Artificial Intelligence Equity Highlight #1: Splunk (SPLK)
Splunk Inc. is a name renowned in the niche of “machine learning,” a sophisticated subset of artificial intelligence (AI). The company’s focus on leveraging AI for IT operations has opened doors for businesses to economize by automating traditional IT tasks, thereby eliminating the need for extensive IT departments.
Despite a hiccup with a -5.8% dip in sales in FY 2021 due to the pandemic, Splunk’s financial performance has been impressive, boasting double-digit growth annually for a decade prior. The rebound to 20% growth in FY ’22 and a subsequent 36% increase in FY ’23 elucidates the company’s resilience. Analysts project a 7% sales growth for the current fiscal year (FY ’24), followed by a further rise of 12.8% in FY ’25. Moreover, Splunk is on the cusp of transitioning into profitability.
As for the stock performance, SPLK has surged 58% from October’s technological sector lows. Despite trading below half of its August 2020 zenith above 220, its recent gains since its May trough suggest a robust recovery. Considering the discounted value of SPLK amidst the burgeoning AI stock market, it presents an enticing prospect for investors.
Artificial Intelligence Equity Highlight #2: Tencent Holdings (TCEHY)
While Chinese equities have been facing headwinds due to the trade wars and pandemic’s origin, Tencent Holdings has managed to maintain a firm stance. As the pandemic recedes, China’s leading social media conglomerate, the brain behind the WeChat app, is back in action.
In a strategic move to augment its voice-to-text and virtual assistant services, Tencent recently established an AI lab in Seattle. Although the TCEHY share performance has remained stable since the pandemic’s lows in March 2020, it’s shown a remarkable recovery of 78% since hitting its low point of $25/share in October.
With a forecasted earnings improvement of 41% for the year, a relatively modest forward price-to-earnings ratio of 20, and a resurgence above the 50-day moving average for the first time in two months, TCEHY is demonstrating promising signs. The favorable technical and fundamental outlooks indicate that the next significant movement for the stock could likely be upward, making it a worthwhile consideration at current prices.
Investors may want to contemplate integrating these AI equities into their portfolio. The broader AI market trend has been beneficial for these stocks and has the potential for even greater rewards as AI adoption accelerates globally and the world economy recovers.
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