We recently compiled a list of the 10 Hidden AI Stocks to Buy Now. In this article, we are going to take a look at where AppLovin Corp. (NASDAQ:APP) stands against the other hidden AI stocks.
Collaborative Partnerships in AI
Research and development in artificial intelligence began in academia and dominated the sector until the early 2000s. Later, this pattern switched up and industry took over AI with higher investment, research, and cheaper inputs. Investments in AI by businesses are also almost always followed by commercial applications, making it a more profitable activity than academia.
While these commercial relationships flourish, many companies focus on taking collaborative approaches to partnerships, revolutionizing the AI industry. By partnering with tech giants, such companies are accelerating AI adoption, driving vertical growth through specialized models, and increasing demand for powerful computing resources. This strategic approach is shaping the future of AI.
This was recently discussed in another article, 7 Most Popular AI Penny Stocks Under $5. Here’s an excerpt from it:
“OpenAI’s approach to fostering collaborative partnerships instead of competing directly with tech giants makes it an exceptional model. Macquarie’s Fred Havemeyer (lead software equity research analyst) praised GPT 4 for its “emotional intelligence”. The growing demand for AI chips, exemplified by OpenAI’s use of over 1.7 trillion parameters in its GPT 4 model, will further help NVIDIA and other AI chip manufacturers grow.
On August 20, Bloomberg reported that OpenAI is releasing a feature that will allow businesses to use their company data to customize GPT 4 so that it can be trained on additional information for niche tasks. This is an example of letting companies fine-tune the AI model to act as a customer-service chatbot for their subject areas. According to DeepL CEO, Jarek Kutylowski, specialised AI models are essential for companies to grow vertically.”
Ever since it was founded in 2015, this research company has promoted open research and collaboration within the AI community. By sharing its findings and models, OpenAI encourages other researchers and organizations to build upon its work. This has accelerated advancements in AI and fostered a more inclusive environment.
OpenAI partnered with Microsoft so that the tech giant’s investment ($1 billion in 2019) could facilitate deep integration of OpenAI’s models into its products. Azure offers these models as compliance-ready solutions, crucial for industries requiring high data security.
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This was also followed by Brazil’s partnership with the tech giant to use OpenAI to reduce judicial costs. By automating tasks, the Brazilian judiciary is expediting case processing and improving efficiency, saving costs in public sectors.
In a recent discussion on CNBC, Barton Crockett from Rosenblatt Securities and Amit Daryanani from Evercore ISI both agreed that AI is crucial for Apple’s future success. Crockett emphasized that AI offers a unique opportunity to reinvigorate The company’s device ecosystem and that consumers are increasingly valuing AI capabilities in their tech devices, and it seems to be falling behind in this regard. He suggested that partnerships with AI companies like OpenAI could help it bridge this gap and enhance its offerings.
According to reports from Bloomberg and The Wall Street Journal, OpenAI is reportedly seeking significant new funding, potentially valuing the company at over $100 billion. The investment round, led by Thrive Capital, highlights the intensifying competition among tech giants for a dominant position in the AI industry.
In August 2024, WebProNews reported that OpenAI’s user base doubled to over 200 million in a year and its annual revenue exceeded $2 billion. Over 90% of Fortune 500 companies now use OpenAI products. However, maintaining lead requires addressing practical, safety, and user-friendliness concerns. OpenAI’s plans, including its new search engine, SearchGPT, aim to address these challenges and solidify its position. CEO Sam Altman believes SearchGPT can significantly improve search capabilities.
These instances leave us thinking about whether it’s collaboration or competition that can help AI progress fastest. As the Managing Partner at Boldsquare, Dylan Jones points out, strategic partnerships can significantly impact a company’s valuation. Tech giants’ moves indicate a calculated effort to maintain their AI leadership, even if it means blurring the lines between collaboration and competition.
In a discussion at CNBC’s ‘Squawk Box’, CoreWeave co-founder and CEO, Mike Intrator, said that the demand for AI infrastructure is relentless and has been in a state of severe disequilibrium for the past 2.5 years.
He believes that the demand for Nvidia chips is skyrocketing, while the rest of the industry is trying to keep up with it, including CoreWeave. According to Intrator, CoreWeave and its clients anticipate significant growth in AI infrastructure demand. Due to limited industry capacity, clients are struggling to train and serve AI models. CoreWeave, with its ability to provide large-scale AI infrastructure, is well-positioned to meet this growing demand.
However, startups often suffer at the cost of these partnerships, failing to compete with tech giants. Still, many companies are emerging and progressing at a good pace. In this context, we are here with a list of the 10 hidden AI stocks to buy now.
Methodology
To compile our list, we reviewed media reports and watched Wall Street analysts’ interviews to determine under-the-radar and hidden AI stocks. We compiled a list of 20 potential stocks and selected the 10 most popular among elite hedge funds that are expected to be key beneficiaries of the secular trends in artificial intelligence. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024.
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 close-up of a mobile device, showing an advertiser reaching out to a consumer via a software-based platform.
AppLovin Corp. (NASDAQ:APP)
Number of Hedge Fund Holders: 54
AppLovin Corp. (NASDAQ:APP) is a mobile app platform that uses AI to optimize app discovery, user acquisition, and monetization. It uses ML algorithms to analyze user data, identify target audiences, and deliver relevant ads to increase app downloads and engagement. Its products are used by both its gaming advertisers and the connected television market which relies on the Internet.
During this quarter, improvement in the company’s AXON technology contributed to the growth of its software platform, generating $711 million in revenue. The app revenue was $369 million, an increase of 7% from last year. The overall revenue for Q2 2024 was $1.08 billion, a 43.98% year-over-year improvement. Management says that the plan now is to invest in organic growth, focusing on engineering and business development to support AXON technology and e-commerce expansion.
AppLovin Corp.’s (NASDAQ:APP) CEO, Adam Foroughi, highlighted the growth potential of in-app advertising. He emphasized the MAX platform’s role in driving this growth by transitioning from inefficient waterfall methods to programmatic bidding. He expressed optimism about maintaining steady growth rates ( 5% to 7% quarter-over-quarter) in the software business, driven by ongoing product enhancements and new categories.
It is well-positioned for growth in the mobile advertising market. With its AI-powered platform and strong partnerships, it can grow rather quickly. As of June 30, the company is held by 54 hedge funds. The largest one is valued at $1,105,913,583 by GQG Partners.
ClearBridge Select Strategy stated the following regarding AppLovin Corporation (NASDAQ:APP) in its first quarter 2024 investor letter:
“We also added AppLovin Corporation (NASDAQ:APP), a disruptor in the IT sector that helps developers market and monetize their mobile apps. Powered by its proprietary targeting engine, the company’s software segment grew robustly in 2023 and should benefit from improving AI efficiency. We believe growth of the company’s targeting engine is still in the early innings as precision continues to improve, its adoption and dataset grow and AppLovin starts to license the engine to e-commerce advertisers, which could open up a brand new multibillion dollar market.”
Overall BE ranks 7th on our list of the hidden AI stocks to buy. While we acknowledge the potential of BE as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
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