2 AI Stocks to Buy if the Market Sells Off Before Year-End
No business is worth buying at any price.
Investors should be aware that the stock market could potentially experience a sell-off before the end of the year due to various factors such as geopolitical tensions and an unfavorable economic environment. While this might present an opportunity for savvy investors to acquire shares of outstanding companies at a discounted price, certain AI stocks could prove particularly intriguing during a market downturn.
Space Exploration Technologies (SPCX) and Tesla (TSLA) are two AI-driven companies that could present attractive investment prospects if the market takes a downturn by year-end. SpaceX, led by Elon Musk, has ambitious plans to generate $1 trillion in revenue by 2030, with AI accounting for 99% of its value by then. The company has recently added numerous AI compute deals to its portfolio, with its AI segment, dubbed Super Intelligence (SI), witnessing a remarkable 830% sales growth in the third quarter, up from $7.6 billion to $15.4 billion.
In addition, SpaceX is anticipating a potential shortage of SI compute, which could persist for an extended period. This scenario is supported by the fact that the company is experiencing a high demand for AI compute services, with requests surpassing its capacity to rent out the resources. Moreover, older systems are fetching higher prices than when they were new. Despite the high forward price-to-earnings (P/E) ratio of 85.5, SpaceX's AI segment could continue to experience robust revenue growth in the medium term.
Tesla, another AI-focused company, shares similarities with SpaceX. Both companies are led by Elon Musk and heavily invest in AI technology. Tesla's Full Self-Driving (FSD) software is trained using real-world driving data, allowing its vehicles to process information in real-time and make instantaneous decisions. This feature plays a crucial role in the company's EV sales, as FSD subscriptions generate around $1 billion in annual recurring revenue.
Furthermore, Tesla is expanding its robotaxi fleet, a business where FSD technology will become even more integral.
However, both SpaceX and Tesla face valuation challenges. SpaceX's stock is currently priced at 85.5x forward earnings, while Tesla trades at 133.3x forward earnings. These stocks might be worth purchasing during a market dip or a company-specific sell-off, but for now, investors may want to refrain from investing in them until the valuation improves.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
