We recently published a list of 10 AI Stocks Taking Wall Street by Storm. In this article, we are going to take a look at where Keysight Technologies, Inc. (NYSE:KEYS) stands against other AI stocks taking Wall Street by storm.
According to a recent Reuters report, the U.S. will empower tech giants to act as gatekeepers worldwide in its latest efforts to tighten its grip on global AI chip access. The move aims to effectively tighten restrictions, hindering China’s ability to acquire critical resources for developing its own AI capabilities.
READ ALSO: Top 10 AI News You Shouldn’t Miss and 10 AI Stocks Taking Wall Street by Storm
The scheme, which could be released this month, would require the companies to comply with strict requirements. This involves reporting key information to the US government and blocking Chinese access to AI chips. According to sources, doing so will allow them to offer artificial intelligence capabilities within the cloud overseas without a license.
While the government is keen on making tech giants gatekeepers, news reported by the Financial Times reveals how Blue Whale Capital investment fund has reduced its stakes in major US technology companies amid concerns about the costs of artificial intelligence. Besides one chip-maker tech giant out of the Mag 7, the fund is increasingly less positive on the rest of the Magnificent Seven tech stocks because of spending on AI, as reported by fund manager Stephen Yiu.
Even though tech giants are adamant that their spending is going to pay off in the long run, the move implies how not everyone is easily convinced. Jim Tierney, a growth stock investor at AllianceBernstein, noted how all of these companies, who are reportedly spending huge amounts of money, will have a hit to their profit margins. This hit is going to be even more noticeable in 2025.
In this regard, a report by The New York Times reveals how OpenAI could reportedly see a loss as big as $5 billion. The company’s largest expense comes from the computing power provided by its key partner and major investor, whose cloud services power its products. Analysts have been skeptical of such investments and wonder whether they will be able to garner returns.
Jim Covello, Goldman Sachs’s head of global equity research, stated that to justify a trillion or more dollars of investment, [AI] needs to solve complex problems and enable us to do things we haven’t been able to do before. He further noted that today’s flagship AI models, largely cannot.
Even though generative AI technology has been achieving a lot, such as advancing drug development, generating video clips, and even solving complex problems, making the technology profitable is still a major question. Only time will reveal whether these groundbreaking advancements can justify the immense investments that are pouring into the technology.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds.
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).
A technician examining a complex circuit board in a semiconductor development lab.
Keysight Technologies, Inc. (NYSE:KEYS)
Number of Hedge Fund Holders: 36
Keysight Technologies, Inc. (NYSE:KEYS) is a global technology company that provides electronic design and test solutions to various sectors. On December 16, JP Morgan analyst Samik Chatterjee upgraded the electronics test equipment maker to “Overweight” from Neutral and raised its price target to $200 from $170. According to the analyst, the company’s end markets are going to recover in 2025. These markets had been facing challenges throughout the year due to factors such as higher capital costs, slower industry growth, and inventory digestion in certain markets. The analyst noted that customer demand will expand beyond the company’s current AI-related focus and investments in the future.
The company’s AI-driven technologies include its AI data center test platform for validating AI/ML infrastructure performance by simulating realistic, high-scale AI workloads and Eggplant Test Automation which is an AI-driven software test automation solution. Additionally, the recent acquisition of Spirent Communications is also likely to result in “robust” organic incremental margins. The deal is anticipated to be concluded in the first half of Keysight’s fiscal 2025.
“We envision a broadening out of the demand drivers beyond the narrow focus and investment on AI, which when put against the backdrop of lower interest rates is likely to be driven by higher spending appetite from customers that have been cautious over the last year”.
-JP Morgan analyst Samik Chattarjee
Overall, KEYS ranks 7th on our list of AI stocks taking Wall Street by storm. While we acknowledge the potential of KEYS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KEYS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.