It’s been off to the races for the artificial intelligence (AI) trade, with any tech firm remotely touching AI being rewarded with hype-driven gains. Though the AI trade may be getting a tad long in the tooth for some of the more obvious plays — think Nvidia (NASDAQ:NVDA) and its significant rise today — I still think there’s value to be had with lesser-loved tech firms that may play a pivotal role in the AI race.
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There are many ways for investors to make money from a tech-driven trend. The most obvious ways may not be the best plays, given that they tend to be a lot pricier. From a hardware perspective, Nvidia seems like the obvious play to stash in one’s portfolio to get a front-row seat to the AI show. Nevertheless, NVDA isn’t the only stock out there.
Therefore, let’s use TipRanks’ Comparison Tool to check in with three “Strong Buy” tech stocks that may have more upside than Nvidia after its historic single-day surge.
1. Snowflake (NYSE:SNOW)
Snowflake stock is melting today over a disappointing outlook that accompanied an otherwise decent quarterly result. Indeed, the data cloud company has a track record of underpromising and overdelivering.
With a choppy usage-based revenue recognition model and the uncertain macro climate, I’d argue Snowflake is smart to be cautious. At the end of the day, it’s always better to set a low bar if any question marks may be ahead. I don’t think SNOW stock should have been punished for ever so slightly lowering the bar. As such, I’m staying bullish.
For the full year, Snowflake expects product revenue to come in at $2.6 billion, just shy of the prior guide for $2.7 billion. Non-GAAP operating margins also got trimmed by a mere percentage point from 6% to 5%. Indeed, these are very slight downward adjustments, but investors won’t have it — not when other high-tech, AI-driven companies like Nvidia continue to defy the laws of gravity.
The actual quarter was overshadowed by the guidance. Snowflake clocked in 48% revenue growth year-over-year, beating estimates calling for $608 million. Alongside the nice top-line beat, CEO Frank Slootman delivered some encouraging comments about AI and the longer-term future.
Slootman views generative AI technologies as providing his firm with a “tremendous gravitational pull.” Indeed, Snowflake may be as much of an AI company as Nvidia, given any AI model is only as good as its data.
Given the incredibly negative stock price reaction, it seemed like investors were too dismissive of the actual quarterly numbers, Slootman’s commentary on AI, and the Neeva acquisition.
What is the Price Target for SNOW Stock?
Snowflake comes in at a Strong Buy, with 21 Buys, three Holds, and one Sell. The average SNOW stock price target of $189.95 implies 29.5% upside potential.
2. Datadog (NASDAQ:DDOG)
Datadog stock has been warming up again, surging nearly 50% since its lows in April. Undoubtedly, promising first-quarter results helped catapult the cloud-based data software company higher. Revenue surged nearly 33% year-over-year to $482 million, well ahead of the $469 million consensus estimate. Datadog expects Q2 sales to be in the $498 million to $502 million range. This is not at all an upbeat guide, but it was still enough to lift the cloud-based SaaS firm.
At writing, shares of DDOG are still off around 52% from their high. Like Snowflake, Datadog could have a lot to gain as AI continues its ascent. Further, the Q2 guide seems a tad on the conservative side. As such, I’d not be shocked if Datadog is setting itself up for a nice beat in a few months’ time. With a reasonable and realistic guidance for the next quarter, I must stay bullish on the name.
Nonetheless, at 12.4 times price-to-sales, the stock is a bit on the pricier side, so that’s a risk to consider. D.A. Davidson’s Gil Luria started DDOG stock off with a “Hold” rating and a $70 price target, which represents around 25% downside potential from current levels. Luria doesn’t see upside in Datadog’s already stretched multiple until growth has a chance to “re-accelerate.”
What is the Price Target for DDOG Stock?
Datadog sports a Strong Buy rating, with 22 Buys and five Holds. The average DDOG stock price target of $97.87 implies 5.8% upside from here.
3. ServiceNow (NASDAQ:NOW)
ServiceNow’s partnership with Nvidia seems to have gotten investors excited again. Anything Nvidia touches seems to turn into gold. At writing, NOW stock is sitting up around 57% from its October 2022 lows and down around 25% from its all-time highs.
As the company moves forward with its plans to build enterprise-grade generative AI with Nvidia, I think the path of least resistance is higher. As such, I’m staying bullish on the enterprise software firm as it punches its ticket to the AI race with one of the leaders.
At writing, ServiceNow stock trades at over 270 times trailing price-to-earnings and over 14 times price-to-sales, which are well over the software industry averages of 52.9 and 11.4 times, respectively.
Like Datadog, ServiceNow needs its growth to re-accelerate to gain any multiple-expansion-driven traction from here. In a recession, this could prove very difficult. That said, with the AI wildcard and a partnership with Nvidia, I do view a pathway higher for the IT software kingpin.
What is the Price Target for NOW Stock?
ServiceNow also comes in at a Strong Buy, according to Wall Street. There are 24 Buys and only two Holds. The average NOW stock price target of $538.35 implies just 1.1% upside potential.
Conclusion
It’s not all about Nvidia. The following tech plays are Strong Buys that can use AI to their advantage. After the latest plunge, Snowflake has the most upside potential from here, according to analysts.
