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 NICE Ltd. (NASDAQ:NICE) 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 data scientist sitting in front of a monitor to review the performance of AI-driven digital business solutions.
NICE Ltd. (NASDAQ:NICE)
Number of Hedge Fund Holders: 28
Average Upside Potential: ~19.8%
Forward P/E as of May 12: ~13.4x
NICE Ltd. (NASDAQ:NICE) offers cloud platforms for AI-driven digital business solutions. The company integrates AI and ML in its core offerings, mainly customer experience, workforce optimization solutions, and contact center. William Blair analyst is bullish on the company’s stock. The analyst opines that NICE Ltd. (NASDAQ:NICE) remains well-positioned for future growth, primarily with the higher AI adoption in contact centers. The analyst believes that if the company can address operational issues, there can be a positive shift in the dynamics, improving cloud revenue growth. Furthermore, the potential for margin expansion with the help of operating expense leverage aids the positive outlook.
NICE Ltd. (NASDAQ:NICE)’s strong emphasis on AI integration throughout the product portfolio places it well for long-term growth and competitive differentiation. The increased AI attach rates across the large cloud deals exhibit that customers are seeing strong value in the company’s AI-enabled solutions. With AI continuing to evolve and mature, NICE Ltd. (NASDAQ:NICE)’s early investments can significantly pay off. Its AI capabilities can result in efficient and effective customer interactions and new revenue streams stemming from AI-driven services.
RS Investments, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“We initiated a position in NICE Ltd. (NASDAQ:NICE), a leading call center software provider, at a 7.5% free cash flow yield. The stock has been weak because of concerns that artificial intelligence (AI) will reduce the number of call center employees and that larger companies, including Microsoft and Salesforce, Inc., will leverage their AI strength to take market share. We believe both of these concerns are misplaced. If AI is successful in reducing headcount at call centers, it will provide massive value to NICE’s customers and NICE will be able to charge more for its software, creating a win-win situation. Additionally, although large competitors are very focused on AI, we think it is unlikely that NICE as the incumbent will be displaced. Call center jobs are repetitive and low technologically, so the key to winning is not who has the most powerful AI model, but instead who has the largest data pool of relevant data to train its AI model. NICE is competitively advantaged over any new entrant because it has the largest data repository of call center interactions. If NICE is successful in deploying AI within its customers, NICE’s revenue growth should accelerate, and we expect the market will pay a higher multiple.”
Overall, NICE ranks 5th on our list of cheap AI stocks to buy according to analysts. While we acknowledge the potential of NICE 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 NICE but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
