Four AI Alternatives For Investors Late To The Party

Artificial Intelligence (AI) stocks have driven market performance since the turn of the year with the industry's biggest technology innovators and chip manufacturers fueling Wall Street’s appetite for generative AI. 

The Financial Times reported that the MSCI Index climbed 7.7% throughout the first quarter of the year as stocks managed to outperform bonds since 2020. On Wall Street, sentiment regarding inflation and interest rates began softening, leaving more legroom for investors looking to gain exposure to artificial intelligence. 

Big names such as Nvidia (NASDAQ: NVDA) and Amazon (NASDAQ: AMZN) remain on investors' radar as global chipmakers, Nvidia added more than $1 trillion in market value during the first three months of the year. 

Current industry estimates project that total global spending on AI applications and tools will reach more than $301 billion by 2026, with generative AI revenues topping $55.7 within the next three years, according to a report by IDC. 

Companies are embracing AI adoption around every turn, looking towards digital solutions to drive improvements and increase exposure for more sustainable investment in artificial intelligence. 

Fortunately, the success of AI isn’t camped within the technology and software industry but instead sees other sectors catching wind of these innovative products and services as they look to cut spending on overheads and stabilize their bottom lines following a tumultuous economic shakedown in the post-pandemic era.

For businesses, this technology brings the opportunity to innovate, while investors late to the party can seize the moment to catch up to their peers and leverage digital advancement before they begin reaching stratospheric heights. 

The time to act is now 

Despite the macroeconomic headwinds - right now seems to be one of the best times to be on the market in terms of AI-focused investing as companies outside of the technology sector begin to rapidly adopt new systems and leverage advanced digital tools to streamline their operations. 

Traditionally, investors were somewhat restricted, with not many often venturing outside of the sector in hopes of finding rare gems that can promise them muted returns. Fortunately, conditions have changed in their favor, and for latecomers, there are multiple reasons to be optimistic. 

The Trade Desk

Artificial Intelligence has been a game-changer for the advertising industry, allowing various players the ability to use more accurate data metrics to better understand consumer trends and making the work of advertisers easier in finding the appropriate target audiences. 

For companies such as The Trade Desk (NASDAQ: TTD), an American multinational technology company, artificial intelligence enables them to further pursue more precise marketing automation efforts, including the delivery of products and services to target audiences through hyper-specialized or personalization metrics. 

For quite some time, The Trade Desk has started venturing into newer avenues, allowing them to further leverage the capabilities of AI technology, which in turn has helped them improve their digital content delivery to users and strengthen their position within the industry. 

On paper, The Trade Desk has a straightforward business model, which sees them partnering with advertisers to help brands place ads with publishers. The Trade Desk is considered the link between brands and publishers in the connected TV (CTV) arena. 

Current projections estimate that connected TV advertising spending in the U.S. could climb to more than $42.4 billion by 2027. This will largely be driven by tailored, skippable ads that can serve wider audiences, and streamline the connection between online and TV advertising. 

Based on their financial performance for last year, The Trade Desk reported roughly $1.95 billion in revenues, accounting for a 23% year-over-year improvement. Additionally, the company reported a record $9.6 billion in spending on their platform, as a growing number of online advertisers are working towards partnering with the company as it can provide them with more accurate and data-centric advertising solutions and as more consumers are moving online. 

On the stock market, performance is following a similar trajectory with TTD already up by 21.59% since the start of the year. Prices managed to peak at just under $90 per share in the middle of February before sliding. Currently, shares are trading in a range between $80.00 and $88.00. 

Opera 

Search engine companies are pouring billions into AI development, making the technology more accessible and widely available than ever before. The likes of Google and parent company Alphabet (NASDAQ: GOOGL) have already seen their balance sheets swell over recent months as the company aims to become one of the leading developers in AI search engine technology. 

However, Opera (NASDAQ: OPRA) could be the strong competition Alphabet needs, and while Opera is not necessarily the largest in terms of user market, the company is quickly shaking up to become an AI-focused powerhouse that’s now leading the race for innovation. 

For instance, at the beginning of April, the company announced that it would be adding 150 local Large Language Model (LLM) variants to its Opera One Browser. This would mean that Opera would become the first Internet browser to have local LLMs made accessible and managed by one Internet search engine browser. 

The development would bring together approximately 50 variants of models and will be supported on Opera’s online Aria AI service. This announcement came roughly several weeks after the company reported that they are planning on adding more features to their online browser, Opera One, which will help provide users with a more transformative online experience and help set the stage for the future of online browsing experiences. 

Despite the stiff competition, Opera is considered an alternative compared to Google or Amazon. Yet, despite this, the company is not a second-best option, and instead an innovation powerhouse that’s quietly helping to transform the industry, and developing some of the most advanced search engine-based tools and applications. 

For the fourth quarter, Opera reported strong revenue of $113 million representing a 17% year-over-year improvement, and topping their guidance of $110 - $113 million range. Their full-year revenue topped out at $397 million, while their margin expansion improved by 23.6%. 

