It makes sense that Nvidia (NVDA 6.18%) has been a Wall Street darling. The demand for its graphics processing units (GPUs) has surged over the last decade. Gaming fueled Nvidia's fortunes first, but in recent months artificial intelligence (AI) has been the primary driver.
AI stocks have skyrocketed for far in 2023. Nvidia ranks among the biggest winners with a staggering gain of over 180%.
But Nvidia isn't analysts' favorite pick going forward. Here's the AI stock Wall Street appears to be most bullish about.
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Analysts excited about analytics
Analysts, including those on Wall Street, love data. They like poring through data, looking for insights and actionable information.
Alteryx (AYX) operates a cloud-based platform that makes analytics easier. This platform enables users to quickly analyze large datasets with no coding required. Alteryx has over 8,300 customers worldwide, including industry leaders such as Chevron, Netflix, Pfizer, and Visa.
Wall Street's average 12-month price target for Alteryx reflects an upside potential of 47%. The most pessimistic price target among the 14 analysts surveyed by Refinitiv is still more than 20% higher than Alteryx's current share price.
By comparison, the consensus price target for Nvidia reflects an upside potential of only 12%. Most analysts think that high-flying AI stock C3.ai will fall over the next 12 months, with the average price target nearly 30% below its current share price.
Alteryx's AI credentials
Unlike Nvidia, C3.ai, and several other AI stocks, Alteryx hasn't delivered an impressive gain in 2023. Actually, its shares have fallen year to date. That begs the question: Is Alteryx really an AI stock?
The answer is unequivocally "yes." Alteryx incorporated machine learning (a type of AI) into its product years ago. It acquired AI start-up Feature Labs in 2019.
Alteryx announced a strategic investment in Fiddler in April 2023 to deepen its machine-learning capabilities within the Alteryx Cloud Platform. Fiddler is a leader in managing the performance of AI models.
The biggest AI advance for Alteryx, though, didn't come until May 2023. That's when the company launched AiDIN, an AI engine that integrates both generative AI (powered by OpenAI's GPT application programming interface) and machine learning into its platform.
Is Wall Street right?
Alteryx has lost roughly three-quarters of its valuation since mid-2020. Is Wall Street right about the prospects for the stock going forward? I think it's a definite maybe.
In 2022, Alteryx's total addressable market for the company was $81 billion. That market size could expand to $154 billion by 2025, reflecting a strong compound annual growth rate of 17%.
A survey conducted in August 2022 by International Data Corporation (IDC) bodes well for Alteryx as well. IDC found that 73% of organizations think that their spending on analytics will be greater than their spending on other software investments.
Alteryx remains unprofitable. However, its revenue continues to grow robustly, jumping 26% year over year in the first quarter of 2023.
The stock trades at less than 3.4 times trailing 12-month sales. That's dirt cheap compared to the internet software industry average price-to-sales multiple of nearly 5.6.
I don't know if Alteryx stock will really soar 47% over the next 12 months. There are a lot of factors that could keep that from happening, with a potential recession near the top of the list. But the stock seems to have room to run. It's not surprising that Alteryx now appears to be one of Wall Street's AI darlings.
