We recently compiled a list of the 10 Best Cheap Technology Stocks To Buy According to Analysts. In this article, we are going to take a look at where Alight, Inc. (NYSE:ALIT) stands against the other cheap technology stocks.
Doug Clinton, the founder and CEO of Intelligent Alpha, joined a discussion on CNBC’s ‘Squawk Box’ on February 12 regarding the state of the tech sector, AI tech race, how heavy AI investments and tariff uncertainty have affected mega-cap tech stocks over the past month. When asked to rate how bad it has been on a scale of 1 to 10, Clinton replied that about 2.5 weeks ago, during what he called “Deep Tech Monday,” it was probably around an 8.5 or 9 due to significant pressure. However, since then, things have calmed down following the earnings reports from hyperscalers like Google and statements from industry leaders such as Sam Altman indicating that the capital expenditure boom in AI will continue.
Clinton emphasized that while they remain bullish on tech overall, not all companies are equally leveraged to AI. For instance, Meta is highly exposed due to its leadership in open-source AI with models like Llama. Google and NVIDIA are also heavily tied to AI advancements. On the other hand, Amazon and Apple might have less exposure compared to other hyperscalers. Interestingly, the iPhone maker recently made a deal with Alibaba to integrate their AI models onto iPhones in China. Regarding tariffs and trade tensions with China, Clinton suggested that while these issues should be monitored for hyperscalers who have significant chip production exposure, he does not believe they will be overly impacted by tariffs due to their limited involvement in import/export activities directly affected by tariffs. Instead of focusing heavily on tariff risks at this point, he believes it’s more important for investors to track how well these companies’ AI products evolve and how customers adopt them.
He also expressed skepticism about a protracted trade war with China under Trump’s negotiation tactics. He noted similarities with recent negotiations involving Canada and Mexico where border policies were adjusted without prolonged conflict over tariffs. While acknowledging potential impacts if tensions escalate significantly, particularly affecting chip producers, Clinton does not foresee this as an immediate concern within the next year. If China were involved in a protracted trade war with the US, it could be very bad for some companies. However, Clinton doesn’t think this scenario is likely because Trump often seeks quick negotiating wins rather than prolonged conflicts.
Methodology
We used a stock screener to compile a list of tech stocks with a forward P/E ratio of under 15. We then selected 10 stocks that had high average upside potential (over 30%) and were the most popular among elite hedge funds. The stocks are ranked in ascending order of their average upside potential. We’ve also added the hedge fund sentiment for each stock which was sourced from Insider Monkey’s database.
Note: All data is sourced as of February 13.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A person viewing their financial progress on a computer, highlighting the financial health offerings of the company.
Alight, Inc. (NYSE:ALIT)
Forward P/E Ratio: 9.79
Average Upside Potential: 65.66%
Number of Hedge Fund Holders: 40
Alight, Inc. (NYSE:ALIT) offers cloud-based integrated digital human capital and business solutions globally. Through its Employer Solutions segment, it provides employee well-being, benefits administration, and payroll services leveraging AI. Its Professional Services segment offers cloud advisory and optimization. Its Worklife platform aims to improve employee engagement and drive organizational performance.
Its primary business revolves around its Alight Worklife platform, which offers employee benefits and well-being services. It prioritizes Annual Recurring Revenue (ARR) from long-term contracts as a key indicator of growth. In Q3 2024, the company saw recurring revenue growth improve sequentially, and BPaaS (Business Process as a Service) revenue, a core component of Worklife, grew 19% year-over-year, representing 22% of total revenue.
Alight, Inc. (NYSE:ALIT) is actively pursuing ARR growth by expanding its client base, securing larger deals, and improving its win rate. It has seen an increase of over 60% in its sales pipeline and double-digit growth in win rates, leading it to expect strong double-digit ARR growth in the latter half of the year.
The company’s first major 2025 update for Worklife, released on February 4, enhances its AI-powered benefits, health, wealth, and absence management solutions. Key improvements include Microsoft Teams integration for seamless access and AI-driven recommendations, an upgraded analytics platform powered by Alight LumenAI, expanded AI automation for claims processing, and broader claim-type support.
Overall ALIT ranks 1st on our list of the best cheap technology stocks to buy according to analysts. While we acknowledge the potential of ALIT as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ALIT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.