2024-01-20 11:41:00 ET
It's 2024, and the stock market has been fascinated with artificial intelligence (AI) for a full year now. Stocks seen as direct plays on the AI trend have skyrocketed, especially if they have an early lead in some subsector of the AI revolution.
For instance, shares of AI-chip pioneer Nvidia (NASDAQ: NVDA) have more than tripled in 52 weeks. AI-based cybersecurity expert CrowdStrike Holdings (NASDAQ: CRWD) soared 177% higher over the same period. Data analytics specialist Palantir (NYSE: PLTR) made a 134% jump, also driven by its AI-powered products and services.
These AI-focused market darlings float on incredibly rich valuation ratios. The price-to-sales ratios in my sample groups start at 17 times trailing revenue for Palantir, stretching to 31 for Nvidia. Profit-based ratios are even wilder with price-to-free cash flow metrics in the mid-70s. CrowdStrike isn't even profitable in terms of earnings, reinvesting its operating income in growth-boosting AI research and heavy marketing budgets.
For further details see:
2024 Prediction: Why IBM Is the AI Stock to Buy and Hold for Magnificent Growth