Artificial intelligence (AI) has been the hottest topic in the stock market for the past six months, or so. Companies like Nvidia are at the forefront and have been leading the charge. Yet here in the UK, I think there are FTSE 100 shares that have gone under the radar in this regard, and could be ready to rally later this year.
Accessing private AI stocks
First up is 3i Group (LSE:III). The large private equity company has been performing strongly over the past year, with the share price up 53% over this period.
The business invests across a wide variety of sectors, focusing on buying stakes in companies that aren’t publicly listed. This means the firms it buys aren’t yet on the stock market. The aim is to identify cheap private companies, improve them, and then sell the shareholding for a profit.
I like the company due to the fact it already has exposure to AI-related tech companies in the portfolio. This includes the likes of Digital Barriers and MAIT Group. Yet given the fact AI’s hot right now, I expect the firm to announce more investment in this sector over the course of this year.
The 3i share price tracks the net asset value (NAV) of the portfolio. As a result, a lift in the value of the AI-related firms should in turn lift the 3i share price.
As a risk, I note that the current share price is at a 34% premium to the latest reported NAV. This could mean I’m buying a stock that could be overvalued. But I’ll look out for a dip in the share price.
Using AI for big pharma
Next, let’s turn to AstraZeneca (LSE:AZN). Some might be confused that I’m including a big pharma company in my list that could benefit from the rise of AI.
In reality, AstraZeneca is already using AI for a variety of purposes. For example, it uses AI to sift through huge amounts of data relating to new drug discoveries, to assess the potential success of any new compounds. Further, it now uses AI to help design and execute clinical trials, to improve the efficiency of operations.
I believe that over the next couple of years, the efficiencies of using AI will help the business cut costs. This should also help to lower R&D spend, further boosting profits. In turn, this should allow the share price to increase.
Over the past year, the stock’s down 6%. It hit fresh 52-week lows only a month ago. Therefore, I like it as an option right now, due to the recent share price movements.
For my plan of action, I’m looking to buy some AstraZeneca shares soon. For 3i Group, I’m also going to see if the share price dips in the coming weeks, and use that as the opportunity to purchase.
The post FTSE 100 stocks on my radar for the artificial intelligence boom appeared first on The Motley Fool UK.
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Jon Smith has no position in any of the shares mentioned. The Motley Fool UK has recommended AstraZeneca Plc and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
