer engagement.
While IBM once represented my top low-cost investment in the AI domain, Alphabet is now slightly more accessible following IBM’s recent gains. Nevertheless, IBM remains a strong contender for anyone seeking a promising long-term commitment.
Source
www.fool.com