Amazon (AMZN) and Meta Platforms (META) are currently trading down about 10% year-to-date, primarily due to investor concerns over their significant AI-related expenditures. However, both companies are demonstrating strong growth and attractive valuations, which have caught the attention of Wells Fargo’s chief equity strategist Ohsung Kwon. He now believes their free cash flow may exceed analysts’ expectations, suggesting that their investments in AI infrastructure are justified if the technology lives up to its transformative potential.
For Amazon, the aggressive spending on AI data centers is expected to bolster growth in its Amazon Web Services (AWS) segment, while also enhancing operational efficiencies in e-commerce. With a forward P/E below 27, the stock appears undervalued given its growth prospects. Similarly, Meta is leveraging AI to enhance its advertising business, leading to increased user engagement and higher ad revenues. Trading at a forward P/E of under 20, Meta also presents a compelling buying opportunity.
Market professionals should consider these stocks as potential buys, especially given their strong fundamentals and the ongoing demand for AI-driven solutions.
Source: fool.com