Over the past year, with the explosion of AI, the prices of AI concept stocks such as NVIDIA have skyrocketed to an unattainable level. How to get a piece of the AI craze in a cheap way has become one of the topics of interest for investors.
David Einhorn, a Wall Street hedge fund guru and founder and president of Greenlight Capital, is focusing on a technology stock that has been overlooked in the AI boom.
Eindhoven stated in a media interview that his company may not necessarily be interested in the market areas where investors are most enthusiastic. On the contrary, his fund is betting on cheaper companies that may benefit from AI in the future. And one of the targets is HP, a manufacturer of personal computers and printers.
"Personal computers will enter the regular replacement cycle, because many personal computers were purchased after the COVID-19 epidemic in 2020 and 2021. If 'AI PC' becomes a reality, we may have a better cycle than the normal cycle." Einhorn said.
In May of this year, HP released its commercial AI PC family bucket, including EliteBook series high-end AI business laptops, Zhan series AI business laptops, ZBook mobile workstations, one-stop Z-series AI all-in-one machines, portable computer assistant "AI Xiaohui" and other products and related technologies, announcing its official entry into the AI PC market competition.
In the third quarter of fiscal year 2024, after experiencing nine consecutive quarters of revenue decline, HP finally achieved revenue growth, with total revenue increasing by 2% year-on-year and 6% month on month, reaching $13.519 billion. This growth is mainly due to the strong performance of its personal systems business, including PCs, laptops, tablets, etc.
On Thursday, HP's stock price rose 1.73% to $36.47; Since the beginning of this year, the stock has risen by about 22% cumulatively. In contrast, the stock price of AI leader Nvidia has risen by over 190% during the same period.
Eindhoven stated that he believes HP will accelerate its growth in the coming years. He pointed out that the stock has a P/E ratio of 10 times, a dividend yield of over 3%, and uses 100% of its free cash flow to give back to shareholders. The repurchase yield is about 7%.
He also stated that as the market becomes increasingly expensive, the attractiveness of well-known AI companies has weakened.
Considering that we are currently in a strong phase of the economic cycle, with a P/E ratio of approximately 23 times for the S&P 500 index, I believe the entire market is indeed quite expensive, "said Eindhoven.
Eindhoven also put forward a similar viewpoint in Green Light Capital's latest quarterly letter to investors, stating that the "overvaluation" of the technology industry is increasing market risk.