Here Is My Top Artificial Intelligence (AI) Stock to Buy During the Correction

Here Is My Top Artificial Intelligence (AI) Stock to Buy During the Correction

  • 25.03.2025 08:30
  • fool.com
  • Keywords: AI, Market Correction

The Trade Desk, a digital advertising platform, saw its stock drop due to missed earnings but remains undervalued. Its AI tools like Koa and Kokai enhance ad campaign effectiveness, making it a strong contender despite challenges. With growing revenue and improved AI capabilities, it offers potential during market corrections.

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Estimated market influence

The Trade Desk

The Trade Desk

Positivesentiment_satisfied
Analyst rating: Buy

Leverages AI to enhance advertising effectiveness and compete with peers like Google.

Google (Alphabet)

Negativesentiment_dissatisfied
Analyst rating: N/A

Competitor mentioned as having a biased platform compared to The Trade Desk.

Context

Analysis of The Trade Desk: Business Insights and Market Implications

Key Observations

  • Stock Volatility: A surprise mistake caused a significant stock sell-off, leading to a drop in valuation.
  • AI Competitive Edge: AI developments have strengthened its position against formidable peers like Google (Alphabet).
  • Valuation Attractiveness: The stock appears undervalued from a forward P/E ratio perspective during the market correction.

Business Model and Market Position

  • Core Business: A buy-side platform for digital advertising, enabling advertisers and agencies to manage ad campaigns across multiple channels.
  • Competitive Advantage: Unlike competitors with integrated advertising businesses (e.g., Google), The Trade Desk's unbiased platform allows for more effective targeting of advertising venues.

AI Integration and Innovation

  • AI Tools: Leverages Koa and Kokai platforms, which use deep neural networks to optimize real-time bidding auctions and enhance campaign effectiveness.
    • Koa: Predicts clearing prices in real-time bidding auctions.
    • Kokai: Improves forecasting and measurement by incorporating retail data and a TV Quality index, targeting opportunities in connected TVs.

Financial Performance

  • Revenue Growth: Achieved $2.4 billion in revenue for 2024, representing a 26% year-over-year increase.
  • Q4 Disappointment: Missed Q4 revenue forecasts with $741 million, triggering the stock sell-off.
  • Valuation Metric: Forward P/E ratio suggests potential undervaluing as the stock price declines during the correction.

Strategic Considerations and Market Impact

  • Essential Platform: Despite missing Q4 projections, The Trade Desk remains a critical player in digital advertising due to its unbiased platform and AI-driven capabilities.
  • Growth Potential: Sustained revenue growth (26% YoY) and improved AI tools justify long-term investment consideration during market corrections.

Competitive Dynamics

  • Peer Comparison: Competes effectively with Google but offers a less biased, more transparent platform for advertisers.
  • AI Race: The integration of advanced AI tools positions it as a leader in AI-driven advertising technology, potentially capturing market share from competitors.

Long-Term Effects and Regulatory Implications

  • Market Leadership: Strong revenue growth and strategic AI investments position The Trade Desk as a key player in the digital advertising ecosystem.
  • Regulatory Environment: While not explicitly addressed, the company's focus on transparency and effectiveness aligns with evolving regulatory trends in digital advertising.

Investment Conclusion

The Trade Desk's improved AI capabilities, sustained revenue growth, and undervalued stock position make it a compelling investment opportunity during market corrections, despite short-term challenges.