Monthly Active Users (MAUs) remain elevated, with the company seeing more than 313 million MAUs by the end of the fourth quarter, a slight improvement from 311 MAUs during the third quarter. The Opera GX, their native gaming browsers, witnessed a similar improvement of 7%, increasing from 26.1 million in the third quarter to 27.8 million by the end of the fourth quarter. 

Flex 

Companies outside of microchip manufacturing have been spearheading a new line of product and service development solutions through the assistance of artificial intelligence. For Flex (NASDAQ: FLEX) an electronics manufacturing and design company, AI-based technology is now enabling them to further their vision of becoming the leader in supply chain management and digital manufacturing solutions. 

Since 2022 the company has been developing and implementing native AI models to support their manufacturing operations, further improving their efficiency efforts and helping them boost their capacity levels. 

For instance, the company mentioned that by implementing a combination of native and local AI or Machine Learning (ML) models within their inspection process they have since reduced their inspection time, leading to improved quality control measures and helping boost output. 

Relying on more advanced equipment procedures, and the ability to inspect products or detect any defects, which are often missed by human inspectors, the company not only improves their workflow and operations but greatly improves the level of quality and standard of products that exit their production lines. 

Based on their findings, the company claims that by rolling out AI or ML models across several processing plants they’ve managed to increase efficiency by 30% while noting a 97% payback on the initial investment of these technologies within a month. 

For companies such as Flex, artificial intelligence isn't simply driving their productivity or helping them cut costs, instead, it’s becoming a livelihood that sees them furthering the industry and introducing more advanced and highly sophisticated tools on the market without having to compromise on their quality and helping them spearhead the race for innovation. 

For investors that have been late to adopting AI into their portfolios, this brings perhaps the chance to leverage the position Flex currently has in the market, and where it’s hoping to be in a couple of years. 

In January, Flex reported their third quarter fiscal 2024 financial results with some earnings coming in above Wall Street’s expectations. For starters, the company reported $7.1 billion in net sales, with an operating GAAP income of $348 million. Total adjusted income was $477 million, and GAAP Earnings Per Share finished the quarter strong at $0.45. 

The company is expected to see revenue guidance of $26 billion to $26.6 billion, with GAAP EPS of $1.42 to $1.52.

On the stock market, things have been improving for much of the year, with FLEX up more than 30% since the start of 2024. Shares hit a bump halfway through March sliding 12%, however, a recovery of 7.87% has helped the stock regain its traction. Based on 12-month performance, stock performance Is up by more than 80% and FLEX could be a cheap way for investors to get their foot in the door, with current shares trading below $30.00.

Jabil 

Fiber optic communication services and products could continue to expand in the coming years as more people move their activities online and commercial demand for artificial intelligence sees optic software developers building more advanced and cutting-edge technological tools. 

While microchip manufacturing might be driving the industry, for now at least, those companies putting in the work in the field, such as Jabil (NYSE: JBL) could bring a new avenue of entry into the AI sector for investors. 

Jabil isn’t a company that’s constantly making headlines, however, they’ve been playing under the radar and it’s only in recent months that investors have started noticing them. The company focuses on manufacturing and engineering key materials for various optic services, including automation, software delivery, and supply chain management. 

More than this, the company is found in several key industries, working alongside some of the biggest names, and generating a handsome return on their efforts. Everything from automotive to commercial trucking and buses, storage solutions, defense, aerospace, and digital commerce, Jabil has found a way to deliver an exceptional product and service that is quickly captivating high-league players. 

Unlike other contenders on this list, Jabil slightly missed the mark following its most recent second-quarter results ending February 29, 2024. For instance, the company reported revenue of $6.8 billion, with adjusted earnings of $1,68, however, these were below Wall Street expectations of $6.89 billion. 

More than this, Jabil’s top-line performance was down by 16%, which fell from $8.1 billion to $6.77 billion for the same quarter a year before. The company explains that a higher inflationary environment and strong demand led to an increase in overhead costs and further cutting into their top-line performance. 

While the company expected higher performance figures following the sale of its mobility business, with company executives delivering guidance of fiscal 2024 revenue of $31 billion, lower revenue markets in 5G, renewable energy, and digital printing led them to cut their guidance. 

Stock slightly reacted to the news of the company not making estimates, although things managed to remain relatively consistent until mid-March after which stocks plummeted by nearly 17% in single-day trading. 

The shake-up however wasn’t long-lived and the stock quickly managed to regain its footing having improved by 14% since the sudden slump. Overall, stocks are up nearly 10% year to date, and the long-term expectation is that JBL could deliver solid gains in the coming months should the company meet its expected guidance. 

Before it’s too late

Investors late to the party need not fret, there is still hope left, and under-picked AI stocks could help them build a robust approach to diversifying their AI options with companies outside of the technology and software sector. 

By investigating how other industries have been adopting and using AI tools to grow their business, investors can develop clearer guidance and allow themselves to build a strategy that requires them to place focus outside of key sectors. 

While it’s possible to unlock the potential of artificial intelligence in a more diversified way, investors can seek opportunities that are less expressed in the news headlines, and perhaps draw in less volatility through experience diversification.