The plunge in technology stocks seems to be reversing course in record time. Still, there are Strong-Buy-rated tech stocks that still haven’t participated in the relief rally enjoyed by most names in the last few sessions. With the confidence of Wall Street analysts and a number of catalysts, the following trio — NVDA, SNOW, and BIDU — deserve a spot atop one’s shopping list before August comes to a close.
Therefore, let’s examine each name using TipRanks’ Comparison Tool to determine which highly rated tech stock is the best of the bunch.
Nvidia (NVDA)
Shares of top AI company Nvidia are moving higher again as a number of analysts recommended buying the latest dip for a shot at a glorious rebound. Given the pace of NVDA stock’s gains, we may very well be looking at higher highs before the third quarter concludes. I’m staying bullish on the stock, primarily because Nvidia didn’t do anything unforgivable to deserve the recent beatdown.
While mild Blackwell production delays due to minor design errors may be a slight hair on an otherwise flawless generational growth story, I find that NVDA stock crumbled mostly due to a rapid shift in sentiment. Every once in a while, fear and anxiety take hold on Wall Street, causing some to sell for no real good reason other than shares falling.
In around two weeks’ time (August 28, 2024), Nvidia’s next quarterly earnings will be on tap. While expectations will be high, some analysts, like those at Bank of America (BAC), believe that recent ROI (return on investment) jitters of investors are “premature and inconclusive.”
No hyper-growth company can keep at it for the long haul, especially one that’s worth a few trillion dollars. That said, it’s really hard to tell just where we stand in the AI boom. If it’s a multi-year boom (the likeliest timeframe in my view) that entails upgrading every year to the latest chip (Nvidia’s Blackwell line next year, then Rubin), the doubters could continue to be wrong about the stock.
Bank of America will probably be proven right in that it’s far too soon in the game to shift gears from thinking about full-on growth and market share gains to ROI. The good news is that investors are staying skeptical and demanding more on the profitability front early on in the game. This skepticism may very well be what prevents AI stocks from becoming a bubble. At around 44 times forward price-to-earnings (P/E), I just don’t see a bubble in the name unless you think Blackwell and Rubin will flop.
What Is the Price Target for NVDA Stock?
NVDA stock is a Strong Buy, according to analysts, with 37 Buys and four Holds assigned in the past three months. The average NVDA stock price target of $144.17 implies 22.1% upside potential.
Snowflake (SNOW)
Snowflake is probably one of the most hated cloud and AI software stocks on the market right now. With Warren Buffett’s Berkshire Hathaway ($BRK.B) selling its small SNOW position in the last quarter, there’s just one more big reason to cut one’s losses with the data warehousing and AI infrastructure company. Nonetheless, I’m inclined to stay bullish as Snowflake still stands out as one of the most compelling software ways to play the AI boom.
Further, the firm’s AI tech and talent seem severely underrated by investors who want to see results today without having to wait for them. As the Buffett sale and association with cyber breaches at AT&T (T) act as overhangs going into the coming quarter (due on August 21, 2024), there’s never been a better time to step in as a contrarian.
Apart from its fantastic slate of AI-enabling products (Cortex and Arctic), the company has also been active in exploring acquisitions and partnerships to further bolster its AI capabilities. Recently, Snowflake mulled a potential partnership with private Canadian AI firm Cohere. Such a deal could be a huge win for both companies. Cohere is a lesser-known AI firm seeking to take on ChatGPT-maker OpenAI, while Snowflake is hunting down Databricks in the cloud scene.
If Snowflake can team up with Cohere or buy the company (valued at $5.5 billion in its most recent funding round) outright, the firm may just be able to reverse and gain ground after shedding 68% of its value since its 2021 peak.
What Is the Price Target for SNOW Stock?
SNOW stock is a Strong Buy, according to analysts, with 25 Buys and eight Holds assigned in the past three months. The average SNOW stock price target of $200.97 implies 57.8% upside potential.
Baidu (BIDU)
Baidu is one Chinese internet firm that Dr. Michael Burry (from The Big Short) has been buying shares of in recent quarters. At writing, BIDU stock is one of the market’s biggest losers, down over 75% from its all-time high last seen in 2021. At 11.1 times trailing P/E (or 8.5 times forward), Baidu shares may very well be the cheapest way to gain exposure to cutting-edge AI models.
Given the depressed multiple and its AI capabilities, which may very well be among the best in China, I’m staying bullish. However, I acknowledge that it could take a lot of time and pain before BIDU stock proves its worth in one’s portfolio.
Baidu’s AI model Ernie may not be the best in the world of the most capable. But it doesn’t have to be the best for it to be a growth engine for Baidu. Why? The Chinese government wants citizens to use homegrown AI models that abide by its rules and regulations. Indeed, ChatGPT could blow Ernie out of the water, but it won’t be able to gain ground in the Chinese market.
In essence, Baidu’s Ernie could be the ChatGPT of China. As AI phones and PCs take off, Baidu could have the most to gain as the Chinese government shuts out global AI firms that will probably struggle to play by the rules in China. Even if it’s not Ernie alone that powers Chinese AI phones of the future, I don’t see much, if any, expectation baked into the stock at these depths.
Its P/E multiple is a fraction of that of American AI firms, thanks in part to the weak state of the Chinese economy and other geopolitical unknowns that can make Chinese investments seem more like a speculative gamble.
What Is the Price Target for BIDU Stock?
BIDU stock is a Strong Buy, according to analysts, with 13 Buys and three Holds assigned in the past three months. The average BIDU stock price target of $141.29 implies 63.6% upside potential.
The Takeaway
The following tech firms seem primed to buy after the market’s latest dip. Whether we’re talking about Nvidia and the likely continuation of its AI chip dominance, Snowflake and its ever-improving slate of AI tech and tools, or Baidu and Ernie’s shot to be China’s preferred AI model, each name has lots to look forward to in the medium term.
Of the three, analysts see Baidu as having the most room to run for the year ahead (63.6%). Given the geopolitical risks, though, I’d rather go with Snowflake, which also has a respectable implied upside of nearly 58% from current levels. It’s been nothing but negative when it comes to SNOW stock of late. Perhaps a surprisingly decent quarter could spark a double-digit bounce.
