Stocks to buy

3 AI Sleeper Stocks to Buy Before Investors Wake Up 

Artificial intelligence (AI) stocks are all the rage so far in 2023. The trend kicked off with ChatGPT and billions of dollars have since flowed into the AI space and into these stocks. However, not all stocks are being treated equally when it comes to artificial intelligence. In fact there are still several undervalued AI stocks out there.

After seeing the meteoric rise in Nvidia (NASDAQ:NVDA), investors have connected the dots, speculating that Advanced Micro Devices (NASDAQ:AMD) could be a future leader in the space too.

In effect, it’s got them thinking about AI sleeper stocks to buy or, put another way, the best AI stocks before they rise. Let’s dig through some of the obvious, and not so obvious, firms that could turn into hidden gem AI stocks.

Adobe (ADBE)

Source: JHVEPhoto / Shutterstock

As proof that Adobe (NASDAQ:ADBE) is one of the top sleeper stocks in AI, I had not really planned on using this company as the lead stock when I started this story. However, ADBE stock has posted back-to-back weekly gains in excess of 10%. I think that may be as investors are starting to realize that artificial intelligence is an asset for Adobe, not a threat.

When investors heard from Chegg (NYSE:CHGG) in early May, management explained how AI was having a negative impact on its business. Adobe did not have the same scenario brewing, but it seemed like there were some speculative concerns about how AI-generated art and images could impact other businesses.

Those concerns seem to be evaporating by the day now. At least for Adobe.

The company has begun to use AI to “solve problems in content understanding (including images, videos, documents, audio, and more).” Further, it’s also leveraging AI for “recommendations and personalization; search and information retrieval; prediction and journey analysis; content segmentation, organization, editing, and generation.”

Baidu (BIDU)

Source: monticello / Shutterstock.com

Baidu (NYSE:BIDU) seems like an obvious choice for an eventual AI powerhouse. The company is often referred to as the “Google of China” and for good reason. This sums it up nicely: “The search giant ranks number five in the world in traffic and is the most visited website in China.”

Investors have already keyed in on how Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) are using and are going to use AI. So naturally, Baidu should be a beneficiary of the technology as well.

That said, no one seems to realize it.

The stock is only 9% off its 2023 low and a big part of that is because of its 6.25% rally on Friday, May 26. Who knows, maybe that’s the world catching onto Baidu’s AI potential. The sluggish action occurs even as the stock trades at about 12 times this year’s earnings estimates and as analysts expect the bottom-line to grow more than 17% this year.

Given its growth rate, Baidu could easily be considered an undervalued AI stocks.

Deere (DE)

Source: Jim Lambert / Shutterstock.com

Deere (NYSE:DE) was founded almost 200 years ago and has been a staple in the agriculture industry for ages. It has since been dominating heavy machinery, lawn care, forestry and other industries as well.

At one point in late 2022, Deere stock was hitting all-time highs as investors plowed into what they considered a safe name with solid growth. Since then, there hasn’t been as much love. The company just reported earnings on Friday May 19 and at first, shares rallied more than 8% in response. However, shares ended the day lower by about 2% and it has since inched lower as well.

Shares now sit at a multi-month low. That’s even as the company beat on earnings and revenue, while sales grew 30% year-over-year to around $17.4 billion. Additionally earnings of $9.65 a share beat consensus expectations by more than $1.00. It was a blowout, and it came with increased guidance as well.

Some may say that while earnings are forecast to grow almost 40% this year, consensus estimates call for almost zero growth next year. That’s a good point, but considering that shares trade at less than 12 times earnings, Deere stock seems like a bargain.

So what makes it one of the undervalued AI stocks? How about: “Deere’s increasingly high-tech robotic and autonomous equipment helps farmers operate more efficiently by reducing operational costs, cutting down on waste, reducing the need for labor, and boosting crop yields.”

On the date of publication, Bret Kenwell 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.

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