Forget Nvidia: Could This Be the Most Underrated AI Stock to Buy Right Now?

Nvidiahis (NVDA -6.39%) The stock has generated life-changing returns for many investors, thanks in large part to its connection to artificial intelligence (AI) and the widespread interest in that sector of the economy. If you invested $33,000 in stocks five years ago and held onto it, you’d have a $1 million investment right now. That’s a staggering return in a relatively short time frame, especially when you consider that it was already a formidable, large, and fairly safe company to invest in at the time.

But with such big gains, it’s hard not to question how much more this AI stock can get from here. Five years ago, its market capitalization was around $100 billion. Now, it’s just under $3.1 trillion. I’m sure Nvidia can still grow in value, but expecting it to double or triple over the next five or 10 years seems a bit optimistic given its already rich valuation. I’m not saying it’s impossible, just unlikely.

If you want to invest in the potential of AI now, there might be a better (if perhaps slightly riskier) option than Nvidia, which offers many more advantages: Lumen Technologies (LIGHT -3.36%). Let me explain.

Lumen stock was hot

Lumen Technologies may be the hottest stock on the market right now. In the last month alone, the value has tripled. Lumen is a telecommunications company formerly known as CenturyLink, and the recent developments it is involved in make Lumen an intriguing artificial intelligence (AI) play.

Lumen doesn’t make AI chips, but it does benefit from AI. What has set the stock on fire lately has been a deal involving the tech giant Microsoft. Microsoft plans to use Lumen fiber products to help increase network capacity and enable it to meet increased demand related to its AI efforts. Through AI and the use of the Microsoft cloud, Lumen expects to reduce its expenses and improve its customer offerings. By doing so, Lumen management estimates it can add $20 million in cash flow to its operations over the next 12 months.

In terms of revenue, the Microsoft business and others that Lumen has already secured could be worth $5 billion. Even better, the company is working on additional deals that could add an additional $7 billion. CEO Kate Johnson doesn’t see this as a temporary boost either. “Our partners turn to us because of our AI-ready infrastructure and extensive network. This is just the beginning of a significant opportunity for Lumen, one that will lead to one of the largest expansions of the Internet ever.”

Lumen is a high-risk, high-reward stock that just got a little safer

Although Lumen has managed a few large deals recently, these will span several years. And there will be costs associated with the deals, so not all of that revenue will go directly to the bottom line. There is definitely some risk here associated with the stock. However, given where Lumen has come from, the upside could be significant if it’s able to close more deals and stay on track to turn around its operations.

Just a few years ago, the company stopped paying dividends and there were serious questions about its business and long-term future. While the telecom stock has been doing extremely well of late, over a three-year period, the stock is still trading up 55%. It trades at 10 times its trailing earnings and 0.5 times its revenue. The company has posted a loss in three of the past four quarters and has struggled to generate revenue growth.

If it can close more AI-powered deals, Lumen’s valuation will likely rise further, given that its share price remains down considerably from where it was a few years ago.

Should You Buy Lumen Technologies Stock?

If you’re a growth investor looking for a possible contrarian play, Lumen Technologies could make for an intriguing and undervalued AI stock to buy right now. It’s not a risk-free option for investors, but it’s hard not to be a little bullish on its prospects, given that it has secured some big deals and is in talks to initiate others.

The future of the company looks much more secure and bright than it was a few months ago. It will involve taking on some risk, but for investors who feel comfortable doing so and buying Lumen shares, there is certainly room for the stock’s valuation to rise much further.