This Undervalued AI Stock Is Trading at a Discount to Its Peers. Here's Why It Won't Last | The Motley Fool

"The theme of artificial intelligence (AI) has been driving the stock market higher for the past few years -- and that's pushed valuations of many AI players higher too. Investors have loaded up their portfolios with shares of these companies that, in some cases, already are seeing revenue soar. Two great examples are AI chip leader, Nvidia, and software company Palantir Technologies -- business at both is booming as customers pile into their AI offerings."

"While Nvidia's stock isn't expensive at today's levels, it still is pricier than it was a few months ago. And Palantir's valuation has soared to a mind-blowing level, with shares trading for 229x forward earnings estimates. This doesn't mean that every AI leader is trading at high levels, though. One major player actually trades at a discount to its peers right now, and it's even the cheapest of the Magnificent Seven tech stocks that pushed the S&P 500 to record highs in recent years."

"The company I'm referring to is one that, early last year, said: "Moving forward, a major goal will be building the most popular and most advanced AI products and services." The company has poured investment into AI, progressively increasing this spending, and has made moves to hire AI experts and even created a superintelligence lab earlier this year."

Artificial intelligence has driven stock-market gains and elevated valuations across many AI-focused companies. Investors have concentrated holdings in top AI players, producing soaring revenues for firms such as Nvidia and Palantir Technologies. Nvidia remains relatively expensive compared with prior months, while Palantir trades at about 229 times forward earnings. Not all AI leaders carry high multiples; one Magnificent Seven member trades at a discount and currently ranks as the cheapest among the group. That company, Meta Platforms, operates Facebook, Messenger, WhatsApp, and Instagram, reaching 3.5 billion daily users and deriving substantial advertising revenue while ramping AI investment and talent.

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