As I mentioned in my Trade of the Day article for InvestorPlace, the smart money is betting against Nvidia (NASDAQ:NVDA). If it was just a one-off incident, maybe it wouldn’t be so alarming. However, for multiple sessions, options traders have been placing wagers against NVDA stock. The company that provides the hardware for machine intelligence may have more to drop.
Of course, other generative AI stocks have struggled amid the crimson wave; indeed, not many innovation-related enterprises have been exempted from the crash. Still, for the patient, forward-looking investor, these machine-intelligence plays look awfully enticing.
Intuit (INTU)
Finance and tax software Intuit (NASDAQ:INTU) makes for an intriguing idea for hidden generative AI stocks, thanks to its underlying utility. Taxes are complicated, especially for those who operate as independent contractors or who run small businesses. Even employees — who typically file simplified tax returns — face complications when dealing with certain taxable events. This is where machine intelligence can help.
Also, Intuit just happens to be one of the generative AI stocks holding its own. For example, data from Yahoo! Finance notes that the S&P 500 return comes in at 19%. During the same period, INTC stock gained 25%. To be sure, Intuit suffered late last week due to the tech sector’s fallout. However, the pain wasn’t nearly as pronounced as other tech entities.
Overall, that’s encouraging, overall as the company has been performing well. In the past year, since the first quarter, Intuit posted an average earnings per share of $4.16, above the average estimate of $3.77. By the end of the fiscal year, analysts are projecting EPS growth of nearly 17% to $16.83. Revenue should rise 12.6% to $16.19 billion.
UiPath (PATH)
Moving onto the other side of the spectrum, UiPath (NYSE:PATH) represents one of the hardest-hit generative AI stocks. Again, citing data from Yahoo! Finance, PATH stock incurred a 52-week loss of 29.52%. Again, the benchmark equities index gained over 18% during this period. While an ugly situation, forward-looking investors may focus on the company’s core strength: providing robotic process automation software that enhances the capabilities of machine intelligence.
PATH stock might be ugly, but a silver lining could exist in this mess. Right now, shares trade hands at 4.78x trailing-year sales. That’s not particularly undervalued compared to other software companies. However, in the past year, the market accepted a multiple of 8.85x. It’s conceivable that with the right catalyst, UiPath could return to its prior valuation.
How feasible is this projection? Well, analysts anticipate that fiscal 2025 (calendar 2024) sales will rise to $1.41 billion. That’s up 7.7% from the prior year. In the following, revenue might hit $1.58 billion, up 11.9% from forecasted ’24 sales. Thus, PATH ranks among the generative AI stocks to consider.
Veritone (VERI)
Operating in the software infrastructure field, Veritone (NASDAQ:VERI) offers AI computing solutions and services in the U.S. and other markets. As with its peers among generative AI stocks, VERI is volatile. Per Yahoo! Finance, its beta stands at 3.34. Keep in mind that the beta for the stock market is only 1. Sure enough, shares lost almost 41% of equity value in the past 52 weeks.
Circumstances look ugly now but with the company’s aiWARE platform — an AI operating system — Veritone could potentially enhance the capabilities of machine intelligence. As such, it may be worth keeping on your radar. One of the enticing factors when it comes to the recent volatility is, of course, valuation. Right now, shares trade at 0.7x sales, which is low as it is. In the past year, the metric stood at 0.92x.
Further, the lone analyst covering VERI stock believes that revenue has the potential to hit $137.9 million. That would be up 8.1% from the prior year’s tally of $127.56 million. Fiscal 2025 could add to that, with sales rising to $141.3 million.
Synopsys (SNPS)
A member of the infrastructure software industry, Synopsys (NASDAQ:SNPS) provides electronic design automation software products that are used to design and test integrated circuits or ICs. With machine intelligence putting more demand on the semiconductor arena, Synopsys could rise in value. As enterprises invest more dollars into their advanced protocols, the company’s revenue streams should expand accordingly.
What’s interesting here is that SNPS stock has been holding its own. In the past one-year period, the equity gained just under 14%. Again, that’s quite decent compared to the benchmark index’s performance of 18%-plus. It’s also less volatile than other generative AI stocks, featuring a five-year beta of 1.07.
Now, it did take a hit on Friday, losing more than 6%. Nevertheless, that could be an opportunity. Yes, SNPS stock trades at 12.46x sales, which is quite high compared to the industry. However, in the past year, the market previously accepted a multiple of 13.53x.
By year’s end, sales could rise 13.1% to $6.13 billion. It’s one of the top ideas for generative AI stocks to keep on your watchlist.
Elastic (ESTC)
Another entity within the application software realm, Elastic (NYSE:ESTC) is an AI-based search company. It delivers hosted and managed solutions, designed to run in hybrid, public or private clouds, along with multi-cloud environments. Primarily, the company offers its Elastic Stack, a set of software products that assess and store data from multiple sources.
Moving forward, ESTC could be an attractive idea for generative AI stocks, thanks to its ability to absorb unstructured data and yield meaningful results out of it. Sure enough, the market recognizes the opportunity. In the past year, ESTC stock gained nearly 64% of equity value. However, last Friday, shares incurred a loss of nearly 5%.
That could be an opportunity. Admittedly, ESTC runs hot, carrying a sales multiple of 8.38x. However, during its fiscal fourth quarter, the company ran a multiple of nearly 10x. So, it’s relatively undervalued.
By year’s end, sales may rise to $1.48 billion, up 16.6% from last year. In the following year, revenue could bump up again to $1.73 billion.
C3.ai (AI)
Billed as an enterprise AI software company, C3.ai (NYSE:AI) is becoming more intriguing as one of the generative AI stocks. That’s because it serves a wide range of entities, including government agencies. This includes the defense sector, which ranks as one of the growth arenas. While the market is struggling, the relevance of defense plays has risen due to geopolitical flashpoints.
To be fair, that dynamic hasn’t spared AI stock, which lost more than 5% on Friday. Also, critics will point out that C3.ai has been a laggard, losing over 35% of its value in the past year. Still, the bright side is that the valuation of the enterprise looks more attractive. It’s not objectively cheap compared to the industry, carrying a 9.39x sales multiple. However, in the past year, this metric stood at 11.53x on average.
Also, it’s worth pointing out that roughly in the year-ago quarter, the sales multiple stood at 17.29x. So, investors may be getting a deal here. Covering experts are looking to the current fiscal year to generate $383.39 million on the top line. If so, that would imply growth of over 23.4%.
Cerence (CRNC)
A multinational software company, Cerence (NASDAQ:CRNC) develops AI assistant technology, primarily for the automotive sector. Fundamentally, it’s one of the most relevant generative AI stocks thanks to its synergistic potential. In the mobility space, companies are already digging deep to reach the holy grail of full autonomy. Therefore, Cerence could be part of a massive paradigm shift.
However, CRNC stock is incredibly risky and volatile. To be clear, both things — strong narrative and wild volatility — can be true at the same time. Basically, the bottom line here is that investors shouldn’t enter without fully understanding the dangers. In the past 52 weeks, CRNC stock dropped almost 90%. That’s a good start in terms of risk disclosure.
Is there a silver lining? Well, I suppose that CRNC stock trading at 0.32x sales may be attractive. In the prior year, this multiple stood at 2.87x. Now, a lot needs to happen before Cerence regains that same valuation.
For fiscal 2024, analysts are looking at revenue of $324.6 million, up 10.2%. That’s not nothing. However, more conservative speculators may want to wait until later this week when Cerence discloses its Q2 earnings results.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.