We recently published a list of 10 Trending AI Stocks to Watch in September. Since Hewlett Packard Enterprise Co (NYSE:HPE) ranks 9th on the list, it deserves a deeper look.
Sam Stovall, chief investment strategist at CFRA Research, said while talking to CNBC in a latest program that since 1990, the market on average gains about 18% between the last rate hike and the first rate cut. However, during the 30 days after the first rate cut, the market historically “tread water,” gaining less than “one half of one percent.”
“Most of the action is below surface however, in the sectors, areas where a lot of the leaders be in the defensive areas but I have to add technology in there because investors don’t want to be giving up on the growth,” Stovall said.
Stovall pointed to another important historical data point regarding election years. He said that usually August and September are slow months in the stock market, but during election years the trend shifts to September and October, with markets historically rebounding in November and December once the uncertainty around the election subsides. The analyst recommended investors to position for a post-election rally which he believes buoys growth stocks.
For this article, we chose the top 10 AI stocks currently on investors’ radar following important news, earnings and analyst ratings. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
manaemedia / Shutterstock.com
Hewlett Packard Enterprise Co (NYSE:HPE)
Number of Hedge Fund Investors: 58
Hewlett Packard Enterprise Co (NYSE:HPE) recently posted upbeat quarterly results and guidance amid strong AI server demand.
Morgan Stanley analysts noted a modest upside in Hewlett Packard Enterprise Co (NYSE:HPE) third-quarter results but kept an Equal-weight rating on the stock with a $21 price target. Analyst Meta Marshall commented that while more growth was expected from the Intelligent Edge segment, factors such as the ongoing deal with Juniper and slow demand in international markets likely tempered the results. Despite this, there was no indication of a further decline in global demand.
Hewlett Packard Enterprise Co (NYSE:HPE) saw its adjusted gross margin fall by 410 basis points year-over-year and 130 basis points sequentially, largely due to lower margins in its AI server business. However, the company’s Server segment grew by 35.1% year-over-year, driven by the rapid rise in AI workloads, which also contributed to the lower gross margin.
But analysts believe this decline in AI server margins is temporary because the company’s AI offerings include both products and services. Services currently make up only about 10% of total AI revenue. As AI server growth stabilizes, the mix of higher-margin services should increase, boosting overall profitability.
Overall, Hewlett Packard Enterprise Co (NYSE:HPE) ranks 9th on Insider Monkey’s list titled 10 Trending AI Stocks to Watch in September. While we acknowledge the potential of Hewlett Packard Enterprise Co (NYSE:HPE), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HPE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.