LUMN Stock: “Unsexy” AI Picks from Goldman Sachs

Bigger names in AI might hog the headlines, but smaller companies offer an enticing prospect for those looking to diversify beyond megacaps. Here, OPTO dives into the fundamentals of LUMN and four other AI stocks you may not have heard of, but which are making a splash with investors.

Despite more than doubling its revenue year-over-year, Nvidia’s [NVDA] share price fell as much as 7% immediately after its most recent earnings announcement.
 
Delays around its next generation artificial intelligence (AI) chip, Blackwell, and an indication that its stellar sales growth was starting to level out, prompted Wall Street to contemplate the possibility that the AI theme might be waning. In light of this, it might be time for investors to look beyond the megacap stocks that have dominated it to date.
 
Kate Johnson, CEO of Lumen Technologies [LUMN], recently told Goldman Sachs’ Communacopia and Technology Conference that her company views the AI boom as having three phases.
 
We are currently in the first of these phases, which involves the development of AI models and a rush for the data infrastructure underpinning them.
 
Insider Monkey recently compiled a list of 10 “unsexy” AI stocks involved in the Communacopia and Technology Conference, and which have been overlooked by the broader market but eagerly bought up by hedge funds.
 
Here, we explore — following in the footsteps of Insider Monkey — five stocks that, while not making headlines in the way that Nvidia has, still stand to benefit during this phase.

Unsexy is In, Says Goldman Sachs

1. Lumen Technologies

Lumen Technologies is a technology company that sells connectivity products — such as edge cloud services, internet protocol, managed security services and software-defined wide area networks — to customers ranging from residential and small businesses to large enterprises such as Walmart [WMT] and Volkswagen [VWAGY].
 
Perhaps its most significant customer, however, is Microsoft [MSFT]. In July, the two announced a partnership that would see Microsoft implement Lumen’s networking equipment to expand its AI workflow capacity. This appears to have solved a data center infrastructure capacity issue that, back in April, Microsoft had said was preventing it from capitalizing on the AI boom.
 
Lumen’s share price has exploded in recent months; the stock is up 297.81% in the year to date and 460% over the past 12 months.

The Microsoft deal appears to have been a catalyst for much of this growth. The stock gained 107.24% in the week after the deal was announced and 378.94% in the two months following the announcement.

2. Iron Mountain

AI might be a new phenomenon, at least as a stock market trend, but Iron Mountain’s [IRM] business has been running for over 70 years. The company is a real estate investment trust focusing on data storage and management infrastructure. It manages over 1,400 facilities across 50 countries, and, as well as providing data centers, also ventures into cloud services and — slightly less relevant to the AI theme — art storage and logistics.
 
In August, the company launched its Digital Experience Platform, itself an AI-powered product, that functions as a software-as-a-service platform through which customers can manage their stored assets.

Iron Mountain’s stock gained 70.46% year-to-date and 101.15% over the last 12 months.

3. SoFi Technologies

SoFi Technologies [SOFI] is a fintech company that is leveraging the potential of AI to improve banking services.
 
For example, its subsidiary launched its Instant Verification Engine (GIVE) and Transaction Risk GScore products in September.
 
GIVE provides real-time verification of third-party bank accounts to help prevent fraud, while the Transaction Risk GScore assigns quantitative values to various risk factors, enabling financial institutions to respond quickly to potential risks.
 
In August 2023, SoFi implemented Galileo’s intelligent digital assistant Cyberbank Konecta into its platform in order to improve and streamline its customer support offering.
 
SoFi’s share price gained 7.43% over the past 12 months, but fell 20.10% in the year to date. However, CEO Anthony Noto told the Communacopia and Technology Conference in September that the US Federal Reserve’s interest rate cuts will benefit the stock going forward, as it will increase demand for loans through the product.

4. Okta

AI is likely to have a significant impact on the cyber security industry, not only by increasing the capability of attackers, but also by improving the ability of cyber security products to counter these threats.
 
Okta [OKTA] puts machine learning and generative AI at the heart of its offering via its Okta AI product, according to CEO Todd McKinnon, speaking at the Communacopia and Technology Conference.
 
Okta’s stock fell 18.27% in the year to date, and 5.64% over the past 12 months. Despite an earnings and revenue beat in its Q2 earnings in September, investors were concerned that guidance suggests growth may be slowing.
 
However, McKinnon told the Communacopia and Technology Conference that the company’s investments into its R&D would, he hoped, re-accelerate growth over the longer term.

5. MongoDB

MongoDB [MDB] is one of the world’s most popular database platforms and therefore positioned at the center of the current phase in AI’s development.
 
In May, it launched a suite of tools for its Atlas developer platform that will help users build AI apps on top of its cloud database system. It includes integrations with Alphabet’s [GOOGL] Google Cloud and Amazon [AMZN] Web Services.
 
Like SoFi, Mongo is also making use of generative AI internally to improve its customer support capabilities.
 
“We’ve had a fair amount of success… making people who are customer facing more context aware,” MongoDB Chief Financial Officer and Chief Operating Officer Michael Gordon told the Communacopia and Technology Conference.
 
“We recently rolled out a next iteration of some of our customer-facing knowledge base with generative answers in that, and that further helps them self-serve and not have to open up underlying support tickets. That’s actually been super helpful and obviously leads to both higher customer satisfaction and greater efficiency in terms of how we serve those customers.”
 
While MDB stock rose in the months following the Atlas tools launch, it is down 34.08% year-to-date, and 17.14% in the past 12 months.

Comparing LUMN and Other AI Stocks

Source: Yahoo Finance

Conclusion

These five stocks all offer exposure to the AI theme in different ways. While none have been garnering headlines in the manner of Microsoft or Nvidia, their share prices have already gained on investor expectations that they will benefit from it in future.
 
Investing always involves risk, and investors should familiarize themselves with those involved in high-growth trends like AI before reaching any decision.

OPTO’s proprietary theme relevance system maps the world’s biggest investing megatrends. For in-depth analyses of stocks with high growth potential, subscribe to OPTO Foresight.