After NVIDIA's (NASDAQ:NVDA) astounding AI-fueled earnings results and guidance last week, its valuation briefly vaulted past the $1 trillion mark and Wall Street analysts scrambled to jack up estimates on the company. But that massive surge makes Nvidia a tricky buy right now: InvestingPro’s fair value algorithm calls the stock overvalued at current levels, with some 30% potential downside risk.
So if you’re itching to jump on an AI play, where should you be looking? Five VIP Pro Picks have made the cut, per InvestingPro metrics, and Baidu (NASDAQ:BIDU) stands out among them as wildly undervalued.
This week’s picks all look poised to benefit from the AI explosion. But, importantly, they’ve also earned top marks from InvestingPro, indicating a fantastic track record on profits, cash flow, and other critical indicators - which can give you peace of mind even as you get in on this scorching hot trend.
Altogether, each of these picks boasts a commanding InvestingPro financial health score of 2.75 or more out of 5, which for the last 7 years has indicated outperformance vs. the S&P 500.
Turning to Baidu, the China-based search giant just announced that it will officially launch a generative AI large-language model “very soon” in order to upgrade its search engine and power its Ernie Bot app - in the mold of the ubiquitous ChatGPT - aiming to “reconstruct Baidu’s mobile ecosystem with a native AI approach.” On top of that, the company is setting up a 1 billion yuan ($145 million) venture capital fund for AI-focused start-ups.
Not only is Baidu positioning itself ahead of the AI trend, but the company’s financial metrics are rock-solid, giving it a comfortable InvestingPro financial health score of 2.93 that reflects its substantial bottom-line growth, even as the stock trades at a discount. Baidu’s price-to-earnings ratio, for instance, is quite low relative to its recent profit growth, and it has recorded a 475% leap in cumulative diluted earnings per share over the past three years.
Most stunningly, InvestingPro’s fair value algorithm says Baidu’s shares have more than 40% upside from current levels. And Wall Street agrees: Analyst targets call for a 36.5% surge from here.
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Data as of June 1, 2023.