A common misconception is that you need a large sum of money to get started in the stock market. However, even $200 can be a good starting point. Savvy investors recognize the value of growth stocks, which have the potential to generate high returns in the long run.
Here are two high-powered artificial intelligence (AI) stocks that you can buy for under $200 each right now, with both of them offering excellent long-term prospects as AI advances.
Baidu
The first stock on my list is Baidu (BIDU), a leading tech company in China. Baidu, founded in 2000, has evolved from a simple search engine into a tech titan. Baidu rose to prominence alongside the rapid expansion of China's internet ecosystem. Its user-friendly interface, combined with its emphasis on understanding the Chinese language and culture, drew investors' attention.
Furthermore, Baidu has expanded its product offerings to include online advertising, cloud computing, and AI.
Year-to-date, Baidu’s stock has dipped 13.3%, compared to the S&P 500 Index's ($SPX) gain of 9.3%.
According to Statista, Baidu controls roughly 62% of China's search engine market as of April 2024. Aside from Baidu's search engine, the company's intelligent driving segment is gaining traction and generating more revenue. Its autonomous ride-hailing service, Apollo Go, reported a 49% year-over-year increase in rides in the fourth quarter.
Total revenues at Baidu increased 6% in the fourth quarter of 2023, while adjusted diluted earnings per share (EPS) increased by an impressive 43%. Total revenue and earnings for the full year increased by 8.8% and 37.2%, respectively.
In a statement accompanying the results, CFO Rong Luo emphasized, “As we look ahead into 2024, our goal is to persistently enhance operational efficiencies and achieve high-quality growth."
Looking ahead to 2024, analysts predict Baidu’s revenue to increase by 7%, while earnings could dip by 2.9%. However, revenue and earnings are projected to grow by 7.8% and 10%, respectively, in 2025.
Overall, Wall Street rates BIDU stock a "strong buy.” Of the 16 analysts covering BIDU, 15 have rated it a “strong buy,” and one has rated it a “moderate buy.” The mean price target of $165.25 for BIDU implies a potential upside of 60.2% in the next 12 months. Trading at nine times forward 2024 earnings, Baidu is a reasonably valued AI stock to buy now.
Baidu's strong market position, technological capabilities, and diverse business portfolio are all positive indicators of its long-term success. However, the company is also facing headwinds such as regulatory uncertainty, geopolitical tensions, and increased competition. Given that, I would advise investors to start with a small stake in this growth stock.
Alphabet
The second name on my list is tech behemoth Alphabet (GOOGL), which has captivated investors with its dynamic growth trajectory and innovative ventures. Now, with the help of AI, the company is experiencing rapid growth.
Over the years, Alphabet's stock has experienced remarkable upside, fueled by Google's unrivaled advertising business, robust cloud computing services, and more. The stock has returned a staggering 483% in the last 10 years.
Year-to-date, GOOGL stock is up 11.7%, compared to the tech-heavy Nasdaq Composite’s ($NASX) gain of 9.8%.
Google Search has long held a global dominance in the search engine market, accounting for approximately 92% of the market. Google Search brought in $175 billion in revenue in 2023, an increase of 8% year on year.
The company's other key growth driver, Google Cloud revenue, jumped 26% year-over-year to $33 billion in 2023. Google Cloud holds the third position in the overall cloud computing market.
Alphabet has been working tirelessly to capitalize on the AI frenzy and compete with OpenAI's ChatGPT with its new launch, Gemini AI. However, temporary setbacks with Gemini in February prompted the company to announce it would relaunch the product within a few weeks.
Wedbush analyst Daniel Ives believes the market overreacted to the news, and that “Google has a massive opportunity on AI with the Street giving no credit. Gemini headwinds but we believe Google is one of the core winners in AI revolution."
Despite these setbacks, Alphabet is more than capable of venturing deeper into the AI space and offering more to its customers. It had $110.9 billion in cash, cash equivalents, and marketable securities at the end of Q4. It also holds long-term debt of $13.2 billion. However, Alphabet generated free cash flow of $69.5 billion in Q4, which should allow it to repay debts and fund future projects.
Analysts predict that Alphabet's revenue and earnings will increase by 11.0% and 16.8%, respectively, in 2024. It is currently trading at 22 times forward 2024 earnings, which seems reasonable for a hyper-growth AI stock.
Out of the 44 analysts covering Alphabet stock, 35 have a “strong buy” recommendation, three rate it a “moderate buy,” and six recommend a “hold.” Based on analysts' average price target of $163.33, Wall Street sees a potential upside of about 4.7% from current levels. Its high price estimate of $180 indicates a potential upside of 15.4% in the next 12 months.
Despite the occasional setbacks, regulatory scrutiny, and fierce competition in the AI space, Alphabet has cemented its status as an outstanding blue-chip tech investment. I believe it will continue to do so, making it a strong buy right now.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
