Artificial intelligence (AI) is no longer a futuristic concept but a tangible reality permeating nearly every facet of our lives. As we move further into 2024, cheap AI stocks to buy present a multitude of opportunities for investors.
While tech giants leading the AI revolution like Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT) dominate the headlines, their lofty valuations can be increasingly problematic. This has led to many Wall Street analysts cutting their price targets on these giants. Furthermore, forward price-to-earnings ratios in the sector look extremely stretched, with many of the stocks trading in overbought territory. With AI applications being extremely vast, many hidden gems are well-positioned to benefit from AI tailwinds.
Therefore, astute investors will be more inclined to consider these companies than buy expensive AI giants at a potential top. Now, let’s discover the top 3 cheap AI stocks to buy to benefit from AI tailwinds in 2024 and beyond!
Automatic Data Processing (ADP)
Automatic Data Processing (NASDAQ:ADP) is a well-established player in the human capital management sector (HCM). As the sector rapidly embraces automation, AI will be pivotal to ADP’s long-term strategy.
ADP remains ahead of the curve when it comes to the implementation of generative AI and machine learning principles for business. Its generative AI platform, ADP Assist, offers robust AI capabilities from the industry’s largest HCM dataset. It can validate payroll information, detect fraud, offer insights, and answer questions about all aspects of the HCM experience. This will be extremely beneficial to its more than 1 million paying customers and further strengthen its already high retention rates.
In its latest quarterly financial results, revenue increased 7% year over year to $5.3 billion. Net earnings rose 14% year-over-year to $1.2 billion, or $2.88 per share. Moreover, adjusted EBITDA margin increased by 140 basis points to $29.3%, driven by healthy new business bookings. With a forward price to earnings of 25, ADP is one of the best cheap AI stocks to keep on your radar in 2024.
Godaddy (GDDY)
Godaddy (NYSE:GDDY) is a global leader in web hosting and domain registration. The company has been leveraging AI to enhance its customer experience and streamline operations. Its extensive use of AI spans from personalized customer support to sophisticated marketing tools for small and midsize enterprises (SMEs).
AI plays a crucial role in Godaddy’s operations. The company’s new Airo platform provides an unparalleled customer experience providing its customers with a full suite of AI tools. Some of its features include AI-generated logo creation, social media ad creation, email marketing, and more. In FY23, Godaddy delivered extremely impressive earnings results as management continued to execute on strategic priorities. Net earnings skyrocketed nearly 295% year over year to $1.4 billion, with free cash flow surpassing $1 billion for the first time.
Its diverse platform offerings also contributed to notable EBITDA margin expansion. Additionally, the company recently joined the S&P 500 on June 21st. This is an extremely positive tailwind as major funds, ETFs, and institutions will be forced to buy up the stock. Godaddy offers a significant growth potential with a relatively low price-to-earnings ratio, making it one of the top cheap AI stocks to buy now.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM), a giant in the semiconductor industry, is undoubtedly one of the best cheap AI stocks to buy in 2024. Known for its Snapdragon processors, Qualcomm’s chips power a wide range of devices, from smartphones to laptops, and IoT devices.
The increasing demand for artificial intelligence has provided a significant boost to the semiconductor industry in 2024. Led by AI GPU giants such as Nvidia, the market has soared to unprecedented heights. This has many investors questioning its valuation and highlighting the potential untapped value of companies like Qualcomm. In its latest quarterly financial results, the company reported strong earnings at the high end of its guidance.
Net earnings increased 37% year over year to $2.33 billion, driven by strong performance in its automotive platform. The company’s Snapdragon X platforms continue to gain traction, including its recent blockbuster deal to supply AI chips for Microsoft’s Surface PCs. With a forward price-to-earnings ratio of 18, Qualcomm represents a compelling opportunity among cheap AI stocks to buy in 2024.
On the date of publication, Terel Miles 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.