It is indisputable which companies were at the forefront during the advent of the artificial intelligence (AI) era. Nvidia’s processors are a common component in high-performance AI systems across the globe, and their work in addressing the COVID-19 pandemic brought Palantir Technologies’ software into the limelight. Moreover, both companies have seen remarkable stock growth over the past few years.
Moving forward into the new phase of AI development, however, there are some unforeseen requirements arising. Companies are now playing catch-up with their competitors to stay ahead. Additionally, the market’s stocks are experiencing more fluctuations as investors begin to compare and contrast them. Fresh contenders are emerging on the scene.
Against this scene, let me share with you three artificial intelligence company stocks that are currently undervalued, making it an opportune moment to invest in them at a relatively low cost.
1. C3.ai
I’m observing C3.ai, which seems quite similar to Palantir in its function. They both offer software solutions that enable the use of artificial intelligence. However, compared to Palantir, C3.ai is relatively small, with a market capitalization of just $4 billion.
Don’t let its smaller size deter you, though. C3.ai packs a powerful performance punch.
The key differences between the two companies lie in their market focus and the way they deliver their solutions. While Palantir Technologies focuses on providing just a few platforms primarily for institutional and government use, C3.ai offers a variety of smaller, specialized applications designed mainly for businesses. For example, utility company ConEdison utilizes C3.ai’s technology to manage smart meters at customers’ homes, whereas oil and gas giant Shell is leveraging C3.ai’s expertise to optimize its production equipment for improved efficiency. Moreover, C3.ai is enhancing its AI agent solutions, which serve as an affordable replacement for human customer service representatives.
Over these years, I’ve noticed a significant expansion in this area, particularly with C3.ai. Although it hasn’t consistently turned a profit and likely won’t for some time, the market seems optimistic about any advancements that bring C3.ai closer to financial stability. This anticipation is even stronger now, given that the stock has dropped over 30% from its December high, despite a slight recovery from its April low.
As an excited investor, remember that C3.ai’s current profitability is absent. This means it could be a slightly riskier asset to hold, with potential for higher volatility compared to the usual stock market averages.
2. Applied Digital
Many investors are so engrossed in examining the hardware and software employed by AI data centers that they seldom ponder over the entities constructing them. One such constructor is Applied Digital, identified as APLD.
Building an AI data center isn’t just about piling up blocks and installing servers. In reality, these facilities consume vast amounts of electricity and generate substantial heat. Consequently, the expenses associated with them can soar to great heights.
Applied Digital effectively manages costs by strategically designing data center infrastructure that takes power supply and cooling into account. By leveraging local renewable energy and implementing comprehensive liquid cooling systems throughout the facility, as well as planning for future growth in server capacity, the company offers innovative, cutting-edge solutions tailored to the AI data center market.
Similar to C3.ai, this business exhibits some volatility. This year, our projected revenue is expected to surge by around 33%, but next year, growth is anticipated to decelerate to less than 8%. The high cost of establishing AI infrastructure initially is largely responsible for this unpredictability. These are substantial investments that demand substantial funding, which can be halted at the slightest hint of economic turbulence. In light of this, Microsoft has recently scrapped plans for a few new data centers in Ohio, and Amazon is re-evaluating several as well. To put it into perspective, Astrid Atkinson, co-founder and CEO of Camus Energy, a grid-optimization software provider, predicts that only a fraction of the nation’s planned data centers will actually be constructed. This prediction helps explain why Applied Digital’s shares have not shown significant net growth since late last year, experiencing a couple of substantial sell-offs during that period.
Stepping back momentarily, let me reflect on the grand scheme of things. The importance of artificial intelligence in our long-term future remains undiminished. It’s only a matter of time before the sector requires the services that this company offers.
It’s worth noting that almost all analysts covering this stock view Applied Digital as a solid investment choice, with an average predicted price of $14.61 per share, which represents a significant increase of over 30% compared to the current market price of APLD stocks.
3. DigitalOcean
In summary, consider including DigitalOcean (DOCN) in your portfolio of AI stocks. The stock is currently trading over 30% below its February high and over 70% lower than its 2021 peak. Analysts believe it’s currently undervalued, with a potential increase of at least 30%, but there may be even greater growth prospects in the future.
To put it simply, DigitalOcean isn’t like traditional data center builders or AI software providers. Instead, they offer the underlying cloud infrastructure and platforms that educational institutions can use to set up their own AI data centers. For instance, their GradiantAI platform is designed for developers, making it easy to create, grow, and deploy applications powered by artificial intelligence. It’s a bit like being somewhere between Applied Digital and C3.ai, but with a focus on providing the essential tools rather than building data centers or offering user-friendly AI software directly.
As an observer, I note that this company provides diverse options, including simpler web-hosting solutions, blockchain technologies, and video streaming tech. Interestingly, AI plays a significant role in their growth strategy, having boosted their revenue by 13% last year. This trend is anticipated to gain momentum over the next three years, with an expected slight increase in its pace.
The company’s growth trajectory appears to be strong and sustainable beyond the predicted timeline, primarily due to the fact that most of its income now comes from recurring revenues. This means that customers consistently pay for continued access to its services. In the first quarter of this year, the annualized revenue run rate was $843 million, compared to a reported $211 million for the specified quarter. (It’s quite evident that the company excels at retaining business once it is acquired.)
Absolutely, it’s not just beneficial, but quite lucrative indeed! Last year, the revenue stood at a whopping $781 million. From that, they managed an impressive $328 million in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). To add to this, they reported a free cash flow of $135 million. While there are larger and more profitable companies in other sectors, none in the same field offer such promising prospects as this one does.
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2025-07-23 11:51