The launch of ChatGPT has generated a lot of buzz, making artificial intelligence (AI) one of the hottest topics in the business and investment world. Many companies are seeking to learn how to leverage AI's power to grow their businesses.
Investors are pouring into AI stocks, hoping to cash in on the frenzy. However, many AI stocks will likely never live up to the hype. Because of that, investors should consider companies with AI upside that haven't yet gotten caught up in the hype. Equinix (EQIX -0.60%) and Intuit (INTU -1.18%) are under-the-radar AI stocks. Adding to their appeal is that both pay dividends, enabling investors to immediately generate income from companies starting to capitalize on the AI megatrend.
Giving AI the space it needs
Equinix is a data center real estate investment trust (REIT). Those facilities will be increasingly crucial to supporting AI because companies will need space to store all the data used to train and run their AI programs.
The REIT is already starting to see AI-driven demand materialize. CEO Charles Meyers stated on the first-quarter conference call: "We've closed several key AI wins over the past few quarters and are seeing a growing pipeline of new opportunities directly and with key partners for both training and inference use cases." Meyers believes we're in the "early days" of AI-driven data demand, which will be an "exciting incremental opportunity for the company."
AI could support strong occupancy, rising rental rates, and new development opportunities for the company. Equinix sees AI using two types of data centers. AI learning will likely occur in large-scale data centers like its xScale facilities. Meanwhile, AI interface programs, like ChatGPT, will likely run in retail locations close to end users because they need proximity to quickly crunch data and generate outputs.
Equinix's data centers generate a lot of cash, giving the REIT the money to pay a decent dividend. Equinix has a 1.9% dividend yield, slightly higher than the S&P 500's 1.7% yield. That enables investors to generate a nice passive income stream from an AI-powered stock. The company raised its payout by 10% earlier this year and has steadily increased the dividend over the years.
Meanwhile, investors are getting a reasonable price on a company with lots of AI-powered upside. Shares are down about 5% from their 52-week high as the stock has yet to get caught up on the AI hype train. They currently trade at about 23 times forward earnings, much cheaper than many AI stocks.
Leveraging the power of AI to empower customers
Intuit's strategy is to be an AI-driven expert platform. The fintech company wants to leverage the power of AI and human expertise to improve outcomes for its clients.
Intuit powers its unique AI-driving expert platform with several technologies. It uses knowledge engineering to arrange and work with rule sets like the tax code. It employs natural language processing to interact with customers and help meet their needs seamlessly. The company also relies on machine learning to tap into its massive data and create personalized customer experiences. Finally, Intuit is investing in generative AI capabilities to improve customer outcomes.
The company is leveraging the power of AI across its platform. For example, its Mailchimp marketing platform allows customers to tap into the power of AI to create marketing email campaigns. Marketers can automate, generate, and optimize content, saving time and improving outcomes. Meanwhile, TurboTax and QuickBooks customers can gain automated digital assistance from AI or get matched with a human expert through that technology. Finally, Credit Karma uses AI to provide users with personalized insights and recommendations.
Intuit enables investors to generate a little passive cash flow from its AI-powered expert platform. The company pays a modest dividend, currently yielding about 0.7%. It's a decent payout, considering many hype-driven AI stocks either aren't profitable or don't pay dividends. Meanwhile, Intuit regularly increases its dividend. It gave investors a 15% pay bump last year.
Speaking of the hype train, it certainly has yet to hit Inuit, given the stock currently sits about 35% below its 52-week high despite its AI-focused strategy. The fintech company trades at a reasonable 30 times earnings, which isn't anywhere near as expensive as some popular AI stocks.
AI-powered income streams
Equinix and Intuit are early leaders in harnessing the power of AI. Their investors don't have to wait long for a payoff from their AI-driven growth because both companies pay quarterly cash dividends they've steadily increased. That enables investors to make a tangible return on AI-powered investments, even if the technology never lives up to the hype.
