Forget Nvidia shares, I’d rather buy this FTSE AI stock instead

The substitute intelligence (AI) growth has been ramping up not too long ago. I reckon there are some nice FTSE choices to capitalise on it.

As a substitute of the burgeoning Nvidia (NASDAQ: NVDA) shares, I’d love to purchase Volex (LSE: VLX) shares after I subsequent have some investable funds.

Right here’s why!

Nvidia shares proceed their nice run

I’m not saying Nvidia’s current efficiency and share value ascent isn’t value taking a more in-depth have a look at.

The enterprise appears to be the recent AI inventory of the second, and continues to churn out wonderful outcomes persistently.

Nonetheless, for me, I’m searching for shares that supply a greater entry level, and a special play on the AI revolution.

Nvidia continues to be a preferred inventory amongst buyers, however for me, it may very well be a sufferer of its personal success. For instance, the shares now commerce on a price-to-earnings ratio of 46! That is greater than extra established tech companies together with Alphabet and Meta!

Is development already priced in? Plus, if gross sales had been to drop, might the share value fall off a cliff? I’ll be watching with curiosity, however I received’t be shopping for the shares any time quickly.

The grunt work behind the magic of AI

It will not be immediately obvious the place Volex can capitalise on the AI growth. In any case, the enterprise is a producing enterprise specialising in interconnect options. These embody high-speed copper, fibre optic, and different cables. Nonetheless, it’s an trade chief in knowledge centre cables.

Knowledge centre cables are key to run, you guessed it, knowledge centres. These knowledge centres play a vital function in AI as enormous quantities of knowledge is required to configure and execute AI.

Volex shares are up 21% over a 12-month interval from 287p right now final yr, to present ranges of 348p.

Knowledge cables will not be probably the most direct, or glamorous, path to capitalise on the AI revolution, however I reckon it is a nice option to acquire publicity, no less than for me and my holdings.

The shares commerce on a price-to-earnings ratio of 16, which I think about respectable worth for cash. Plus, a small dividend yield of 1.2% might develop. Nonetheless, I do perceive that dividends are by no means assured.

Lastly, Volex’s most up-to-date FY outcomes for the yr ended March 2024 made for good studying. The important thing takeaways for me had been will increase in income, working revenue, and its remaining dividend. Nonetheless, the agency’s internet debt did rise, which might have an effect on its steadiness sheet.

From a bearish view, the agency is moderately small, which implies it may very well be vulnerable to extra volatility, and even takeover bids from bigger companies on the market. Plus, Volex has a observe file of acquisitions. These are nice to spice up development after they exercise. Nonetheless, just one unhealthy one might have untold monetary and reputational harm, to not point out hurting investor sentiment.

Total, for a less expensive, various choice to entry the AI revolution, Volex is a inventory I’m firmly eyeing up.