Playing Catch Up: 3 Tech Stocks Being Left Behind By the AI Boom

Stocks to buy

The generative artificial intelligence (gen AI) boom has continued to pick up speed, with GPU firm Nvidia (NASDAQ:NVDA) once again leading the way. The company’s latest quarterly blowout sent shares soaring nearly 10% while the rest of the market sunk lower. Undoubtedly, there’s still plenty of gas in the AI engine, even if the market is starting to lose a bit of steam after a robust springtime rally.

Not all companies have been able to gain traction on the back of AI tailwinds, however. Even the companies spending time and money to bolster their footing in AI may have seen little upside action in their share prices, at least so far.

It can be tempting to dismiss such tech firms as “being left behind in the AI boom.” That said, I view the biggest gains from such AI bets as coming in gradually over the next six years and beyond. You see, AI won’t be an overnight shot in the arm for every firm.

Many companies playing the long game with AI will be rewarded in due time. For investors with long enough time horizons, I believe the following lagging tech stocks will be well worth the wait.

Apple (AAPL)

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Apple (NASDAQ:AAPL) is a tech juggernaut that comes to mind when one thinks of firms that haven’t really taken off at the hands of an AI boom. In my opinion, Apple may be playing possum when it comes to its AI capabilities.

In a recent sit-down with CNBC, Steve Eisman, the investment legend behind The Big Short, referred to Apple as a “hidden AI play.” He thinks once the AI apps arrive, consumers will buy AI devices, perhaps kicking off the start of an AI-driven refresh cycle. That’s some bullish commentary from one of the smartest investors out there. And I think he’ll be proven right about AAPL stock over the next 18 months.

Build the AI apps, and they will come.

Also, the new Microsoft (NASDAQ:MSFT) Copilot+ PCs represent a potential competitive threat to the Mac if Apple can’t make the most of its powerful M4 chip from an application standpoint. The M4 neural engine is powerful, but it also needs to be more useful for a wider range of applications.

Though I’m not entirely sure if AI PCs will be in high demand this year, next year or sometime later, I think it’s safe to say that Apple will eventually be ready to make a huge splash in AI. Either way, the Apple AI rumor mill has been rotating at increasing speed lately.

Snowflake (SNOW)

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Snowflake (NYSE:SNOW) is a data warehousing company that’s remarkably pivoted towards generative AI in recent quarters. With Sridhar Ramaswamy, a new face running the business, and a number of small but smart moves made to bolster Snowflake’s AI software suite, it’s clear Snowflake is serious about harnessing AI to power growth.

With strong strategic partnerships with some of the world’s AI leaders (like Nvidia and Mistral AI) and a growing appetite for bite-sized AI startup acquisitions, I view SNOW stock as one of the lesser-appreciated AI companies that could enjoy AI-related upside gradually over the next five years.

Snowflake’s recent $1 billion pursuit of Reka AI has fallen through, but look for the firm to spend the money elsewhere as it looks to wheel and deal on AI. The way I see it, SNOW stock is a bargain after falling over 5% after some impressive quarterly results. It won’t stay grounded in the AI race forever.

Cisco (CSCO)

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Cisco (NASDAQ:CSCO) is another tech titan whose AI innovations may be vastly overlooked. Today, CSCO stock is down over 26% from its 2021 highs, and the negative momentum seems to be picking up speed, even after the firm reported quarterly sales that weren’t nearly as bad as they could have been. The guidance wasn’t bad either, but it seems like investors have had enough of the network equipment maker and the relative lack of timely AI catalysts.

Like it or not, Cisco has been improving its slate of products with AI. With a useful AI assistant brought to the Webex suite and its Security Operations Center (SOC), Cisco seems to be following in the footsteps of many other firms by enhancing existing offerings with AI.

In the meantime, investors seem less impressed with the AI additions, but I expect such efforts will translate to growth eventually. At 15.7 times trailing price-to-earnings (P/E), CSCO stock is quite cheap (and bountiful with a 3.43% dividend yield) for a “hidden” AI play.

On the date of publication, Joey Frenette held shares of Apple and Snowflake. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

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