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2 AI stocks down over 40% from their peak – add to watchlist?

2 AI stocks down over 40% from their peak – add to watchlist?

  • 26.03.2025 00:48
  • financialexpress.com
  • Keywords: High Risk, Valuation Issues

Two AI stocks, Netweb and Anant Raj, dropped over 40% from their peak despite strong growth in AI and data center trends. While valuations are stretched, their potential in AI adoption and data demand makes them worth monitoring.

Nvidia Services

Estimated market influence

Netweb Technologies

Positivesentiment_satisfied
Analyst rating: N/A

Netweb's role is as a leading provider of HPC and cloud solutions. Their financials show strong growth with revenue increasing at 72% CAGR and profits at 110% CAGR. They have strategic partnerships and are expanding their manufacturing capabilities, aiming to capitalize on AI and data center trends. However, their stock has dropped over 40% from peak, indicating potential market volatility despite strong fundamentals.

Anant Raj

Positivesentiment_satisfied
Analyst rating: N/A

Anant Raj is transitioning into data centers and cloud services, showing significant growth with a 78% revenue CAGR and 189% profit CAGR. Their focus on higher-margin businesses aligns with market trends, but their stock has also dropped over 40%. Despite this, they have strategic alliances and are expanding their cloud capacity, positioning them well for future growth despite current valuation concerns.

Context

Analysis of AI Stock Performance and Market Implications

Overview

  • Two AI stocks: Netweb Technologies and Anant Raj
  • Stock performance: Both dropped over 40% from their peak despite strong growth in AI adoption and data center trends.

Key Facts and Data Points

Netweb Technologies

  1. Revenue Growth:

    • CAGR: 72% during FY21-FY24
    • Total revenue: ₹7.24 billion
    • Margins expanded from 10.2% in FY21 to 14.2% in FY24

  2. Profitability:

    • Profit CAGR: 110% during FY21-FY24
    • Return on Equity (RoE): 29.4%
    • Return on Capital Employed (RoCE): 38.5%

  3. Valuation:

    • P/E ratio: 92x (lower than the 20-month median of 145x)
    • Target price: ₹2,655 (up 63% from current price of ₹1,625)

  4. Growth Drivers:

    • State-of-the-art manufacturing facility with Surface Mount Technology (SMT)
    • Partnership with NVIDIA for AI systems
    • Expansion into Europe and Middle East
    • New product lines: network switches and 5G ORAN devices

Anant Raj

  1. Revenue Growth:

    • CAGR: 78% during FY21-FY24
    • Total revenue: ₹15.2 billion

  2. Profitability:

    • Profit CAGR: 189% during FY21-FY24
    • Margins improved from 20% in FY21 to 25% in FY25

  3. Valuation:

    • P/E ratio: 48x (much higher than the 10-year median of 16x)
    • Target price: ₹1,100 (up 120% from current price of ₹520)

  4. Growth Drivers:

    • Transition to data center and cloud services
    • Cloud capacity target: 25% by FY32
    • Strategic alliance with Telecommunications Consultants India Limited

Market Trends and Business Impact

  • AI adoption: Strong secular growth trend in AI and data center demand.
  • Data localization: Increasing focus on data centers in India due to global data trends (India generates 28% of global data but hosts only 1% of data centers).
  • Valuations: Both companies have high P/E ratios, indicating stretched valuations despite strong growth.

Competitive Dynamics

  • Partnerships: Collaborations with major tech players like Intel, AMD, NVIDIA, and Samsung provide a competitive edge.
  • Market Expansion: Both companies are expanding into new markets (e.g., Europe, Middle East) to capitalize on global demand for AI and data center solutions.

Strategic Considerations

  • Netweb: Focus on HPC, cloud services, and AI hardware manufacturing.
  • Anant Raj: Shift from real estate to data centers and cloud services to leverage India’s digital transformation.

Long-Term Effects and Regulatory Impacts

  • Sectoral growth: AI adoption and data center demand are expected to drive long-term growth in the sector.
  • Regulatory environment: Potential regulatory focus on data localization and digital infrastructure could impact future growth opportunities.

Conclusion

  • Both stocks have shown significant volatility, with valuations remaining stretched.
  • Despite this, their exposure to AI adoption and data center trends makes them worth monitoring for long-term investors.