We recently published a list of The 10 best automation stocks to buy nowIn this article, we take a look at how Analog Devices, Inc. (NASDAQ:ADI) compares to other automation stocks.
2023 was the year of generative AI, largely due to the widespread adoption of ChatGPT and the resulting response. Now 2024 is the year when companies have really started to leverage this ever-evolving technology. McKinsey has found that AI helps companies in both aspects: reducing costs and increasing revenue.
Automation technologies – key trends
In 2024, the integration of automation technologies continues to revolutionize every aspect of supply chain management, leading to unprecedented levels of efficiency and agility. According to industry data from Market.us, the global integrated automated supply chain is expected to grow from $13.4 billion in 2023 to $25.6 billion by 2033.
From eliminating warehousing bottlenecks to inventory management and demand forecasting, supply chain automation has transformed traditional practices and redefined the dynamics of the logistics industry. When it comes to inventory tracking, advanced warehouse management systems powered by AI and ML algorithms focus on optimizing inventory placement, route planning, resource allocation, etc.
Inventory tracking and management is being revolutionized by the use of automation solutions such as RFID tagging, barcode scanning and computer vision. Real-time tracking technologies provide detailed insights into inventory movements. This enables companies to monitor inventory levels, detect deviations and manage under/overstocks. Manufacturers are now moving towards smart factories.
Smart factories reflect and demonstrate the principles of Industry 4.0. They typically use 5G, IoT, AI and other advanced technologies. Experts believe that smart factories enable predictive maintenance and decision-making.
Introducing advanced automation
A new theme is emerging in the field of automation: automated decision making. Its application has rapidly expanded beyond traditional industries such as manufacturing and logistics. The need for decision intelligence arises from data-driven and well-informed decision-making requirements that increase the competitiveness and efficiency of companies.
Automated decision making is now accepted in major sectors such as healthcare and finance. In healthcare, automation complements clinical decision-making processes, improves patient care, and manages resource allocation by leveraging AI and ML algorithms to evaluate patient data, medical images, and genome sequences to tailor patient care.
In finance, too, automated systems continue to transform best-in-class operations such as risk assessment, fraud detection, and investment management. AI algorithms evaluate large data sets of financial transactions and market trends to optimize investment strategies. In 2024, the software development industry is poised for a remarkable transformation with groundbreaking innovations.
Quantum computing and robotics
The latest software technologies expected to reshape the landscape include quantum computing, virtual reality (VR), augmented reality (AR), Big data, data analytics, 5G technology, robotics, etc.
Quantum computing continues to evolve rapidly and change the scientific and industrial landscape. Unlike classical computers, which use bits as the smallest unit of information, quantum computers use qubits, which use the principles of quantum mechanics to perform complex and difficult calculations. For example, in drug discovery, quantum algorithms simulate molecular interactions more accurately and sophisticatedly than traditional methods. The integration of quantum computing into AI is another important new trend.
The unprecedented advancements in robotics and AI are expected to bring revolutionary positive changes. More and more industries are realizing the benefits of adopting robotics and AI. Globally, the robotics market is expected to witness healthy revenue growth and reach a projected value of $38.24 billion this year. The strongest segment in the robotics market is expected to be service robotics, which is expected to lead the market volume. Service robotics finds application in industries such as healthcare, medical, military & defense, logistics, etc., while industrial robots are used in automotive, electronics, food & beverage, etc.
The trends driving the robotics market are supported by developments in new technologies. These include 5G, AI, edge computing, IIoT, cloud, open source, etc. As AI in robotics advances, more and more industries are using the latest technologies. Therefore, manufacturers are making data-driven decisions. Some industries are using self-learning robots to perform work processes.
Smart factories use AI-powered robots to perform smarter, more reliable and efficient processes. They help in production optimization. AI-powered robot technologies, including computer vision and tactile sensing, are used to automate certain tasks. For example, reinforcement learning is used for better industrial assembly. The use of robots, intelligent automation and high-tech manufacturing will help workers with manual labor and reduce repetitive tasks.
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A technician works on energy management in a semiconductor factory.
Analog Devices, Inc. (NASDAQ:ADI)
Average upside potential: 23.04%
Analog Devices, Inc. (NASDAQ:ADI) is a leading manufacturer of chips for analog, mixed-signal and digital signal processing. The company has a significant market share in converter chips. These are used to convert analog signals into digital and vice versa. The company specializes in analog chips (sensors). These sensors interact with signals from the physical world, just like electricity or sound waves.
The company released its results for Q2 2024. Revenue came in at $2.16 billion. This figure was above the midpoint of the forecast. Analog Devices, Inc. (NASDAQ:ADI) achieved profitability and earnings per share above the high end of the forecast, primarily due to the resilience of its business model and disciplined cost control. With inventory rationalization occurring across its customer base, the company expects a return to sequential growth in Q3 2024.
The company’s products serve the needs of high-growth trends such as automotive electrification, advanced driver assistance systems, factory intelligence/automation, etc. These factors are expected to help the company generate positive free cash flow in the coming years.
Artificial intelligence is one area where Analog Devices, Inc. (NASDAQ:ADI) has increased its investments, and the company is quite optimistic about its applications. It expects AI to accelerate high-growth trends from centralized applications in data centers to applications at the physical edge.
Analog Devices, Inc. (NASDAQ:ADI) stock has had a rough time of late, largely due to weak demand from customers and dealers. However, Wall Street analysts say that trend appears to have bottomed out and investors have regained confidence in the industry’s long-term demand characteristics.
Analysts at JPMorgan Chase & Co. have rated Analog Devices, Inc. (NASDAQ:ADI) shares and raised their price target from $220.00 to $260.00. They gave the stock a “buy” rating on March 23.rd May 2024. Since the first quarter, the stock has been held by 65 hedge funds with a total value of $4.37 billion.
Craftsmen partneran investment management company, published a second-quarter 2024 investor letter and mentioned Analog Devices, Inc. (NASDAQ:ADI). Here’s what the fund said:
“To look at the positive side of the balance sheet: our largest contributors were Analog Devices, Inc. (NASDAQ:ADI), NetApp and Arch Capital Group. Analog Devices (ADI) is the world’s second largest analog semiconductor chip manufacturer behind Texas Instruments. Investors are excited about the prospects of a cyclical recovery in the semiconductor sector as ADI’s orders have increased due to increasing demand and tight inventory. Originally purchased in 2006, ADI is one of our longest-held stocks as the company has proven to be an excellent value creator due to its leadership position in a secular growth industry, strong balance sheet and cash-generating characteristics. ADI operates in attractive segments that offer high gross and operating margins and have loyal customers. Manufacturing chips for applications that often last for decades (automotive, industrial, communications) and that represent only a small fraction of the total cost within the value chain makes this business attractive and difficult to displace once integrated into the product/application.”
Total, ADI takes 10th place on our list of the best automation stocks to buy. While we recognize ADI’s potential as an investment, we believe AI stocks promise higher returns and do so in a shorter time frame. If you’re looking for an AI stock that’s more promising than ADI but trades at less than 5x earnings, read our report on the cheapest AI stock.
READ MORE: $30 trillion opportunity: The 15 best humanoid robot stocks to buy, according to Morgan Stanley And According to Jim Cramer, NVIDIA has “become a wasteland”.
Disclosure: None. This article was originally published on Insider Monkey.
