We recently published a list of 13 Cheap AI Stocks to Buy According to Analysts. In this article, we are going to take a look at where Akamai Technologies, Inc. (NASDAQ:AKAM) stands against other cheap AI stocks to buy according to analysts.
As per Morgan Stanley, in 2025, technology companies are expected to maintain their focus on building AI platforms catering to their enterprise customers’ needs for optimized performance, profitability, and security. The companies have been partnering throughout the AI ecosystem of chip companies, hyperscalers, large language models, data, and software companies. At the same time, they have been tackling the unknowns of US trade policy and resource constraints.
AI Revolution- Biggest Tech Transformation
Wedbush analyst Daniel Ives has been constantly discussing the AI Revolution over the past few years. This is because he believes that this industry exhibits the biggest tech transformation in more than 40 years. As per Ives, the global AI market is projected to touch $407 billion by 2027 and $1.81 trillion by 2030, exhibiting a CAGR of 36%. Amidst such growth potential, several industries have been choosing AI in a bid to solve complex problems and optimize business processes through the use of advanced algorithms, ML, and data analysis techniques, added Daniel Ives.
Since the world generates ~400 terabytes of data on a daily basis, and 90% of the world’s data was generated over the previous 2 years, the analyst believes that several companies continue to look for ways to leverage their datasets to power AI initiatives. The focus is to generate witness operational efficiencies through the automation of repetitive tasks.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Factors Affecting the Growth of the AI Industry
FTI Consulting believes that AI-native companies, which have been developed around foundational and proprietary AI technologies, have seen strong investor interest, and this premium is expected to continue in 2025. Despite high-forward multiples, several AI companies demonstrated strong revenue growth and exhibited sustained earnings, which have kept pace with price. Moving forward, the firm believes that, in 2025, the stronger AI-native companies are expected to develop healthy ARR. The investors will look to balance portfolio risk through emphasizing investment in such companies possessing clear potential for mid-term revenue and profitability, as compared to companies having more long-term prospects.
FTI Consulting also opines that PE investment in AI or AI-influenced targets continues to rise. In 2025, the focus is expected to be on investments fueling significant cost efficiencies with relatively predictable AI applications. Also, the firm sees M&A activity in the broader AI sector to be strong in 2025.
Our Methodology
To list the 13 Cheap AI Stocks to Buy According to Analysts, we sifted through several online rankings to shortlist companies that cater to the broader AI sector and the ones that trade at a forward P/E of less than ~15.0x. Finally, we chose the companies that analysts see upside to. The stocks are ranked in ascending order of their average upside potential, as of May 12. We also mentioned hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A close-up of a person using a laptop with cloud solutions in the background.
Akamai Technologies, Inc. (NASDAQ:AKAM)
Number of Hedge Fund Holders: 37
Average Upside Potential: ~26.6%
Forward P/E as of May 12: ~12.7x
Akamai Technologies, Inc. (NASDAQ:AKAM) is engaged in the provision of security, delivery, and cloud computing solutions. The company leverages AI and ML across key areas of its business, primarily in edge computing, cybersecurity, and content delivery. RBC Capital analyst Rishi Jaluria increased the company’s price objective to $80 from $75, keeping a “Sector Perform” rating. Given that the underlying business has been witnessing a shift, the firm is cautious on the near-term outlook. However, it also opines that the risk-reward on the company’s stock remains balanced. The advancement of AI provides numerous opportunities for the company to enhance service offerings and fuel growth. Notably, AI technologies remain in line with Akamai Technologies, Inc. (NASDAQ:AKAM)’s strengths in edge computing and distributed networks, positioning it well to capitalize on the trend.
The higher adoption of AI applications continues to fuel demand for edge computing resources. AI workloads tend to require low-latency processing close to the data source, which is what Akamai Technologies, Inc. (NASDAQ:AKAM)’s edge network offers. With companies implementing AI-driven solutions, the company is expected to see higher utilization of its Compute segment services. As AI becomes more relevant in enterprise applications, Akamai Technologies, Inc. (NASDAQ:AKAM)’s extensive network, as well as its enterprise customer base, offers a healthy foundation for offering AI-as-a-Service or specialized AI-optimized delivery solutions.
Also, AI technologies can be used to optimize the company’s core CDN services. Furthermore, AI can be used to enhance Akamai Technologies, Inc. (NASDAQ:AKAM)’s security offerings. ML algorithms have the ability to improve threat detection, automate response to security incidents, and provide sophisticated analysis of network traffic patterns. This can result in effective and efficient security solutions, fueling growth in the company’s security business.
Overall, AKAM ranks 4th on our list of cheap AI stocks to buy according to analysts. While we acknowledge the potential of AKAM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for a deeply undervalued AI stock that is more promising than AKAM but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
