Consider Swapping MicroStrategy for Two Artificial Intelligence (AI) Shares as an Alternative?
Enterprise software developer MicroStrategy has been making waves in the stock market recently. With a staggering 359% gain in 2024 and a total increase of 2,370% in five years as of January 6, the company is leaving its competitors in the dust. MicroStrategy's obsession with Bitcoin has proven to be a game-changer. Instead of being viewed as just a software business, it's now seen as something like a cryptocurrency bank.
However, MicroStrategy shouldn't be everybody's cup of tea. The company's reliance on Bitcoin means it's vulnerable to fluctuations in the cryptocurrency's price. Plus, it's hard to assign a fair market value to MicroStrategy, given its unconventional business model. Most investors prefer stocks with more predictable trajectories.
But here's a different direction you might want to explore: the AI boom. Tomorrow's biggest winners might just be the companies pioneering AI right now. So let me introduce you to two such companies with less risk than MicroStrategy.
IBM: The silent AI titan
Wall Street is slowly, but surely, waking up to IBM's AI prowess. IBM's stock has climbed 39% over the past year, and the price-to-free cash flow ratio has hit 17.5. But to me, that's still a bargain.
IBM's primary business is cyclical, with revenue heavily dependent on its mainframe systems. These systems are upgraded about once every two years, and the next round is expected in 2025. The new models will feature IBM's cutting-edge AI accelerator chip, Telum II, built with machine learning and large language models in mind.
IBM's AI capabilities have been overlooked for too long. Its software and consulting services division is thriving, particularly with its generative AI platform, Watsonx. In just three months, the platform had a massive $3 billion backlog in software and consulting orders.
In the world of AI, IBM is a powerhouse with unmatched expertise. Its cyclical business might be a concern, but the potential rewards are massive. With a reasonable stock price, this could be an excellent entry point into the high-octane AI boom without the market and valuation risks associated with MicroStrategy.
Micron: The memory king
AI systems require a lot of memory. So why not bet on the company that provides these essential chips? Micron Technology, a leading memory-chip maker, has a lot going for it.
Micron's memory chips are crucial for AI systems, including AI accelerator cards and supercomputers used for training large language models. In reply to this demand, Micron is expanding its chip manufacturing facilities in Virginia and Singapore.
The shift towards AI has boosted demand for Micron's chips, especially high-speed SDRAM. Micron's CEO, Sanjay Mehrotra, has made it clear that the company is well-positioned to capitalize on this trend.
Despite a challenging past, Micron's stock is surprisingly undervalued. With a forward-looking P/E ratio of 8.8, Micron could be a great way to profit from the AI surge without the risks associated with Bitcoin and MicroStrategy.
In conclusion, IBM and Micron present less risky alternatives to MicroStrategy for investors looking to capitalize on the AI boom. While IBM's stock price might seem a bit overvalued, the company's AI capabilities and upcoming mainframe systems upgrades offer significant potential gains. Micron, on the other hand, is a value play in the memory chip market, which is essential for AI systems to function. Neither stock is without risks, but both could be more stable and predictable investments compared to MicroStrategy's Bitcoin-dependent business.
- Despite MicroStrategy's significant gains in the stock market due to its Bitcoin investments, investors who are risk-averse might prefer companies like IBM and Micron, which have less reliance on cryptocurrency valuations.
- IBM, often overlooked for its AI capabilities, has seen a 39% increase in its stock over the past year and a significant demand for its generative AI platform, Watsonx.
- Micron Technology, a leading memory-chip maker, is capitalizing on the AI trend with its high-speed SDRAM chips, which are essential for AI systems to function.
- In 2025, IBM is expected to launch new mainframe systems equipped with its AI accelerator chip, Telum II, which could further boost the company's AI capabilities and stock value.
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